With the new year just around the corner, I'm sure many of you are already planning how you're going to do things differently in 2006, including trading. So, what better time than now to address one of the most common questions we get - how does a trader setup his or her workspace? The reality is that we could write books on that topic alone. Today, though, we'll just hit the key points you need to think about between now and next year.

Any Structure Is Better Than No Structure

One of the first questions everyone faces in trading is whether or not any kind of workspace/software/analysis tool is even needed to be a trader. Theoretically, no, all you need is a broker. But in reality, this game is just too hard to be winging it. So, at the very least, there has to be some sort of core process or focal point for your trading activity. I'd estimate that for 99% of us, our core resource is our software and/or our data feed from our brokerage firm. Since we all can (hopefully) agree on that much, I won't belabor that point. However, there are some key components that every piece of software must have. These are:

1. The ability to simultaneously display multiple charts in multiple timeframes. If you can't do that, doing complete analysis can get real old real quick. At a minimum, we're looking at daily and weekly charts at the same time, and even intra-day charts when applicable.
2. A watchlist is essential. There are always more potential good ideas than actual good ideas, but you never know immediately know which ones are which. If you don't have an easy way to track them all, you'll probably miss most of the good ones.
3. A portfolio tracker of your real trades is also essential. Managing your open trades is half of this battle, but if you don't know what's going in, then you can't properly manage your account.
4. Finally, there has to be some sort of consistent way of getting trade signals within your workspace software. If you have to leave your workspace to go look for trade ideas, you're apt to wander aimlessly....and waste time.

Less Is More

That list of 'essentials' seems like a pretty big one, but it's really not. In fact, we've gotten most of our portfolios boiled down to just four screens.....two for charts, one for the watchlist, and one for the actual portfolio of open trades. And all four of them can fit on one computer screen at a time. The only other thing we don't have 'up' all the time is our trade signal scanner, but that's just one click away in most cases.

We use several pieces of software, but one of the key ones we utilize is TradeStation. For an example of our typical workspace, click below the following link: http://www.bigtrends.com/122205workspacesample.gif.

See anything interesting about that workspace? A lot of you may have been surprised to see just how simple and minimal it was. By the way, our 'buy' signal automatically appears on our weekly chart, eliminating the need to go elsewhere to find them.

Granted, for some of our other services that trade spreads, or where we need to know about the option 'greeks', we may look for a few more details within our workspace......but not a whole lot more. The point is, your software has to be something you can actually utilize, which brings me to the key point........

Over the last few years, trading software has become tremendously powerful. Anything you can even think you'd want, you'll find it. In fact, there are more trading bells and whistles out there than anybody could ever fully explore in a lifetime. However, I caution you against being enamored with bells and whistles. In my observation, using complex software is almost becoming the focal point of trading, rather than making money. And as such, trading software has almost becoming more meaningful for computer programmers than traders. Tools are great, but never forget that your goal is to buy low and sell high. If knowing that the "Detrended Price Oscillator is under zero" helps you make more money, then great - use it!. But, nothing really says 'bullish' quite as much as a chart that's moving higher. That's why we try and keep things as simple as possible. Remember, less is more.

Less Typing, More Clicking

Every barrier you put up for yourself just makes it that much more difficult to trade effectively. And, using a keyboard can indeed be a barrier. Even if the only typing you do is typing in a ticker symbol for a chart, then it's still too much. How's that? While the physical motion of typing may only seem minor, it's not. If you have to do it several hundred times a day, you'll eventually stop doing it. The mouse is a much more effective way to navigate through your software, so, use it whenever possible.

Perhaps you're wondering how. In most of the newer trading software, there is a 'linking' option between charts, watchlists, and portfolio positions. That just means when you click on a stock symbol, all of the charts (and maybe even a news or data screen) reloads for that particular symbol. Literally, you can sort through an entire watchlist, look at multiple charts, and even scan news headlines without ever touching the keyboard! What took several minutes (or longer) now just takes a few seconds......which means you'll actually do it. If you have a linking option, and if you have workspace tabs (as you saw on the bottom of our TradeStation workspace), please set them up so you can view everything you want to with little or no typing.

Sound crazy? I don't blame you for thinking it, but I promise you, once you do it, you'll never go back. It's a HUGE help.

Things That Are Nice

While I don't consider any of these items essential, we highly recommend them if it's at all possible for you to have them with your workspace.

1. A technical system builder or system tester. Are you trading on a hunch, or is a particular technical signal a proven winner?
2. The ability sort or scan by technical or fundamental criteria. Can you actually find the viable trade candidates?
3. Real-time data. Actually, real-time data is a two-edged sword. If you're going to see it and then act upon it, then it's great. But, if you're just going to be hypnotized by it and watch the quotes stream by, then it's a liability. In that sense, real-time data can be over-rated. I've known plenty of delayed data (or end of day) traders who have outperformed real-time traders.

Things You May Not Really Need

1. Level 2 data. I've always felt that bid sizes and imbalances in the buy/sell balance are reflected in price changes, which makes level 2 data somewhat unnecessary. The exception may be for the scalpers or institutions who are trying to scrape up a few pennies.
2. Expensive software. In general, you get what you pay for, but there are a lot of exceptions to this rule when it comes to trading software. I've seen overpriced, underpowered software, and I've also seen free software that works very well. Be sure to test drive everything you're considering before actually paying for anything. And, don't assume you have to spend a ton of money to use effective software. The only thing your workspace has to do is work for you, which means it could cost little to nothing. That said, don't be afraid to spend a little money to own software that can make you a better trader - it will pay for itself.

That's all for now, although I'm sure we'll be looking at workspaces again real soon. It's nine days until the new year, which should give you just enough time to get your workspaces revamped for 2006.

Price Headley is the founder and chief analyst of BigTrends.com.