Whether it’s accidental photos or tab overload, beta-testers for phonemakers have always struggled to identify human quirkiness. Humans are not stupid, but the product design can make them look stupid. Could it be that the user interface of your stock trading tools is causing you to act stupidly as well?

Trading software has been around for decades but that doesn’t mean that it has been optimized for human use. Remember how long it took the packaging industry to realize that a cap could be placed on the bottom of a bottle?

The default graphical representation of historical stock prices enforces a day-trader’s self-fulfilling, ruler-drawn resistance levels while the standard column for the daily price change encourages intra-day trading. The software manufacturer has of course designed the GUI to push high volume trading to generate transaction fees. (Side note: If you are generating a lot of fees then why not invest in the software provider’s stock?). The more trading impulses, colorful news flashes and emotion provoking graphics, the more difficult it is for a compulsive day-trader to refer from trading unnecessarily.

So here is the question: Would you trade differently if you didn’t see the historical price evolution of a stock?

Unless you are an employee of a financial company, you are likely allowed to trade stocks freely (no mandatory 30-day holding period nor threat of unintended insider trading). But without historical price data, your appetite for short-term swing trading will likely dissipate. The game of interpreting candle stick formations will be replaced by digging into company data and walking outside to check what businesses are really popping out there in the real world. Imagine if you couldn’t press a button on your keyboard to purchase a stock, but you would have to make a phone call. Would that change your trading behavior and your trading style?

On the other hand, what would happen if you hire an algo expert and an IT wizard that can automate any trading pattern and market scenario you can think of? Would you be tempted to trade more frequently?

Your portfolio performance and trade history reveals if you should start blaming your trading tools or at least question if the tools may impact your trading style negatively. After all, you are a good trader, a good investor and a good portfolio manager. But maybe you are exposing yourself to the wrong environment. Maybe you don’t input trailing stops because you are monitoring the trades every millisecond anyway. It reminds me of a sign often seen in common spaces, such as laundry rooms, that says “Please Turn Off The Light When Leaving”. We all know that installing automatic lights would work better than the sign, but we couldn’t be bothered. We shake our head at the people that forget to turn off the lights. Anyway, it’s probably the same people that forget to close their web browser tabs on their phone.

#trading #daytrading #swingtrading