Today we want to discuss the importance of having a daily trading routine as part of our overall trading plan. Regardless of what you trade – Stocks, options, futures, metals, or forex you should have in front of you a routine that you follow on a daily basis as you begin to trade. This does not need to be an extensive list of things but should include some of the important things you will need to do when trading. Think of it like a pre-flight checklist where you are checking everything out to make sure you are ready to fly and that your plane is safe. So with regards to this let’s discuss some of the things you may want to include in this checklist.
The first thing that you should consider, and the most important thing, is what is happening to the current positions that you are trading. This of course is where you are either making or losing money and where you need to make the decisions as to staying in a position or exiting it. The first thing to look for is to see if you have any positions that have been stopped out or hit your profit target. This will do a couple of thing for you including knowing how well you are following your rules. If you are constantly getting stopped out you will want to examine why this is happening. You will then want to identify any stop or target adjustments that are needed, based on your rules. This will also help you with your position sizing as it will tell you the amount you currently have at risk. After you know where your current portfolio is sitting you will be able to move the the next step.
The next thing to consider is how much more you are able to trade. If you have a specific amount of total risk you are using you will want to know how close you are to that level. So if you are only willing to risk 10% of your overall account at any one time and you currently have 5% risk you will know you can risk an additional 5% to stay within your limits. This is where you can spend some time reviewing charts to determine which ones might be setting up for a trade based off of your setup conditions.
In this step you will look at the chart and make the evaluation as to the setup based of you your current trading rules. You will look at the trend, support and resistance, volume and any other indicator that you might be currently using. Once a setup has occurred you will then take the necessary steps to place the trades into your portfolio.
After this step you will begin the monitoring process to make sure you are making the necessary trading changes that might be required.
Alright, so this is not an all inclusive list of things but something to get you started about the process that you need to go thorough when beginning your trading day. Again take some time to setup your trading routine by looking at these following things:
- Current Trades
- Current Adjustments
- Current Risk
- Current Chart Setups
- Monitoring
In the end, if you have a simple routine that will allow you to be on “top” of your trading you will be happier and more successful in the end.