Line Your Own Pockets

Michael: 00:00

Okay, everyone, welcome back to another episode of Line Your Own Pockets. I think we got a real good one today because when Dave brought this one up, said this is an exact problem that I'm having. So every time something like that occurs, think it's a good time to turn on the camera and talk to you guys. So we're gonna go over what Dave and a client were going through more particularly. But the main thing is that there's not a lot of time in the day, especially when you've got a lot of things going on, kids, personal life, all this.

Michael: 00:28

So we're mainly going to go over what do you do when you have a million things to do to your trading? Where do you start? Where do you focus so that you're getting the best use of your time? Because you only have till the next trading day, hopefully, to make some improvements on your system. So if you're spending weeks and months doing something that is going to add edge to your system, well you're losing out on money, right?

Michael: 00:50

Every day you're not doing it. So why don't you go over Dave a little bit what you and your client were talking about and we'll dive in from there.

Dave: 00:57

Yeah, so this is a client that I've been working with for a while. He's he's doing really well. He was I've mentioned it before on the podcast. He he was a losing trader, and he's crushing it now. I I think I even shared with you a few weeks ago a message he sent to me that I'm not gonna share the exact numbers, but everybody on here would be impressed if they heard the numbers.

Dave: 01:25

Long as you just put it that way.

Michael: 01:27

It was it was very good. It was very good for for a month or

Dave: 01:31

I don't like sharing numbers because a lot of times people just don't believe them, and they're big numbers. And so and I and we'll do another podcast on

Michael: 01:43

why

Dave: 01:43

exactly why I don't do it, but there's a good reason for it, and it's a whole another thing. But my point is with this, he's reached a certain level, and he wants to get to the next level. And he I'm confident he will. But in our last call, he was a bit frustrated because he's got several systems that he trades. There's lots of different things he could do at this point to improve, And it's kinda hard to figure out what to work on next.

Dave: 02:23

And he was, I would say, frustrated, down in the dumps, with sort of overwhelmed about what to work on next. He felt like he had a whole bunch of stuff he could do, but he was kind of down on himself because it felt like this mountain of stuff and he just couldn't get to the next thing. So how do you so you you mentioned kind of the same thing, Michael, and you're you're trading. Like, how do you think about this? And is this a problem for you sometimes?

Dave: 03:01

How do you what do you think about it?

Michael: 03:04

Well, yeah, it's it's absolutely a problem. And again, as a dad of a one year old and a three year old, right, the the amount of time you get throughout the day is is quite limited. And, you know, time in general, even if you're just someone with just a nine to five, and then you've got that that the kids that young, that it becomes really hard to do anything. And when you're when you really love this game, you want to spend as much time productive time as you can doing it. So the the problem I have as someone who's kind of newer and inching my way into the systematic world is I was under the impression of a lot of people that this would maybe even be less work than actually just sitting and then trading throughout the day.

Michael: 03:48

But it turns out that you've opened yourself up to unlimited possibilities. And I think that's where a lot of people initially get stuck is, you know, I have day trading systems I'm building. I'm working on some crypto systems. I'm working on some future systems. I there's just tons of ways you can go.

Michael: 04:05

And because everything is is super new and super interesting, you end up getting pulled in all of those directions. And I think that is the worst thing that you can do because then you're not, you know, laser focused on on one thing at a time. So the only kind of solution that I have right now, which is why I'm interested in going over this with you, is you can sit down with a pen and a piece of paper and make intermediate term goals. And where do you know, where do I want to be done next month and maybe even next week? And then try to ignore everything that doesn't directly contribute to those goals.

Michael: 04:39

But it does get really hard again as someone a little bit ADHD who is seeing all of these possibilities. I think that's where it came from. If there's a if there's a much more linear path that you can set yourself up on, I don't think this becomes much of a problem. But again, when you're systematic trading, there's, again, different time frames, there's different securities to trade, there's within a security and a time frame, there's an almost an infinite amount of systems. So it's all about, I think, narrowing choice.

Michael: 05:06

And I think that's what we need to need to get to. But I'm super interested on the on the kind of system you go through with people to help

Dave: 05:13

with this. Yeah, I think it is really important. And I I think the audience for this podcast, this particular episode, like, if you don't have something a system that works and is making you money now, that's the only priority, right, getting something that works. But I think what's a more interesting problem to solve is when you have at least one system working and you've got different projects that you want to do, some might improve an existing system.

