In Trading Routine and Psychology

 

If there was ever a turning point in my career where I went from mediocrity to consistency, it was when I started putting together a daily plan on a regular basis. The exercise takes about a half hour to an hour, and when I say that things started to turn around, I mean things really started to turn around. I went from ups and downs, more losers than winners, etc, to winning every day, and having the ability to fall peacefully asleep every night and knowing that I was better than 98% of other people that take up trading for a living.

Daily Planning:

Lack of proper daily planning is a massive hindrance on any trader. Even now, if I don’t do this daily exercise, I find myself completely lost if attempting to trade, and usually don’t end up trading at all because I’m so unsure of what to expect. The commentaries you see on the website every day are just me speaking out my daily thoughts, but I always have a good handle on general price direction and what the safer trades are to take. The other ones, I rarely take, and if I do, use smaller position size. Planning seems like such an easy thing to do because it is, but ask any number of newer traders how much time they really spend each day looking across markets and the reality kicks in as to how many of them are completely uninformed.

Lets assume for a second that there are two basic traders: the constant loser and the constant winner. Here’s my take on what happens every day in their trading lives:

The Constant Loser:

1. Trader sits down at the computer, turns it on, opens up trading platform
2. The moment he open the charts, sees that stochastics are heavily oversold on one timeframe
3. Trader buys the pair with more than comfortable leverage, seeing how heavily oversold conditions are
4. The pair keeps dropping, stop loss gets lowered
5. Trader gets anxious, doesn’t want to lose money, pounds on walls and heart rate increases
6. The pair keeps dropping, stop loss gets lowered
7. Trader looks for clues, doesn’t find any….starts digging through his trading system arsenal for an answer, heart rate keeps increasing
8. The pair keeps dropping, stop loss gets lowered
9. Trader can’t take it anymore, pulling out hair, kicking and screaming, cursing himself out
10. Trader closes the position for a massive loss
11. Pair turns the moment the trade is closed and goes in the favor of the trader

The Constant Winner:

1. Trader sits down at the computer, turns it on, opens up market news and research
2. Digs through data, research, opinions on macro economic conditions affecting the pairs planned to trade for the day, as well as other markets that will affect those pairs
3. Makes conclusive decisions (forecasts) of the pairs planned on being traded based on intermarket cash flows, current trends, market hype fads and potential deviations from any of these
4. Write down these conclusions with references as to why they will occur
5. Opens trading platform
6. Mark up key possible turning points based on raw technical levels using no indicators (major areas of support and resistance, including Fibonacci levels and diagonal trend lines) across multiple timeframes – he is well informed that these areas are noted my the majority of traders in the market
7. Makes a plan about how to trade these levels in conjunction with projected fundamental forecasts and writes it down
8. Sets price alerts on pairs he is trading at key levels, while monitoring price action throughout session for any new levels that are created
9. Sees that price is hitting a resistance level the trader designated, he sells
10. Price moves against the trader 20 pips
11. Trader questions the unexpected move, but doesn’t panic as he is well aware that there is very high probability of the trade being successful based on the information he has gathered
12. Price comes back, and hard. Falls 100 pips in an hour and profit target reached.
13. Price turns against the trader the moment the profit target is hit and position is closed

Misconceptions:

I think one of the largest problems with this business is the way in which it is advertised. If I went through every Forex or Day Trading advertisement on the internet, I bet I could find about 75% of them referencing big profits or how easy it is to trade. This is what gets most traders to start trading in the first place, and the idea that its so easy gets embedded in their subconscious. They don’t think they need to do any more work than what they put in already in order to turn $10k into $10mm.

That’s the notion, but it of course has the reverse affect on traders. Most traders simply aren’t prepared and have no idea what to expect.

Another massive problem is that too much emphasis is put on only trading technicals. My confidence level shoots through the roof if I know that I’m trading in line with intermarket cash flows and have a very good understanding of where price will head and why. Fear goes away and I can let trades do as I intend them to do.

I get many questions from traders asking me how I know if a level is safe to trade, or how I know there is going to be a breakout on a level. The answer to this question is simple: if its in line with my daily plan, and I agree that it would be a safe to take the trade based on all of the information I have gathered for the day.

Measure Twice, Cut Once:

If there’s one major piece of advice I have, its to simply be prepared. This and this alone is going to save you thousands in the long run and a lot of time that would normally be wasted on making up for poor decisions. A half hour to an hour each day isn’t long at all and the benefits to reap from it are only limited to your time on this planet. Trade smart, be informed and do your homework.

