Many Traders wander aimlessly through their trading day, taking new trade positions on the fly, just because it “feels right”, especially in the excitement of the moment when the price is moving without them.
It can be a costly habit, entering a trading day being unprepared for what lies ahead, without a Trading Plan or even a Traders Daily Routine checklist. When you consider that professional traders prepare for 2 or 3 hours before the markets opening bell, it shows how serious they value their work and money.
Good trading habits can only be formed by repeating a good preparation routine. Only when the routine is carried out consistently, you can expect consistent trading success.
I have developed a basic Traders Daily Routine checklist to get new traders started. Changes can be made depending on your trading style (day, swing, position), if you trade more than one market, or if you are and End of Day Trader because you not able to be trade during market hours.
The time before the market opens is crucial for getting an overall feel for the day's market, finding potential trades, creating a daily watch list and, finally, checking up on existing positions. Here is a summary of how I prepare Pre-Market:
- Journal - Self Analysis before trading
- Evaluate the Market Trend (bullish/bearish trends on multiple time-frames)
- Overall Market Sentiment (bullish/bearish sentiment, key economic reports, inflation, currency, etc.)
- Sector Trend (hot or weak sectors, growing sectors, etc.)
- Open Positions Review (news, earnings, etc.)
If you are an EOD trader you can perform you Pre-Market Overview in the evening, after the market has closed.
Find Potential Trades
Next, the trader will scan for potential trades for the day. So whether your Trade Entry Method is through Fundamental Analysis, Technical Analysis, or a combination of both, it is key that you follow your trading plan. Its also advisable that you set up scans that will filter all the stocks to a manageable list (10-30), that meets your criteria, in matter of minutes.
I like to keep it simple and look for the following:
- Sector, Indexes and ETF plays: - There are exchange-traded funds on nearly every Index, Currency, Commodity imaginable. I think indices and ETF's are a great place to start, in general they may not trend as powerful as some stocks, but they don't gap as much, the spreads are usually tighter and there are even tax advantages. Also to become an expert in a select group of ETF's or indices and how they behave, can be a great way to cut your teeth in the markets.
- Stock opportunities: - I like to be more selective when looking for new stock opportunities, and only action the best of the best opportunities.
Make a Watch List
Next you will want to weed the list of possibles, down to a focused Watch list of quality opportunities. While filtering does focus you on stocks the meet your criteria, not all signals are equal, so weeding out the weaker signal helps you focus on only the quality signals. Some traders like to keep a Clipboard of even something more visual like White-board next to their trading computers with a categorized list of opportunities, entry limit prices, profit target prices and stop-loss prices for the day.
Check Existing Positions
Its a good idea, in the pre-market hours, to check up on your existing positions, if you are able to. Things to check are:
News specific to your open positions.- If there is, you have to determine whether it affects your position & adjust your stop-loss and take-profit points accordingly.
Continued Next Week........
This concludes the basics of a great Pre-Market routine, enjoyed it and can help accelerate you on your desired destination.
Stay tuned next week, for Part 2 of this Blog Post "Traders Daily Routine Checklist - Are you ticking the Boxes - Part 2", where I will discuss the routine for Market Hours & After-Market.
I hope that you are enjoying this blog series on the “Top 10 questions a Trading Plan must answer“. Below are all the posts in this series:
- What are your Life Goals & Trading Goals?
- What is your Trade Entry Method?
- What are your Trade Exit Methods?
- What type of orders will you use to enter & exit?
- What are your Money Management Techniques ?
- How will you manage your Position Risk versus Reward?
- What is your Process for Open Trade Review & finding New Trades Picks?
- What is your Trading Success Profile?
- How will you Review your Trading System to measure & improve?
- What is your Trading Daily Routine-(Part1 & Part 2)?
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