Michael: 05:50

Mhmm.

Dave: 05:51

Some might be to create a new system. You've probably got a whole workflow for your trading routine. You can improve that. That wouldn't affect directly a particular system. You could go learn a new technology.

Dave: 06:09

You could learn Python. That could certainly help in a lot of different ways. So a lot of those things are harder than others. And the question is how do we how do you prioritize all those things? You can't work on all of them at once.

Dave: 06:27

You know, each one of those is going to take some focus, it's going to take some time. You don't know how long it's going to take, a lot of these projects. So how do you think about it?

Michael: 06:35

Think that just to double click on that is the not knowing how long something would take. Right? Because if you're doing a more normal job as something that you can track, you can estimate those things. You say, okay, you say you're a developer. I'm gonna I might be talking to my butt here because I'm not a developer.

Michael: 06:52

When you say, listen, I need to revamp this part of the website, that's going to take roughly and you give yourself an estimate of, you know, ten to fifteen hours or whatever it is. The problem with a lot of what we do is you could spend 100 on the system, and it's just it's garbage, right? You're just trying to make it work and it's just it's not you had a hypothesis, you try to test the hypothesis and it's wrong. Or you could take a system and just have it be like and I've actually done this recently where I tested something and it's far outside of my expectations of how well it's working in backtest. But that improvement process that I could have just opened up month worth of work in order to get it into an exact shape and an exact thing that I can fully systemize and that I'm comfortable with.

Michael: 07:39

So I think that's a big part of it is because if I knew, you know, this project is going to take me two hours and this project is going to take me a day, I can just take the shorter term projects and just get them out of my out of my life. But because everything you don't have that timeframe on, you're really struggling to know where to prioritize even within kind of a simple example like that, right?

Dave: 08:02

Yeah. It's interesting that you bring up software development because software development projects notoriously are hard to estimate, and the estimates are usually crazy bad even when you know exactly what you want to do and you know exactly what the outcome's going to be. We just overestimate or underestimate how long stuff it's gonna take. So your point, I'm just underscoring your point here. Yeah, when you get into R and D, something that is essentially r and d.

Dave: 08:36

Like, you don't know if it's gonna work, something gonna work on. And so so here's the way I prioritize what to work on and how I think about it. And this is how this is what I this is what I went through with the trader. I said, okay. Tell me everything you're thinking about working on, and then let's talk through how we would prioritize and what things I think you should work on.

Dave: 09:06

It was very, very helpful. And this is the rubric I applied to it. And so if you think about first, let's step back a bit. Think about the process of creating a strategy in place, paper trading it perhaps, trading it with small size, and then trading it with significant size over time. That is gonna take a long time.

Dave: 09:35

Right? Longer than most people think. And a lot of that time is gonna be after you get it trading live. Like, I always tell people whenever I talk to a new trader, one of the first things I ask them, certainly if they have some experience, is what is your what I'm trying to get at is what is your path to confidence for the strategy you trade? And that that's the big idea that I'm trying to get them to answer.

Dave: 10:03

And the question I might ask is, okay. Well, why aren't you trading that with full size? What's stopping you from trading that with full size? And it's sometimes sort of hem and haw a bit because it's something that, you know, they've never been asked before. And it's it really just underscores how long of a process it is because you need to be on a path to confidence to trade your strategy with size.

Dave: 10:34

It's not hard to trade strategy with tiny size,

Michael: 10:38

but

Dave: 10:40

it's a whole different ballgame to trade it with significant size for you. And so that process takes a long time. So to step back, the the first the easiest path for improving what you're doing is to improve an existing strategy you're already trading because you're already you already have you already know it really well. You've been trading it. You you know the ins and outs of it.

Dave: 11:11

There's a lot of unknowns that you know about at this point, as opposed to a completely new strategy where you don't really know the ins and outs yet. Maybe you've done a backtest, maybe you have an idea that you think will work, but you're just at a much earlier stage in that process, and for that reason, there's more knowns about a strategy that you're already trading, and there's typically the path to having something beneficial from the work you do, you should prioritize something you're already trading now first. That's the one way to prioritize a specific task. If it's in that bucket, then I treat that separately.

