Why & How To Create A Daily Trading Routine
BY Chris Andreou
|December 22, 2020As a trader, you’ll be familiar with the concept that focus and discipline are among the most important virtues in trading that can lead to consistently high performance. The problem with this kind of advice though is that it’s easier said than done.
One way to try to instil these positive traits within yourself is by creating a daily routine. Creating positive habits and tasks that you carry out every day without question or exception is the best way to build an unwavering formula for success.
Let’s look at the importance of routine-building and explore some of the things you should include in your daily checklist.
Why Should You Have A Daily Trading Routine?
A daily checklist of tasks to tick off at the beginning and end of each trading day is an important part of your wider trading plan.
Routine offers you a repeatable process that will get you into the “flow” of things, get you started on the right foot and make sure you’re not hampered by costly oversights or unnecessary omissions.
By having a written checklist, you reinforce positive habits and make sure negative habits (such as forgetting to do basic and necessary tasks) are eradicated. This document or piece of paper will serve as your preparation for the day, keeping you focused and bringing you back in line when you get sidetracked.
Check Economic Calendar
One of the first things you need to do before you start to trade is check the economic calendar for scheduled data releases or critical press conferences from heads of economic institutions.
Skipping this step is akin to trading in the dark. You leave yourself wide open to potentially large movements in either direction that you will have failed to anticipate.
By knowing exactly when to expect releases throughout the day, you will have a necessary understanding of when to expect volatility, and you can plan your entry and set your take profit or stop loss levels accordingly.
For example, if you plan to trade a USD pair on a day when the NFP report is being released, you may choose to either wait until after the data release to enter your position. Alternatively, if you find that you already have open positions that are exposed to an imminent NFP release, you might want to extend your stop loss to avoid being stopped out.
More than anything, the economic calendar is a risk-management tool that helps you know what trades to enter or avoid, and what trades to adjust based on expected volatility.
What Happened Overnight?
Before you start thinking about which trades you should enter or exit, take some time to look at what’s been happening since you last checked in with the markets. Look at price charts of the previous sessions and what you missed while you were away or sleeping. You should aim to get a sense of whether the asset you’re looking at has been pinging between a range or is presenting a trend.
Once you get a good understanding of whether the market is range-bound or trending, you can roll out your favourite technical analysis tools to tackle either characteristic.
Not all strategies and indicators work under every market condition, so it’s important to note the type of market behaviour before you begin to apply additional analysis.
Let’s say for example you find that since your last trading day, the market you’re trading has been confined within a range. You might then use a technical indicator that’s useful for range-trading, such as bollinger bands.
If on the other hand, you find the asset is firmly set in a trend, you might choose to add a few moving averages to the chart to determine overbought or oversold conditions.
Update Support and Resistance Levels
Support and resistance lines are vital price levels that will define your trades, even if your analysis is largely fundamental.
When you boil it down, a support line is a narrow range of price in which you can expect relatively high buying activity, while a resistance line is one in which you can expect a relatively high amount of selling activity.
Before you trade, check if your support and resistance lines have been breached, or whether they have been tested and reinforced. It’s often useful to draw one set of support and resistance lines using a longer timeframe (around 5 or 6 times longer than the chart you’re using) and one set for using the same period as your main chart.
Keep the different sets colour-coded so you don’t confuse which is which.
Updating support and resistance is a crucial part of your daily checklist, so be sure not to overlook this part before you begin trading in earnest.
Modify Your Open Trades
This one is pretty obvious, but it’s worth stressing nonetheless. Do not under any circumstance throw yourself into new positions before you’ve assessed and adjusted your currently open trades.
First, evaluate the price on the charts of your open positions to see if any “maintenance” is required, such as moving your stop-loss or take-profit, increasing your trade size, or perhaps decide it’s time to quit while you’re ahead (or indeed, behind). These assessments should be made on every open position you hold.
Part of trade maintenance is also checking your balance to ensure you have the margin you need to avoid getting stopped out. Being aware of your balance will also help inform your future trades in terms of what size positions you’re willing to take.
Prepare For the Following Day
The last item on the checklist comes at the end of your trading day. Take whatever time you have left to prepare yourself for the next day.
In large part, this constitutes some of the things we’ve already discussed, but it’s worth repeating the process both during the start and end of your day.
For example, it’s a good idea to check the economic calendar for news releases that may come out while you’re away or before you’re up the next day.
Another task you might want to do again is to reassess your support and resistance levels to make sure you’re in no immediate danger.
Conclusion
Most successful traders will follow some version of the above checklist. As discussed, a list of tasks that you have to carry out with no compromise is key to developing the focus you need to stay on top of a wild market.
Foster these positive trading habits so that you can concentrate on actually trading during the session without springing into a panic about what you might have forgotten to do. This will help you build confidence and avoid unnecessary distractions.
We hope that if you follow our advice, you’ll be quickly surprised at the level of productivity gains your checklist will help you achieve.
Speaking of negative distractions…
Risk exposure is one, your broker can often be another if you don’t choose wisely.
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