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5 Things to check before starting your trading session

 

5 things to check“Today it is a good day for making money” - that’s what you said to yourself this morning. Now that the opening bell is about to ring on the trading floor, you’re in front of your computer and you are eager to start trading. Still, before that, take a look at the tips below as they may help you avoid losing any money.

1. Make sure you’re in good physical shape
Yesterday you’ve had a great trading day, one of those days when every trade goes your way, so you felt like celebrating it. That’s normal and healthy because it is very important to give you a prize whenever you deserve it and it helps you from a psychological point of view. But if today all that celebrating gives you a headache, skip trading. You’re not in the best shape and you won’t be able to focus. Also, the principle applies to any kind of pain or illness.
Whatever severe physical fault you may have, it should keep you away from the trading platform. I’m sure you wouldn’t want someone physically unfit gamble with your money. Well, if that guy is you, the same rules are applicable.

2. Make sure you’re in good mental shape
When you trade you need to always remain focus. You have to be there 100% with your mind and thoughts. Things change really quickly, money flow like the wind so you must act fast and take the correct decisions.
That is why, in order to do so, you have to be in the right state of mind. Remember that you compete with computers, so you have to be sharp and emotions-free – practically a robot. Any kind of emotions may harm your portfolio: sorrow because you had a fight with someone you love, anger because your car broke up, overstated joy because you won a prize (yes, even this may lead to overconfidence and excessive trading), or even feeling blue because of the weather. The list is very long and all these may affect your judgment in a certain way.
So, if you are experiencing strong emotions, be sure to clear your mind before starting trading.

3. Make sure you won’t be disturbed
Again, you need to remain focus. Imagine you’re in a winning position, expecting for the price to keep going your way according to your analysis, and suddenly it’s time to go for a meeting. What do you do? Or, you are about to enter a position, you have your finger on the button ready to click, you are fine tuning for the perfect entry price, when on the TV you have opened you see your favorite team scoring a goal. Then, after finishing your celebration, that perfect moment to trade has already gone. What do you do?
These are things that may happen to anyone, but they shouldn’t affect your judgement. Before starting trading, make sure that nothing can get your mind diverted and if you are expecting to have some distructions, try to take a break before they occur.

4. Do your homework
When you have chosen your broker, you made sure the trading platform would provide you with enough FX pairs to choose from, so that you won’t run out of ideas or opportunities. Therefore, you are the lucky owner of a computer with over 50 FX pairs on its screen waiting for your trades. What’s next?
Actually, the correct question is “what before?”. As hard as it may be, you should accept that you are a human being so your brain has limitations. You can’t follow in real-time an unlimited number of assets. It is physically impossible. This is why you have to screen through them and make yourself a shortlist for the day. The keyword is “research”. Research through them and see where you can expect some movements. Exclude those where your analysis tells you they will move sideways. Maybe you’ll want to exclude those where you may expect roller-coasting action, with no obvious direction (personally I would because I don’t like excesses and especially don’t like to trade in a stormy session). Also, you may want to exclude pairs that are not liquid enough. For example, I wouldn’t trade GBP/CHF when it’s midnight in Europe.
After a rough screening which should shorten your list to a decent number of pairs, start analyzing the remaining pairs: news, trends, technical indicators, macro information, anything you can find (and have the ability to understand and interpret) is a plus. You want to know what to expect during the day in terms of direction, intensity, volatility, etc and again exclude what you don’t fancy. When you’re done, you have your shortlist, which already should have a length a humanoid can deal with.

5. Plan your day
Now that you have created your shortlist you should think of what you’re going to do with it. Remember that you have to control your emotions and you have to follow a robot-like trading session. Remember that computers have the plan already built-in and statistics says they will beat your performance. You have only one toll with your fight against the computers: you can adapt.
Even so, before that, there is something else you must decide: if nothing goes wrong and there is no need to adapt. This is your Plan A. The basics are to determine what needs to happen that would make you enter a trade. It may be a specific price or price range, it may be a succession of prices (you want to see a rise, then a pull-back and then another rise), you expect a technical signal from an indicator… It doesn’t really matter how your plan looks like. The important thing is that it exists and you stick to it.
There are 2 main occurrences that require from you to adapt. The first is what happens if your trading signals aren’t triggered. In fact, what happens if the market goes the other way. In this case you may want to have an alternative strategy (meaning that if Plan A is bullish, you may want to have a bearish Plan B). The other issue (and the most important) is what you do after you’ve placed your trade. This is called an exit strategy and has a binary outcome: a positive and a negative one. What I mean is that when you enter in a position you must have an idea about when you close your position. In a positive scenario it means to think when you mark your profit, while in a negative scenario it means when you accept the loss.
Remember that the plan doesn’t have to be very specific but it has to be clear and somehow written, either in a word document, excel spreadsheet or just drawn on a chart. It just has to have a form that will allow you to follow, to remember what the analysis was about and all this in a timely manner.

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