Michael: 12:01

That makes total sense, right? I don't think there's too much to argue with that, Other than the question then becomes, you know, where is the upward limit to that, right? Because you know that eventually, if you continue to tinker with a strategy long enough, you're just getting into kind of over optimization and, and that type of thing. So there's that. And then I would also clump in with that the kind of process and systems behind kind of running it, right?

Michael: 12:32

So like say you, you have a system and that is working for you and it's making at least a non zero amount of money, right? It is profitable. Congratulations. You're way better off than a lot of traders out there already. So making that the the best and most efficient way.

Michael: 12:49

So it's taking up the least amount of your time and it's doing exactly what you want it to do in the best way possible. That makes a lot of sense. I guess the question would be, where do you know that you're reaching that diminishing marginal returns for lack of a better like, you know, okay, if I spend this system makes me 20% a year and it's got a good drawdown, I'm happy with it. Do I take a couple days to say, okay, I can maybe make it 25% a year? Do I take six months to try to do something like that?

Michael: 13:21

Like, where is it the point where the amount of work I'm putting in for a single system is no longer optimizing that system in a responsible way enough that it's making me more money? Because there's definitely, there's a point there. Just at what point do you kind of draw that line?

Dave: 13:39

Yeah, that's a good question. I think the way I think about it is, am I trading that system with the maximum amount of size that I can? If I'm not, then what's stopping me from doing that? And I might have a few things on that list. Things that questions that I need to answer to improve it, to get to the point where I'm trading with full size.

Dave: 14:08

And And that might, you know, the strategy might have might be further along in the cycle. I'm maybe not trading with full size, but maybe there's something about it that the question is too big or maybe I can't get to full size with that strategy. So you're right, I think there's not a cut and dry answer, but I think just the more mature the strategy is and the longer you've worked with it, you kind of get a sense of, okay, how much meat is left on the bone here and, you know, what's the payoff going to be?

Michael: 14:48

Because, yeah, I think it's one of those it's a bit of a double edged sword, right? There's there's certainly a risk of leaving a strategy partially done and and not exploring some tweaks that could really, really up the win rate or or, you know, rid of some catastrophic losers or something like that. But then there's also, I think, kind of the same exact risk of, you know, I've now spent countless hours on this one strategy to make very incremental gains to the outside. So I like that of of when do I feel comfortable giving this is, you know, a size that I'm comfortable it being kind of the end end game based off the drawdowns that I've I've done in my backtest and all of that. And then it's kind of, okay, what's next?

Michael: 15:33

So, right? So if you've gotten that system good and and you're you're happy enough with it that until you get that moment, which I think we should always leave open, right? Maybe you're trading it one day and a light bulb goes off and you say, I need to go back to it and test this, which I guess compounds this whole problem is sometimes you think you're done and then something kind of pulls you back. But when you get that system good to go, then kind of what's the next step from there?

Dave: 15:58

Yeah, so well, let me back up just one step as you were talking there. Usually traders underestimate how much meat is left on the bone and like I do these trading assessments for traders. That's like they'll come to me with their strategy, and we'll I'll I'll give them a do some analysis, give them an assessment, and show them ways to improve the strategy. There's not a single one of these I've done where there's not significant ways to improve the system. So I know that traders underestimate how much they can improve an existing system that they think is, like, tapped out or as good as it can be.

Dave: 16:49

Okay. There's just there's no question.

Michael: 16:53

Another episode that we should probably make sure we write down right now because that process I think would be very interesting for listeners as well, right? Because if they're sitting there and saying, you know, I've done all that I can, and you're saying, well, in most cases, no, you haven't. And that's just a whole I don't want to go down that tree right now. But that's a whole another tree to go down later is, know, how do you are you when are you fully done at that point? I think, again, that's a whole separate podcast topic.

Dave: 17:23

Yeah. I've I've worked with traders that have completely abandoned strategies that they thought were no good anymore. And we've done an assessment of it, and we've got him I helped him get him back trading live easily. Like, it's there I'm I'm consistently surprised how much meat there is left on a lot of these bones of trading strategies. So that that's that's always been just super exciting for me and really fun to to to help traders do that.

Dave: 17:59

But okay. So let's back up. Let's say that let's say that there's there is really not a left not a lot left to do on an existing strategy, and you've got another one, another idea for a new, completely new strategy. As we said before, the workflow for that is gonna be long, but it's necessary it's a necessary workflow and that you have to be constantly doing this over time. So it's always important to be testing new ideas.

