In today’s electronic age of trading, everything seems very easy. Just log on, point and click, and viola! – a trade is opened or closed. Pretty simple.
But, lurking under that simplicity is a huge hidden danger – what do you do when things go wrong? Technology and infrastructure sometimes fail, and inevitably when they do, it will likely cost you money if you are not prepared. It only takes one position that you can’t close to go against you to do major financial damage.
If you don’t have a plan for dealing with trading related disasters, you need one. And it should include, at a minimum, backup or contingency plans for your broker, your trading signal provider (if you have one) and you. Each of these areas is covered below.
Backup Plan for Your Broker
At a minimum, you need to have the phone numbers at the ready for your broker, in case you cannot connect to them via the Internet. This should include both an 800 number, and a non-800 number. Sometimes, 800 numbers go down, or may be swamped with other callers. Having a fax number for the brokerage is another option if those numbers are jammed, since most customers would never even think to use it.
Another possible backup idea is to have accounts at multiple brokerages. Then, if you need to enter a position, but cannot do so at your primary broker, you can enter it at a backup broker.
Any good broker will have their own backup plans to deal with their internal problems and connecting with the exchange, so you don’t have to worry about that part. Just make sure that you can reach the broker when you need to.
Backup Plan for Trading Signal Provider
If you utilize a trading signal or recommendation provider, or a subscription service, make sure you know how to get a hold of these people in an emergency. Websites and e-mails are great, but in an emergency it is nice to have a voice to talk to. One missed signal could cost you a lot.
Most good signal providers are willing to go the extra mile to make sure you get the information. One I know of recently text messaged the subscriber every day for a week, just to ensure the data was properly received!
Backup Plan for You
Don’t underestimate the significance of having proper backup plans for yourself. For example, if your computer crashes, do you have a backup ready to go? If your primary internet connection fails, do you have a quick alternative? If your phone line fails, do you have a cell phone nearby? If your power goes out, do you have battery backup? And what about you – if you can’t enter orders, is there someone trained that can?
Depending on your trading style, you might need to consider some or all of these questions. The backup plan for you doesn’t have to be complicated, but it should include all of the bad scenarios you can think of.
In Closing
Unfortunately, most people do not think about disasters and backup plans, until it is too late. It is sort of like backing up your hard drive – most people don’t think about it until the drive crashes and data is forever lost. By then it is too late.
Making money trading is hard enough to do when everything is working properly. Don’t let the lack of a disaster plan make things even tougher for you.
