When to Change Speeds

Sean McLaughlin
October 27, 2022

How great it is that we can change our minds and take decisive action immediately?

As traders in the financial markets, if our spidey senses detect that something is amiss or conditions have changed, we can often liquidate our positions and head safely into cash with just a few keystrokes on our computer. Depending on the size of our positions, we can be completely in cash within minutes, maybe even seconds!

You can’t do that with Real Estate.

You certainly can’t do that with Private Equity investments.

You definitely can’t do that with a small business.

All of those investments are fine for their own reasons. But they don’t offer us the opportunity to immediately exit if we change our minds.

Of course, just because we can change our minds on a dime doesn’t mean we always should. If we’re wishy-washy and trading without a plan, it becomes incredibly easy to overtrade and drive our commission bills and nerves through the roof. While this might make us popular at our broker’s office, our accountants will unlikely be pleased.

And regardless as to how low our commission costs may be per trade, the slippage of constantly getting in and out of trades likely far exceeds what we pay in commissions. It’s the hidden, sneaky cost that is hard to quantify. But trust me, it’s real.

There is no right answer on how much is too much or too little trading for you. But a good rule of thumb might be this: If we’re winning, it’s probably ok to step on the gas. If we’re losing, then it might make sense to slow it down, take our time, and make sure we’re only trading our best setups.

How do you manage your trading speed? I’d love to hear about it. 

~ @chicagosean

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