Success in trading doesn’t just happen; it’s a product of continuous preparation and disciplined adherence to a set of well-defined rules. Here’s how I set myself up to maximize trading success, which includes profitable trading and staying mentally sharp and focused.

Pre-Market Preparation

  1. Review Market Conditions: Each trading day, I spend 5 to 30 minutes before the market opens reviewing overnight movements and the morning’s activity. This includes watching price develop across all my charts, which helps me get in tune with the market’s pulse.
  2. Upcoming News and Events: I always check for upcoming news events that could impact market conditions. This includes economic announcements, earnings reports, and geopolitical events (e.g., elections, presidential debates).
  3. Be Aware of Holidays: Trading around holidays can be tricky due to lower liquidity and unexpected volatility. I avoid trading during holiday seasons, particularly around Thanksgiving, Christmas, and New Year’s. During those three holidays, I will tend to stop trading a certain number of days before and after the holiday. For example, I tend to stop trading sometime between the 20th and 22nd of December and don’t resume again until at least 1 trading day has passed after the start of the New Year.

Establishing a Trading Routine

  1. Set Trading Hours: My prime trading hours are from 9:30 AM to 11:00 AM EST, coinciding with Regular Trading Hours (RTH) when liquidity is usually higher. This routine helps me capture the best market movements.
  2. Avoid the Midday Slowdown: I refrain from trading around lunchtime, starting at 11:00 AM, when the market typically slows down and becomes less “predictable.”
  3. End-of-Week Strategy: Fridays are unique in that market sentiments from the week are culminating, and traders are preparing for the weekend. I have a rule to stop trading after a specific time on Friday to avoid erratic market moves and start the weekend fresh. Certain systems are also not allowed to trade on Fridays due to the longer potential hold time for trades to reach profit targets.

Trading Mindset and Discipline

  1. Goal-Oriented Trading: My primary goal is not necessarily to maximize profits but to minimize losses. Preserving capital is paramount. I know this sounds counterintuitive in that having a good risk-to-reward would be about maximizing profits, but trading is not just about taking good trades. The extreme impact of trading to the psyche can significantly impact my trade decisions, so the first thing I try and do is protect that, which means my goal is to preserve capital so I can “live to fight another day.”
  2. Decision Making: If I’m not in the right mindset to make sound decisions, I prefer not to trade. Trading is as much about psychological readiness as it is about market conditions. This could be for any number of reasons. Maybe I am sick, have a phone call, or need to leave for an event by a certain time that won’t allow me to dedicated the appropriate time to reading the market.
  3. Knowing When to Stop: Recognizing when to end your trading day is crucial. If the market isn’t responding well or if personal performance is lagging, it’s better to shut it down and come back refreshed the next day.
  4. Handling Volatility: I avoid the temptation to trade during extreme market volatility unless it fits within my tested trading strategies.
  5. Follow Your Rules: One of the hardest parts of trading can be sticking to my plan, especially after a tough day or when I miss a profitable move. Consistency in following my rules is key to long-term success.
  6. Adapting to Market Conditions: I adjust to break-even positions to avoid losses. Being flexible and adapting strategies based on market feedback can help safeguard capital.

Conclusion

By sticking to these strategies, I maintain a disciplined approach to trading. The focus is always on making good decisions, following my trading plan, and adjusting as needed to protect my capital. Happy trading, and remember, a disciplined trader is a successful trader!

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