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CO04 - What Is Your Daily Pre-Trading Routine?

"Whether you are playing a game, or going on a road trip, chances are that you will do your research first and come up with a plan rather than just go on a whim. A plan essentially is a strategy that tells you what you should do and also prepares you for handling any unforeseen risks or surprises that may come along. In the forex markets a pre-trading plan is equally important. If you think you can make money trading forex without dedicating the time to having a pre-trading routine, it can be disastrous to your trading. Without a trading plan or a pre-trading routine, you are essentially shooting in the dark and this can be akin to gambling. In this article, we discuss one of the most important topics in trading, which is having a pre-trading plan. Learn how you can start preparing for the markets, the day or for the week ahead by developing the habit of having a pre-trading routine."

A pre-trading routine is something that is essential in determining the way you trade. This means following the markets and preparing a trading plan even before you start to trade. There are some benefits for following this procedure of course. Trading the markets with a trading plan is essential as it is equivalent to having a strategy or an approach.

You will be a lot more disciplined and you will be able to trade the markets a bit more confidently.

There is magic to having a pre-trading routine. This can vary from one trader to another and is largely a personal preference rather than following a set of rigid rules. Let’s see how traders build up a pre-trading routine or a plan.

Check the pulse of the markets

The markets tend to shift its moods. Therefore, even before you dive into technical analysis, it is important that you first check the pulse of the markets. The markets basically have either a risk on or a risk off sentiment. At times, the markets can just drift sideways due to lack of any major catalysts.

The first thing that traders should do is to check on the latest news that price has already discounted. This will includes keeping a tab on both the recent economic developments as well as the upcoming news events that could influence the markets.

By doing the above, you would be able to have a better grip of what the markets are doing.

Pick the currency pairs that you will be trading

The next step after getting the overall layout of the market landscape is to pick the trading instruments that you will be using. It is not required that you analyze all the currency pairs. If you have done your due diligence in the first step, then you would already know what currency pairs you should focus on.

If you find this to be difficult then practice the first step until it becomes second nature. Picking the currency pairs to trade will also set you up mentally for what to expect. By combining the information you gained from the first step, having a short list of the currencies that you want to trade will open the door to the next step.

Analyze the markets

This is where you will be making use of technical analysis to identify potential trading opportunities. You could either make use of your trading strategy to see if the buy or sell signals align with the general market sentiment, or you could prepare the charts yourself.

There is no right way or a single approach to analyzing the markets. Each trader has their own way of doing this. So the sooner you find a method that is convenient for you, the better the chances.

By analyzing the markets you are basically taking into account the market outlook on the shortlist of currency pairs that you will be trading. Make sure that you do not focus on too many currency pairs as once you start trading, it can be become quite a handful to manage your positions.

Prepare your risk and outline your strategy

The final step is in of course managing your risks. Depending on your leverage and the amount of risk you are willing to take, prepare the strategy accordingly. This means either setting up pending orders or waiting for the markets to reach the intended levels before you begin to trade.

It is important that you pay attention to the risk management aspect as well. This will be crucial in determining the outcome of your trading strategy. Always know when to get out of the markets if you are proved wrong.

The above pointers are merely guidelines to get you started. In reality, there can be many different ways how you can prepare a pre-trading routine. Some traders, depending on whether they have the time or not do this on a daily basis.

Most traders prepare a trading plan over the weekend and plan for the week ahead. Having a trading plan and a strategy is essential to trading the forex markets. Without a trading plan or a pre-trading routine in place, you would be trading on emotions. This can eventually lead to potential losses as you do not have a plan to follow.

A trading plan essentially is like a map to the forex markets. If you discard the map, there is a good chance that you might end up lost at the cost of losing your trading capital. Therefore it is in the trader’s best interests to follow a pre-trading routine.

Read 850 times Last modified on Thursday, 04 July 2019 10:07