Every top athlete, musician, performer, etc., realizes that a warm-up before his final presentation can induce a considerable difference in performance and outcome. Trading is more or less likely similar in the approach where each day presents new challenges that one must overcome to profit consistently. Institutions and big banks demand their traders to sit 2-3 hours after the market closes as they believe the preparations for the next day start immediately after. And let us not forget the quote from Benjamin Franklin here, i.e., “By failing to prepare you are preparing to fail.”
Benefits of preparing for a trading day
A trader can have an edge if he decides to put more effort into preparation. It is possible to reap the following benefits out of it:
- Reduces errors. You will find out that you are committing fewer mistakes. Having a clear and concise game plan can help in mitigating wrong decisions and clicks.
- Stress reduction. It can positively impact your psychology as you teach your mind to stay optimistic in adverse outcomes. You can enjoy more out of life consequently.
- Better profitability. There are more winners and fewer losers. You can increase your trading gains by a considerable margin.
- Discipline. You can induce self-discipline, flexibility, and resilience.
Tips for preparing
By following some essential tips, you can ensure that you stay ahead of others by a significant margin and are best equipped to face any challenges.
Journal your previous day
It would be best to accomplish it immediately after your trading ends for the last day; however, if you forgot, then it is necessary to do it right before the opening. It will only take a few minutes of your time if you are not an aggressive trader who opens many positions.
Fill your stomach
Working on an empty stomach is detrimental to your health, mind, and trading. There is no way that good trading decisions will come out if you are starving. Take a heavy breakfast in case the idea is to sit on the front of the screen for long durations.
Have a clear mindset
You must have a clear perspective and be free of any emotions that may cause harm. Feelings such as greed, fear, frustration, and revenge due to the past trading experience should be left inside the dustbin before approaching the desk. Do meditation, take a walk in the park, or whatever that helps you. Starting your day with a positive and clear mindset will create a significant impact as psychology constitutes nearly 80% of investing.
Scan the environment and news
Do a pre-market analysis on the critical fundamentals that may affect the prices of the instruments you are about to trade. Imagine trading any USD currency pair during the release of NFP or a report from FOMC. The volatility and slippage will be so severe that it’ll be hard to grasp what happened for a few moments. Set up alerts if any indicator hits your desired price or if a certain stock becomes overbought or oversold. Once you are all set in this department, it is time to move forward to the next one.
Pre-plan your trades in your mind
Have an idea of the trades that you will execute and repeat the stuff in your mind. Pick out the currency pairs, stocks, or futures that are in play for the day. You can also share your ideas with mentors if you are under any coaching programs. Take a look at your charts and point out any new resistances, supports, key levels, trends, and Fibs.
The whole concept is to prepare a watch list and do a pre-market analysis.
Making sure your trading equipment works
Open up your trading platform and see if everything is in order. Sometimes the software can malfunction, or there can be issues in logging in due to connection problems at the broker’s end.
Check out your previous trades
Double-check if you have any orders that you left hanging overnight. Take partial profits or close them according to your strategy.
Define your risk management
Risk management is one of the critical factors that many novices ignore and dry up their assets in return. Clarify the number of lots you are willing to put on each trade according to your risk appetite and identify your stop loss and take profit levels. This step is similar to pre-planning your executions.
Last but not least, be grateful for the opportunity that you have. The market may decide to give some profits or take away your money, but in the end, it is great if you live to fight another day. Do not mix your trading career with your lifestyle and leave all your battle scars on the desk for living life to the fullest.
End of the line
In the beginning, it can seem like a daunting task to become an early bird and do all the stuff just to prepare for trading. Remember that markets do not care about you, and if you step on the floor with no preparation whatsoever, then the chance of receiving margin calls increases a lot. Everyone spends a lot of time grabbing their degrees, making a living out of it, and taking trading as some game. Well, the industry gives them the same treatment as a result. Take markets seriously, and at the end of the day, you will make a lot of money out of it.