Dave: 18:38

So I would put that a little bit lower priority than improving an existing system just because of that fact. So you think about the payoff from your work that you put into it. The payoff is gonna be could be really big, but it's gonna be a while before you see that payoff. That's the trade off that you have to think about. But both of these things I look at as really high priority things.

Michael: 19:12

Well, yeah, and I think a good example to bring it back to and something we talked a little bit about in the last episode was like running a business or a franchise or something like that, right? So you own an ice cream shop. And, you know, you you've it's profitable, it's making money. I think before you open up ice cream shop number two with the other side of town, it makes sense to like make sure everything inside that one thing is optimized in the best way you can be and is making you the most amount of money. But yeah, there comes a point where that one store can only generate so much income, and it makes sense to then go and open that other one up.

Michael: 19:49

So but I think it also makes sense with the level of difficulty, right? It's way more difficult to set up a brand new business, even though you have a kind of a framework on how you kind of systematize the old one, than it is to get that old one dialed in. So, yeah, and I think, you know, just from a broad level, we're going down this tree, right, where it should always be what is the least amount of time for the most amount of kind of immediate reward that you that I think is a good framework to go. It's like, again, optimizing a current system that you're already running and doing some tweaks and everything there, you are going to see those benefits way faster than going all the way to a new strategy and going through the exploration phase and going through the testing phase and whatever. And like we know, dollar today is worth way more than the dollar tomorrow.

Michael: 20:40

So I I think that's a good framework. I don't know if I'm, you know, getting ahead of myself, but I think that's kind of where you're going at is trying to get systematized the what am I going to work on part of things.

Dave: 20:51

Yeah, I think that's generally true and I think it's a good way to think about it. The other thing that I think is important to think about that doesn't necessarily correlate to, you know, time spent to pay off, like I'm optimizing on that, is just enjoyment. Sometimes you get a lot of enjoyment out of certain projects versus others. And there's a lot to be said for, like, enjoying what you're doing and really getting a kick out of it. One of the things I get a kick out of is like working on new strategies, doing backtests.

Dave: 21:28

There's something that there's some sort of feeling I get when I run the first backtest for a new system and just all the possibilities and, you know, all that could come from the decisions I'm getting ready to make in that process, that's just really fun for me. So, yeah, I am going to, you know, take that into account. It's not just, you know, time in is money out. Like, I wanna think about the enjoyment part of it as well.

Michael: 21:59

Well, that's what I I smiled when you said that because that's the same thing for me. Right? It's like, for me, the fun part is, you know, researching and watching content and trying to come up with a new idea and then testing it and getting that kind of gratification of, okay, there's something here that I can now sink my teeth into. And then the boring but necessary part of it is kind of the rest of it, the, the tracking and the fine tuning and optimization and reconciliation, all that that's kind of like the, the eating your vegetables as opposed to, you know, if I, if I read a sub stack, and then someone's talking about this kind of new strategy they have, and then I take that and I test that myself and there's some promise there, that's that's like that's the ice cream. That's the thing that I wish I could do more of and then pass off the other side to, you know, to an assistant or something like that.

Michael: 22:48

Yeah. But yeah, you've got to do the other side, even though it's not the most amount of fun. But I think that's why it's important that we're talking about now about systematizing all of that kind of process and, you know, finding a way to refine current strategies and do all that, because even though it's not probably the most fun thing, necessary, right? So you got to spend your time doing that regardless of whether or not that's what you want to be doing.

Dave: 23:15

Yeah, well, you know, some of that, the plumbing work or workflow work, you know, process work, I think is fun. And I think it's fun because it affects all your strategies. And that's another bucket of types of to dos and projects that I think differently about because the payoff is usually maybe even longer than creating a new strategy, but it's gonna pay off for all of your existing strategies and any new ones that you create in the future. So the more you can focus on your workflow, your process, the more powerful that is. So I almost think that there's even more potential there than a new strategy when I'm thinking through that.

Dave: 24:08

So that part is exciting to me. So the one really powerful way to think about it is sometimes you can create a new strategy by using a new process and sort of kill two birds with one stone. So, like, let's say this particular trader, he has on his list to learn Amabroker. So use Amabroker as a back tester, get well versed in it. He also has some new ideas that he wants to test.

