Most traders be it Swing trader,Day Trader i have interacted during my training session do trading on the fly, take a position when it “feels right” or “Based on Intuition” Not preparing for what lies ahead for the day, week or month can be a costly proposition and can eventually bust your trading account.Most of traders have no trading plan, checklist to prepare for the trade they are going to do. Most of professionals traders spend two to three hours before the market opens and prepare themselves mentally for the trading day. It only shows how serious they value their work and money.
No trading is complete without a routine to make good trading habits in preparation for the trades. No good trading results come from lack of preparation.
Once a routine is carried out consistently, trading success will come consistently.
Lets discuss basic checklist which every traders especially new trader should follow below the start of trading day. This is not a “Holy Grail” and Modifications can be made accordingly to the trader’s preferences , trading style (day, swing, position) . Knowledgeable retail traders can take advantage of these things in order to profit consistently.
Before Market Opens
1. Check the day’s economic calendar for any economic reports like IIP,Inflation, RBI policy in domestic market and PMI and NFP numbers in overseas market. Also check the Result calendar in Result seasons as to get heads up on the stock declaring results on that day. This will forewarn traders about the potential swings which can be seen in stocks if results are very good or very bad.
2. Check the chart for price action. Normally trader need to check to see if the prices have violated any support/resistance area or any numbers that he considers important enough to confirm or reject the current direction or market conditions. The most popular indicators and tools used are:
f. Gann Price and Time Levels and Any Important Astro Date
3. Write a trading plan – This step provides the trader to write out his plan for the day, how many trades, how much to risk or make, where he’ll be taking the position and where he’ll exit, and how large the position size he’s going to take.
During market hours
1. Do a quick mental self-assessment to determine whether I should trade that day.
2. Set alarms (Either to your broker or in your trading software) to notify crucial levels to trade to change positions that need to be made.
3. Watch news channels (optional) such as CNBC or Bloomberg in” Mute” to make sure there are no sudden economic or political news around the world that may impact market movements such Rate Cut , European QE, or terrorist attack etc. Do not listen to analyst on TV we need to have as much less noises as possible.
5. Take positions as dictated in the trading plan. If the setup had appeared during the trading session that was written in the trading plan, execute it accordingly.
6. Only focus on my trade plans and existing positions, do not get distracted by market noises especially on Social Media.
After market hours
1. Analyze how you have traded that day by making entry in your trading journal, was it according to your plan or not. If you went against the plan analyze why you did and promise to yourself not to repeat the mistake again.
2. Repeat routine of market review and adjust trade plans.
3. Write/Revise the trading plan for the next day, which stocks/ index to buy/sell, how many or how much, and tactically at what price to buy/sell and exit.
4. On weekends and trading holiday spend more time in learning and understanding your trading psychology and spend more time in learning new techniques and strategy and widen your trading knowledge.
Trading is 20% strategy and 80% psychology
- If you have great strategies but you overtrade when you’re feeling excited and undertrade when you’re not, you will fail.
- If you have great strategies but you don’t follow up with a system to monitor and improve your execution, you will fail.
- If you have great strategies but you are not mentally ready when a good opportunity does appear, you will fail.
- Instead, you follow the same process every day so that your psychology remains stable and your trading is in tune with the rhythms of the market.
- Fair warning: process is profitable, but it ain’t sexy. The rest of this answer will probably be of interest only to another trader.
It’s not mainly about checking everything and read all the information out there before the market opens. It’s about be satisfied with the retaining content that works for the trading system. But most important, creating a routine that becomes the foundation in building success in trading.