Updated from its original posting on 2013-09-06
To be a successful trader, you have to do more than simply trading when the markets are open. You have to prepare for what you’re about to get into so that you can make smart and well-informed decisions when it’s time to actually trade.
This is something that many athletes can relate to. Much like how a boxer will review dozens of fight tapes and train for months and months before getting into the ring with his opponent, you too have to take the proper steps in preparing for battle. In other words, you’ve got to do your homework before diving into action.
As they say, “Preparation is half the battle.” And in trading, the battle begins even before you open up your trading software. Below, you’ll find five ways to improve your pre-trading routine to help you conquer the markets!
1. Review price action
It’s hard to know where the markets are going if you don’t know where they’ve been. One of the things you have to do before you begin trading is to review the previous day’s or week’s price action. This will give you a pretty good idea of prevailing market themes, and it’ll also help you determine which technical levels you should keep an eye on.
2. Read, read, and READ
Did you ever take a seemingly perfect trade setup only to get blindsided by an economic report that you forgot was coming out? If so, then you definitely know how important it is to read up on the upcoming economic releases as well as the relevant issues affecting price action.
One surefire way to keep track of these releases is to check economic calendars regularly or, better yet, mark those top-tier releases on your own calendar. Ideally, you should be able to access your calendar in a jiffy so you can either keep one right beside your trading terminal or bookmark our very own BabyPips.com Economic Calendar.
3. Eyes on the technical levels
Another way to prepare yourself for the trading week would be to take note of the technical levels on your charts and pinpoint potential areas where price could retrace or reverse. One of the many reasons why traders often miss out on solid trade setups is that they fail to anticipate possible moves, spotting setups only when it’s too late to act.
To save yourself from a lot of regret, you can note down developing chart patterns and setups early on so you can be ready to take those trades once the technical and fundamental signals line up. If you need an example, you can check out Cyclopip’s Weekly Watch wherein he points out the potential setups on the currency cross pairs.
At the end of the week, you can also come up with a quick review on whether those levels you pointed out were eventually tested. You can also write about the trade setups you were watching and whether they panned out or not.
4. Start a ritual
No, I’m not talking about sacrificing a goat (as some of our forum members seem to have incorporated into their pre-market routine). I’m talking about non-trading related rituals that you can incorporate into your pre-trading routine.
Many professionals do this to get them ready to work: professional athletes take naps before a game, or priests (they’re pros too!) might say a Hail Mary before mass, or a teacher may do breathing exercises.
You can develop your own rituals, like eating a bowl of candy, or watching a Game of Thrones episode, or running 10K – whatever floats your boat!
The point is, no matter how quirky the ritual may be, its purpose is to get you comfortable. It should help relieve stress and help you focus as you begin trading.
5. Visualize yourself trading
I’ve talked about this time and again, and I truly believe that the process of visualization is a great exercise to prepare you for the trading week ahead.
Imagine yourself trading. Think about all the possible scenarios that might happen.
What will you do if the European bond auctions are successful? What will you do if NFP figures come in better than expected? What will you do if you get hit with a big loss early in the week?
Imagine yourself going through these potential scenarios and see yourself reacting to them. Imagine yourself staying calm and relaxed, no matter how stressful the situation may become.
This exercise is self-fulfilling, because once you see yourself in a stable state of mind, it will be easier for you to sustain this throughout the trading week, allowing you to perform to the best of your abilities.
There you have it – five tips to keep in mind as your develop your pre-market trading routine. Remember that as a trader, it is your job to always be prepared. Great traders do all the dirty work before, during, and after trading hours – that is why they are successful. Take these helpful tips to heart and you will see your trading improve over time.