Dave: 24:49

So one of the things you could do is to basically kill two birds with one stone, create a new strategy in Amibroker, and you're learning a new technology for him that could pay off for every strategy he's trading now and every new one he creates, and he's creating a new strategy doing that. So that, I think, is a good combination because, you know, anytime you have something that works now, I'm hesitant to change it too much. So when you're thinking about these big ideas and you're thinking about transitioning to a new backtesting platform or a different trading platform, I always want to try to come up with a new idea for that new technology. So rather than try to rip out and change everything you're doing to make a huge migration to something else, always look to see, is there a way to make this purely additive to what you're doing? So there's a lot of advantages to that because if it's completely additive, that's good.

Dave: 25:59

There's a lot less risk. But if you're So it's just a much better way to do it because you can compare to what you're doing. You like, you have this natural way to compare your existing system with this new way. That's a really nice way to introduce new changes. So it's just you know, workflow improvements are something I prioritize a lot, and I think about those in a different bucket, but they are very powerful ways that have big payoffs, but it's typically down the road.

Michael: 26:39

Yeah, so, you know, just a little bit less quantifiable, I guess, than anything. But yeah, like for the example of using Amnibroker for the first time is that may not only open up new things to do, which is super fun, but as you're learning, and this is something I did when I was learning RealTest, you learn about functionality and things that you may not have thought was super possible before. So then you're going back and you're saying, now how can I kind of reiterate some of that old stuff with it, even though I'm, I'm using this new process? I also think learning something new on something new just makes it more interesting as well, right? Yeah.

Michael: 27:21

Because, you know, you're not I think it'd be very discouraging if you took your current process and you poured it over to Amibroker and like maybe found that it was worse and you had to figure out why and you have to go in and test that because you already have this this kind of gold standard thing and you're trying to pull it up to it as opposed to exploring in a new thing. I think it just it just makes things a little more interesting.

Dave: 27:43

Yeah. Yeah. Anytime I work with a new trader, I'm very hesitant to have them make changes about something that they're already doing Mhmm. Unless it's just completely obvious. What I would like to do what I always try to do is, alright, let's create something that's completely additive to what you're doing.

Dave: 28:04

And just there's there's a lot that percolates when that happens. And just like you said, like, oh, there's different ways to do it here. Let me you know, I'm so used to doing it this this other way that, like, there's a lot of things you start thinking about when you add new stuff to that. So that's always a good way to think of it.

Michael: 28:25

So, you know, just to kind of keep going down the framework, right? So you work on existing things first and then and then maybe process and then maybe down to down to new things. Let's just do a a pure kind of hypothetical of you have four ideas of strategies to go on. You haven't tested any of them. You haven't done any anything.

Michael: 28:48

And, you know, you have to explore which one you think is going to be the most bang for your buck, hopefully in a pretty quick way, because, you know, if I have four strategies and one of them turns into a gold mine, I am going to spend I'm gonna wish that I spent all of my time on that, but obviously I'm gonna need to do some surface level of testing to try to see which of these hypotheses could be the best one. So how do you approach that? Just a broad back test on all four and then dive in the best one, or what do you do from there?

Dave: 29:20

So from that point, here's how I think about it. How much is the how many trades are gonna come from each of these strategies? I would prioritize the one that I thought would have the most number of trades. So that means a day trading system. I mean, I just know a day trading system is gonna make more money than a longer term system.

Dave: 29:43

So I would prioritize that one. So I would think about that. I would also think about how you know, as you as you get more experience trading, you are gonna have varying levels of confidence with certain ideas that you haven't even tested yet. So you should have some sense of confidence. You're not gonna be perfectly confident, but you should have some idea, okay, this one has more legs than this one because of x y z with the experience that I have.

Dave: 30:25

So I think it's I I think I think it's pretty rare that you're at a point where you've got four ideas and they're all exactly equal in your mind. I would say that's pretty rare, but the first thing I would do is think, okay, how many trades is this gonna produce for me? And I'd work on that one first.

Michael: 30:48

That makes sense. So Oslo is gonna have the most room for optimization, right? You have more strategies, you can you can dive in there. The only thing I might kind of add to that, again, I won't touch the comment of day trading always makes more money than anything else. We'll leave that for for another debate.

