You Must Have a Pre-Trade Routine
By Jay Norris
A pre-trade routine is essential in your journey to become a better trader!
At the top of the list should be physical exercise followed by peaceful reflection. This will insure that you are first wide awake, and next in a positive frame of mind for work/trading. If you are too tired or sick to exercise, then you cannot trade that day. Likewise if in the course of your reflection, or meditation, you realize you are too emotional about an issue in your life, then again you cannot trade that day.
Next should be a market analysis exercise to categorize from the highest to the lowest the different trends in the markets you are considering trading. It is essential that you start out on at least the weekly chart, and work your way down to the daily, the 4-hour the 1-hour charts, recording the current trends on the different time frames, and the other influential market info such as price reaction and momentum. It does not matter what time frame you trade because this exercise is not to glean actionable information, but to provide reference material, and to slowly draw you into trading perspective, rather than have you just sit down and try to start trading straight away. Over time you will start to notice how this “top-down” exercise will improve your trader’s intuition. You will recognize which time frame support and resistance the markets are respecting , and you will see how helpful it is when gauging direction in a market to wait for higher time frame confirmation. You will also start to see how larger market moves generally set themselves up well ahead of the actual price movement. You will also start to see how little fundamental news actually influences the trends on the higher time frames other than to support them. When you are doing this exercise you will also need a pen and paper in front of you to jot down notes to yourself. You’re intuition if very powerful and when the time comes to make actionable decisions you will find these notes to be very helpful!
Once you are ready to trade you will also need to have an exercise to refresh yourself every hour-and-a-half or so. Sitting on the screen and maintaning a relaxed yet focused state, and adressing a myriad of actionable decisions can wear on you and you will need to have a simple,easy to do exercise to keep the happy endorphins flowing through your system and your energy and focus levels high. A simple thing like a stretching exercise, or light workout, while still watching the screen is a great idea. One of the hardest things to do in trading, and one that will doom you if you can’t achieve it, is the ability to let a profit run. Day-traders especiailly need to aquire this skill. The only way to achieve sitting through a sideways market, and watching the market cycling back and forth above and below your entry, while waiting for that next move which will take price to your initial objective and net you anywhere from 25 to 40 pips per contract, is by exercising patience and calmness. The key to a disciplined mind is a healthy body and vice versa. The way to that balance is to practice it multiple times a day!
Most important you need to remind yourself that you have an open mind and more times than not the answers to questions you seek are going to be more simple than you thought. Over the course of your trading journey you will discover that so many of your preconceptions were wrong, and so much of what the “experts” you followed had to say turned out to be not for you. Luckily for all of us we were programmed from the begining to succeed, and our intuition is very powerful! And the most important thing of all to be grateful for is the advent of free charts, demo accounts and micro contracts, so we can back-test and confirm our studies before we risk a portion of our hard earned savings in the market place!
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Jay Norris is the author of Mastering the Currency Market, McGraw-Hill, 2009, and a principal in Trading-U.com
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments.