Staring at your Bloomberg all day is counterproductive. A useful anecdote from Schwager’s interview with Seykota:

Jack Schwager: I notice there is no quote machine on your desk.

Ed Seykota: Having a quote machine is like having a slot machine on your desk — you end up feeding it all day long. I get my price data after the close each day.

Here is Richard Donchian’s timeless view from over 30 years ago:

If you trade on a definite trend following loss limiting-method, you can [trade] without taking a great deal of time from your regular business day. Since action is taken only when certain evidence is registered, you can spend a minute or two per [market] in the evening checking up on whether action-taking evidence is apparent, and then in one telephone call in the morning place or change any orders in accord with what is indicated. [Furthermore] a definite method, which at all times includes precise criteria for closing out one’s losing trades promptly, avoids…emotionally unnerving indecision.

Seykota’s slot machine analogy is exact. A quote machine that updates continuously provides a stream of micro-movements, each one triggering a potential response. The trader who watches it all day is not gathering more useful information. They are feeding the machine. Each tick produces a micro-emotion: a small gain feels good, a small pullback feels threatening, a reversal creates anxiety. None of these micro-emotions contain useful information about whether the trend is intact. The daily close does. A trend following system built on daily data requires one look per day per market. Everything in between is noise that costs attention and generates the emotionally unnerving indecision Donchian describes.

Donchian’s observation is from over 30 years before algorithmic trading, high-frequency data, and real-time mobile quotes existed. His insight that a sound systematic method requires only minutes per evening and one phone call in the morning has not dated. If anything, the abundance of real-time data has made the discipline he describes more valuable, not less. The trader with access to every tick on every market at every moment has more opportunity to be distracted from the signal by the noise than the trader who receives daily closing prices and acts on those alone.

The deeper point in Donchian’s quote is the last phrase: a definite method avoids emotionally unnerving indecision. Indecision is not produced by insufficient information. It is produced by a lack of defined criteria for action. The trader who stares at the monitor all day is not staring because they need more data. They are staring because they have not defined in advance what evidence would require them to act. Every movement becomes a potential signal and every potential signal requires a new evaluation. The systematic trader has already evaluated. The criteria are defined. The evening check confirms whether they are met. The morning order executes if they are. No indecision required.

Frequently Asked Questions

Why does Ed Seykota compare a quote machine to a slot machine?

Because both reward continuous engagement with intermittent variable rewards, the same psychological mechanism that makes slot machines compulsive. A quote machine that updates all day produces a stream of small gains and losses that each feel significant and each demand a potential response. The trader gets pulled into monitoring continuously, not because the continuous data is useful, but because the intermittent movement triggers the same compulsive checking behavior a slot machine produces.

How much time does a trend following system actually require each day?

As Donchian described, a minute or two per market in the evening to check whether action-taking evidence is present, and one call in the morning to place or adjust orders if needed. Most days require no action at all. The signal either appears or it does not. When it does not, there is nothing to do. The system’s efficiency is a feature, not a limitation.

Why does staring at the monitor cause worse trading decisions?

Because it exposes the trader to continuous micro-movements that trigger emotional responses without providing useful information about the trend. Small intraday pullbacks produce anxiety. Small intraday advances produce confidence. Neither is relevant to whether the daily trend signal is valid. Acting on intraday noise instead of daily signals introduces decision points that have no basis in the system’s rules, producing the emotionally unnerving indecision that Donchian identified as the cost of undefined method.

Trend Following Systems
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