Michael: 31:06

But the I think maybe another counter to it might be is how how long do you think it will take you to get it to a usable format? And that's kind of what you said, but a little bit with intuition, right? If I think strategy A is, you know, gonna have hundreds of thousands of trades I can optimize. But strategy B is something that I've been doing myself or someone that, you know, I know and trust as a trader is a is a real trader, and has been doing it that way, then maybe I'll gravitate to that a little bit. And then also the complexity of it, right?

Michael: 31:38

If one strategy with millions of trades is a really complex strategy, it's gonna take me a while to get the kind of coding right. Maybe it's something subjective like patterns or something in the market. And then the other one is much more simple, know, for example, it's like a moving average crossover system. I know it's going to take me one tenth of the time to do something very simple than it will be to build something very complex. So that's the other kind of level I would put into it.

Michael: 32:04

Always go for the one that you can kind of knock off the quickest, right? It's how I deal with like my life task list too. If I've got 10 things to do, one of them is answering an email, right, I'm obviously just going do that first just to kind of get out of the way.

Dave: 32:17

Yeah. So as you get more advanced and have more strategies that you're trading, the other thing that I think about is coverage. So what do I mean by that? Like, if you think about the trading day, you've got the premarket, you've got the open, you've got regular time hours, and then you've got the close, and then you got post market. I think about, okay, what part of that day do I not have a profitable strategy covering?

Dave: 32:52

Like, what what you know, I wanna have coverage over as many parts of the day as I can. So I might look at I might step back and think about all my strategies that I have live and the sizes that I'm trading them and think about what I you know, where I'm missing. What parts of the day am I missing coverage?

Michael: 33:13

Mhmm.

Dave: 33:13

And what can I do to create a strategy that will cover that part of the day and the moves around it? So that's, I realize that's a bit more advanced, but that that is the way that I think about creating multiple strategies in a day trading context.

Michael: 33:33

Yeah, and I'd say I it's the same thing for me from, you know, swing trading and long term trading. If you know, if you have a good trend following system, that's great, but there's gonna be periods of time, especially longer term in the market where trend following doesn't work. So it's good to take that and maybe layer that with a mean reverting strategy or a pullback strategy. So yeah, I think there's a lot of similarities there where you want to shore up your weaknesses the best you can and kind of go through and say, okay, yes, this is this is something that I think will will be more profitable or make more sense than than than that because Yeah. Goal is to always be trading something.

Michael: 34:12

So especially I have, you know, in some of my trend following strategies, there's just periods of time where they just shut off, right? And then there's just nothing to do. Right. Or there's just no triggers that day. And that's even more frustrating than anything as the swing traders, okay, you got nothing to do this week, right?

Michael: 34:26

So it's very important to, you know, be able to go back and be able to take some kind of trade. So yeah, if you have a system that's not doing anything for if you're a day trade for periods of days or if you're a swing trader for periods of days or weeks, then, yeah, definitely make sure you're you're trying to plug that hole the best you can.

Dave: 34:45

Yeah. Mean, the way the way I think about it there, like, in a perfect world, your buying power would be completely consumed all the time Mhmm. With profitable strategies that you're, you know, maximizing usage of. So in your in your swing trading example there, I would look for, like, where the where the system is turned off or where you're not getting trades for a week or even more at a time, like, what can you do to plug that hole and create a strategy that trades that specific period so that you're you're using more you're having more efficient use of your buying power.

Michael: 35:27

Yeah, because, you know, you're talking wide breadths of market during, you know, great financial collapses and .com bubbles and all this that, you know, if you're doing a simple system of looking the stocks to break out, well, not breaking out, right? So during that period of time, so it may just be one of those, you know, again, mean reversion or short term trading or even doing some sort of something with long and short. But, yes, I think finding that and and looking for how different your strategy is, I think is very important as well. Like if you have a mean reverting strategy or a trend following strategy that takes fifty two week high breakouts, it doesn't make a lot of sense to me to spend your time going and looking for another strategy that's also trend following. It's also looking for breakouts, even if it's a slightly different metric, because there's going be a lot of overlap there.

Michael: 36:15

So there's a lot of assumptions you can make to say this is going to be different enough that I think it's worth my time as opposed to just another breakout strategy on top of the the one that I already have.