My father did a lot of carpentry work and one of the things I used to hear him say all the time was “measure twice, cut once”. You can’t build a house without a blueprint, and you can’t expect to trade profitably without the proper planning.

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Showing 14 comments
  • Bob
    Reply

    Yet another excellent and insightful post…thank you, thank you, thank you, for continuing to share your thoughts on trading this market – it is helpful beyond compare!!!

  • Tracey
    Reply

    Another wonderful piece and all of it so so true.

    I certainly used to be ‘The Constant Loser’ and with your great insights I hope I am now heading towards the goal, which has to be trader number two.

    Brilliant website … keep it up PLEASE – there is nothing around on the web that touches this (and that includes paid for services and training).

  • Barak
    Reply

    hi BRV ,

    thank you for this post , I do have question concerning planning and what to expect from the market –

    yesterday we saw the pairs reversing , which was expected due to OPEC oil production cuts , the closing of wall st. indices (which looks like a possible correction) – but in the last few hours we saw them returning to theire original route for the last weeks – so , it will be wise to look for tge reversal – but on the other hand the trend is so strong that there is no reason to look for something else but looking for trend continuation …

    like you can see I’m a little confused here about what to expect and how to plan , since there are talking (bloomberg ) about reversal \ correction all the time – I will love to see an example for how you planning your trading day – and how you decide from all the news and information out there which will give the direction and which are just hopes.

    thanks,
    Barak

  • Anonymous
    Reply

    AlbertJee

    A short introduction about myself, i am from Singapore, and i started trading with a lost of
    -50% in the early stage, subsequently i manage to double and manage to proit 150% of my portfolio, and now guess what, currently portfolio i am holding decrease to -200%, almost like the market

    Steve spoke my heart in his teaching, it is insighful and a must have attitude to professional trader.

    I am very please that i have found this site, and i make it a goal to learn from steve everyday, Thanks you for the best effort, you touch my life.

    Albert Jee

  • Dan
    Reply

    “My confidence level shoots through the roof if I know that I’m trading in line with intermarket cash flows”
    Where can I find information that will tell me the intermarket cash flows?

  • Dan
    Reply

    “My confidence level shoots through the roof if I know that I’m trading in line with intermarket cash flow”
    “3. Makes conclusive decisions (forecasts) of the pairs planned on being traded based on intermarket cash flows”
    Where can I look to find this information?
    Thanks for this great site!

  • H.Lee
    Reply

    Brilliant article. Am enjoying all your insights. Keep up your good work ! It’s all very much appreciated

  • Uncle David
    Reply

    Dude love your article. Especially on the Losing Trades and Profitable Traders. FYI I had placed you on my blogroll as #1 as your article are so insightful for us newbies.

    B.Regards
    David
    david-aw.blogspot.com

  • G.K.
    Reply

    Hi Steve,
    I’m not sure why you’ve set up this site, but as a
    new visitor , I believe you’re comments are so valuable for inconsistent traders. I have improved as a trader and your comments are either a repeat or new to me: ALL very valuable .

    Thank you for your generous spirit.
    I’d say you’re a black belt in trading or on your way ! Cheers, G.

  • Amit
    Reply

    yea want to ask the same what dan asked above

    "My confidence level shoots through the roof if I know that I’m trading in line with intermarket cash flows"
    Where can I find information that will tell me the intermarket cash flows?

    Please write abt this

  • Anonymous
    Reply

    thanks steve,

    i blew my first acoount because i used to exactly the same thing mentioned in the constant looser… that to in the same order… how do u know this man… thanks for the post now i want to be a constant winner and this blog will help me doing that .. thanks for the blog.. i have seen very less people do such nice job for others..

  • le chat
    Reply

    I think to pre-pair yourself each trading day is absolutely overlooked by most new traders…
    After blowing a few account's I found out the hard way , that shooting from the hip is a very expensive learning curve..

  • rob
    Reply

    You rock Steve. Your advice encourages me. I’m a newbie but I am rocking my (oanda) demo and largely following your advice.
    Your site is at the top of my list.
    Thanks for the wisdom.
    Love ya,

    Rob

  • Glen
    Reply

    Awesome stuff, very, very glad I found your site, it is absolutely priceless

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