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Controlling your surroundings

Posted on 8/26/2014
Once you have trading methods with edge the day to day task becomes easy. But you still need to organise yourself for trading . A well organised thought process and workplace is what I strive to bring to my trading daily.

Setting up daily routine and modifying it to fit your trading is key to long term survival and prosperity in this game. You don't want unnecessary distractions of messy process and messy tools to distract you.

The starting point for my daily routine is Situational Awareness (SA). SA involves taking good look at current conditions and be aware of them and tactically change your plans in line with current market conditions. For example if you have open positions and you see unexpected  10% gap on them then you need to work out your plan as to what you are going to do about it.

The kind of swing trading setups I use work (I have been using them for 14 years successfully) , but overall market conditions can have impact on the % of trades likely to work. So SA helps you in controlling your trade pace. In good environment you want to be more aggressive. In bad conditions you want to focus on risk management. Depending on SA you need to change small tactics.

Question I  ask daily for SA:

What is my market bias today

Is there a plan to exploit it

Is there an alternative plan

I was for many years primarily a breakout trader but as my account size has increased a lot through compounding and because I help family members and friends with their investments, the capital I trade now is significantly larger. So I have started using anticipation setups to get favorable entries.

Anticipation allows you to control risk and get in to setups early or as they are breaking out or before breakout.  Anticipation is also useful on current open positions. If you have thought through what you will do under different circumstances on your open positions you are in better position.

Question I ask daily for Anticipation:

What homework have I done to identify good opportunities ?

What are the 3 to 5 very high probability opportunities I must focus on today

What is my plan for existing open positions

While focusing on current setups and

Different phases of market favor different kind of stocks or setups. Some time beaten down stocks do well. Sometime stocks with momentum do well. Some time value or growth is in favor. Knowing what is working helps you focus on hot opportunities.

Question I ask daily for What is working:

What is working in the market currently

What stocks and sectors are leading the market currently

What style and setups are working currently

What kind of follow through is happening

The hardware and software and the brokers and other tools we use for trading can sometime fail or have glitches and it can be distraction. For a trader who make living from trading income I ensure my trade factory is working smoothly daily. This involves some proactive planning and replacing hardware on regular basis and building backups.

All our good plans or intentions or setups are of no use if our hardware or software fails or is not optimum for trading.

Questions to ask daily for tools

Are you setup for today

Is your hardware in proper condition

Is your software working without glitch

What is your backup plan in case of failure.

Your mental state affects your trading. If your are well organised and in proper frame of mind for trading you will be successful. If you are excited, harried, angry, disorganized you will find same thing in your trading. Trading is not in isolation. It is part of your life and other things like doctors visit, school parents meeting , others tasks at home can interfere with trading.

Are you calm, excited, harried , or confused today?

Are there distractions likely to affect your trading today?

I use number of techniques daily to remain focused on trading.

While current setups are being used every trader must also work on new set of setups , new markets, new scans to add to his repertoire. Markets can evolve as technology and market participants change, so you have to do continuous R&D on your own to develop new ideas. And you have to do it proactively before your methods stop working .

As a trader you need to focus at least 25% of your daily efforts on developing new trading setups and ideas and on enhancing your trading skill and knowledge of market. A purposeful plan to do this will cumulatively help you transitions in to new setups and ideas as market changes.

What is your plan for enhancing your market knowledge today

What is your plan for enhancing your trading skills

What is your plan for enhancing your trading mindset

What needs to happen for me to be a confident and in control trader is key question I ask myself daily.

Do I have resources to get there?

Do I have the burning drive to get there?

Everyday using this kind of framework helps you improve your trading. Trading is a lonely business as independent trader and unless you have drive to persist with your trading plan and work on yourself as a trader it is unlikely you will find much success.