Dave: 36:25

Yeah. That's true. So so this whole conversation reminds me of a concept that I implemented at Trade Ideas to prioritize the work being done there. So that's obviously a software organization that I was running. It's a very it's actually a similar kind of problem.

Dave: 36:49

Right? You've got a whole bunch of stuff you could work on. Mhmm. But how do you prioritize what to work on? And you can't just say, okay, well, what's the latest thing that the CEO brought up?

Dave: 37:03

Well, no, he brings up stuff all the time and it goes into big backlog. So how do you prioritize? You can't work on everything. So what do you do? There's actually a good generic rubric that we implemented there that I think would benefit creators as well.

Dave: 37:19

Like, it's a good way to think about it and it's kind of a standardized framework. So it's a it goes by the acronym ICE, I c e.

Michael: 37:28

K.

Dave: 37:29

And there's three factors that contribute to priority score that you can assign to each item in your backlog. In this case, you know, each thing that the trader could work on. And ICE stands for impact, confidence, and ease. So each one of those has a different sliding scale. So how much impact, if this thing worked, would it have on your trading, on your on the, you know, the the software product as it were that we were working on?

Dave: 38:11

And then the second one is confidence. How confident are you that it's gonna have that impact? So that's there's a whole sliding scale there. There's some things that you can be more confident in than others is gonna have the the impact that you think it could have. Right?

Dave: 38:29

The last one is ease. So how easy is it to accomplish this task? There's a whole range of ease and the difficulty of which to accomplish the goal. So there are these three sliding scales. All of those contribute to a score.

Dave: 38:51

So something that had a high impact, that you were confident in, and that didn't take a lot of effort to do that was easy to implement, that got a really, really high score. But something that was, say, also had potentially a high impact but you weren't quite as confident in, you weren't sure of it, and that you knew it was going to take more effort to accomplish, that gets a lower score. That gets a lower priority score based on that. So we had our whole backlog. There are hundreds of things in there.

Dave: 39:29

We had our whole backlog scored based on that. So you could easily see the stuff that you should be working on based on that priority score. Again, it's impact, confidence, and ease. So I think you could use that and create your own little rubric as a trader to use literally a metric of a priority score to figure out what to work on. I think it's useful to think about.

Dave: 39:58

It was very powerful at trade ideas. Mean, sort of revolutionized how we work and how we've figured out what to work on. And it's standardized in a way that was just very impactful.

Michael: 40:12

Yeah. Love that, right? And as someone who worked at trade deals, I remember filling those out. And it's good because it kind of answers all the questions that we we just went over, right? Is it the whole kit and caboodle could be done if you sit there and can come up with some sort of scoring mechanism.

Michael: 40:32

The only problem, the only thing you have to work around is you have to be very honest with yourself about what it is, right? And because it's each of those metrics could be subjective and argued, You just got to make sure that when you're doing it, you know, you're in a decent kind of headspace with all that and you're able to go, okay, right, I'm going to be, you know, blunt and honest because it might be the thing that scores the best on that is something that you absolutely don't want to do or you know it's not going to be as much So make sure when you're filling out something like that the fun aspect doesn't leak into as part of it, right?

Dave: 41:10

Yeah, well that's the I knew that was a risk. And so I had one person doing the scoring for the vast majority of the stuff. Mhmm. And then at least they can be more objective than if you had anybody being able to score it because what would happen is, of course, everybody's pet projects would all of a sudden be really easy, have high impact and really high confidence in it, right? And so the score would be good.

Dave: 41:37

So yeah, you have to standardize it. The thing with traders is usually it's one person. So you can have one person doing that. I mean, it's you. No incentive to fake some prioritize scoring when it's just your own self and your own trading.

Dave: 41:56

But yeah, you bring up a great point and that's totally true. But yeah, so we'll put a link to that in the show Yeah,

Michael: 42:04

was going to say the perfect example of that, right, if you were filling out like a dietary score for yourself, right? You know the thing that's gonna, you know, make you feel the best and make you the healthiest in the long run, but then if there was some sort of way to manipulate the scale to that ice cream would always go on it, you'd figure out a way to do it, which it's just part of that. At the end of the day, right, it's your business, you're building the things, that certain kind of level of honesty has to kind of land with you regardless of what system you come up with for prioritization. Yeah,

Dave: 42:33

we'll put that's called the ICE method. We'll put a link to it in the show notes. There's a variation of it called the the RICE method. It it adds reach as another part of the scoring. But, yeah, we'll put a link to the show notes.

