Backup Plans

A friend of mine has been having some technical problems, which has reminded me of the need to review my own trading set up and backup plans. Trading is a very technology dependent activity, and as anyone who spends any time with machines knows, technology doesnít always work. Every trader should have a well defined backup plan for those moments when things go horribly wrong.

The extent of your backup plan and the resources you put behind it depend on the type of trading you do. If you are a full time day trader making your living from the markets, then it makes sense to protect yourself and your income as much as possible by eliminating each single point of failure from your trading setup to enable you to continue to trade even following the loss of any component part (PC, internet connection, and so on). In such a case you would want to install an Uninterruptible Power Supply (UPS) to keep your PC running in the event of a power cut, or perhaps trade from a laptop which would give the same benefit. You would have a telephone line available for emergency internet access in case you lose your main connection, and you may even want to have a second PC configured with your trading software so that in the event of a complete hardware failure you can continue to trade.

Keeping these details on a PC will not be much use if itís the PC that breaks

It is not just the full timer who needs to take precautions though, everyone who trades actively should take some simple but very sensible steps to ensure that they minimise the risk to their capital in the event of technical failure. At the very least, every trader should have the means to close out all of their open positions at any time. Most brokers will allow you do to this over the phone; there may be a charge for doing so, but when offset against possible losses that could be incurred by letting a position run unattended this is almost insignificant. Thus the most basic backup plan is to have a mobile phone available, or to know where the nearest call-box is, so should you suffer a power failure or loss of landline, it is still possible to call the broker and close out positions. Remember also to keep your brokers phone number written down, along with any account numbers, and to know exactly where the piece of paper with this vital information is located Ė keeping these details on a PC will not be much use if itís the PC that breaks.

Finally, I would recommend testing your backup systems at least once a month. If you have a secondary ISP, you donít want to wait until you actually need to use them to find out they went out of business last year, and a UPS with a worn out battery is not going to be of much use in a blackout!

Harvey can be contacted via his website, where you can also read about his day trading course

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