Dave: 42:50

I think it's pretty interesting. It's it's worth going and looking at and thinking about for a while, seeing if it's a a good way to incorporate into your grading.

Michael: 43:01

Well, yeah, and I'm I am super glad we did this because what I'm going to do later today is I'm going to go through. I've got my short list of things I want to work on, and I'll just going to build myself a little system like that. Because like with everything, like with trading, like with everything we talk with systematizing, as soon as you build a little system like that, it frees up a lot of your brain because I no longer have to look at that ever growing list because every, you know, we talked about this in a way early episode, every time you get an idea you throw it on the on the list, but I don't have to I don't have to think about that anymore. I'll just go down, I'll have them sorted by which one's the highest up in the list, and then I'll just start doing that. The last question I want to ask before we go is so just because it came to me, so you get an idea and you sit down, you do that exercise and that idea is ranked above what it is that you're working on right now.

Michael: 43:52

Do you shelf what you're working on right now and then go to that or is the process you finish whatever you're doing at the moment and then go to the next kind of project later?

Dave: 44:02

That's a good question. I think that's very person specific. The only thing I'll say there is context switching is hard. So it's harder than most people think and you lose a lot. I mean, there's been so many times, like, wish that I would have documented certain things like about how, like, maybe a certain question I have about a strategy or certain roadblock I have in specific strategy.

Dave: 44:35

I wish I'd have documented everything about my thought process, why I'm stopping work on this for the moment, going on to something else. It just makes the context switching much easier to get back into. And there's just lots of times where that's been the case. And you can just a few notes at that point before you move on to another project can be very, very helpful for you to jump back in and be productive really quick when it's time to jump back into it. So, yeah, that that's how I would think about that.

Dave: 45:10

But, yeah, if you're objective with the way you prioritize things and you've all of a sudden there's a new project that has the highest priority score based on what you've decided to do and implemented, yeah, there's no reason you shouldn't work on it. Mean, that's kind of the whole point, right?

Michael: 45:28

Yeah, I guess. Yeah. And it but what I mean, what I may add as part of the system is that it's got to be a big enough threshold because I may even subconsciously fudge those numbers if I'm getting bored with what I'm working on. Yeah. To the new things.

Michael: 45:41

But this is again, this is great. Again, something that I'm going to implement. So hopefully something that you guys can can take away from this as well, where, again, you you now have a game plan, just go through your current list and rank all those things based off that metric. And then you know what to do with next so you're not spending your time just kind of waffling around. So anyone, any other thing to leave anyone before

Dave: 46:04

we

Michael: 46:05

take Well, it'd be

Dave: 46:07

cool to see the to dos that you come up with and how you prioritize them. That'd be a great idea for a future episode. It reminds me so there's a good family friend of ours whose daughter is sort of famously the most recent movie she's seen is always her favorite. So it's like the same sort of thing that your most recent idea is going to be your favorite and you want to work on it. So I think it's a similar thing where I think it's good to have a system to kind of step back and keep track of the things that you might work on and have some system for prioritizing.

Dave: 46:48

It's an important thing, an important skill that you'll get better at over time.

Michael: 46:52

Yeah, and it's right. It's the dog chasing the squirrel or to use the Canadian analogy, right? You skate where the puck is going instead of instead of trying to chase it because yeah, and you know, this has been to be blunt with the whole audience. This has been great because it's I've kind of felt and this happens over time, you feel you get kind of overwhelmed, I think with the amount of things you can do. And the worst thing that can happen and it will happen to you sometimes certainly does you end up doing nothing, right?

Michael: 47:20

Because you look at this kind of really daunting list and you're like, of which one of these do I want to tackle today? And then as we mentioned in the beginning, you have everyone has something going on in their life that's limited the amount of time they have to work on this. It's really, really important to make sure you're spending that time effectively. So again, I think this was a great episode. But as always, you know, comments and emails to us and everything is fantastic and certainly helps us, you know, guide the show and we always love reading the feedbacks that we get.

Michael: 47:51

So thanks for people for tuning in and as always I'm Michael Noss.

Dave: 47:55

And I'm Dave May. Hope you join us next week on Line Your Own Pockets.