Trading Routine | How to Prepare for the Trading Day

Trading Routine | How to Prepare for the Trading Day


This article on Trading Routine is the opinion of Optimus Futures.

Trading Routine

Key Points

  • Although there is no sure-shot formula for winning in the markets, there’s a sure-shot formula for losing big, and it’s called “lack of preparation.”
  • Your trading routine, from the moment you begin your trading day to market close, will likely define your overall performance.
  • The biggest mistake you can ever make besides not preparing for your trading day is letting your mental and physical attributes suffer as a result of your trading.

“By failing to prepare, you are preparing to fail.”

– Benjamin Franklin

Whether you succeed or fail in any trade, preparation plays a key role. It is true that not every outcome is a result of what you had prepared (or not prepared) to do. There is the element of chance that plays into any endeavor, particularly speculation.

But preparing to stack the odds in your favor, or to simply gain more than you lose over time, is possible and necessary. Besides, what else are you going to do–not prepare? To a certain extent, every trader has a trading routine, a way of preparing for the trading day. But not every trader takes preparations as seriously or as thoroughly as he or she can. Big mistake (as we all know from experience).

Preparation is especially important for futures traders, as futures trading involves high leverage, a huge risk in itself. So, if you trade futures, make sure your futures trading routine is based on well-thought and solid preparatory practices, from target-setting to contingency planning (as markets can often move against you).

Here are a few trading routine ideas, suggested in order.

Scan the Market Environment

Unless you want to get hit by a car when crossing the street, look both ways. The same principle applies to trading. If you do not want to get hit by large market movements, check the economic calendar and make sure you’re on top of major fundamental and geopolitical news events.

Following an economic calendar is a no-brainer. Imagine trading the S&P 500 futures, Dow futures, or Nasdaq futures right before a weekly jobless claims report, completely unaware of its pending release. Imagine trading any index during major earnings reports. These releases (and plenty of others) can either help you or hurt you. So why not make them part of your routine?

Also, markets are moved by two things–sentiment and fundamentals. Knowing when a market over-reacts based on sentiment can serve as a trading opportunity. Likewise, knowing when market sentiment is not responding to fundamentals can also be a trading opportunity. This is reason enough to follow the news, such as Bloomberg, Reuters, CNBC, MarketWatch, Fox Business, etc.

If you want trader-oriented news–or news with analysis geared specifically for traders–then sign up for Optimus News, a tool that frames news events as actionable opportunities. Optimus News does part of the analysis for you, helping you find trading opportunities within a stream of real-time data. It is also a free resource for Optimus Futures customers.

Once you’re all set, then get to the next important step in your futures trading routine.

Get Your Trading Platform Ready

Your trading platform is your proverbial vehicle in the markets. Metaphorically speaking, does your vehicle have enough fuel, is your parking brake on, can you see out of your front and rear-view mirrors, and if it’s raining, do your wipers work?

Translated into a trading context, is your data connection streaming correctly, is your internet connection strong, is your chart template set up the way you want it, and do you have the right markets up? These are just a few of the important considerations. The details will differ according to your own personal trading approach.

Let’s take a look at an example.

Optimus Flow Trading Routine

Using the Optimus Flow platform, I am looking at three indicators, set up according to my strategy. On the right-hand side, the Power Trades indicator allows me to see trades of unusual volume, suggesting potential short-term buys or sells based on buying and selling pressure. This gives me order flow insight that most traders cannot see when looking at a plain chart.

The VWAP indicator is also present. If I am entering quick day trades, I want to see where the larger institutional funds may be placing their buys and sells. I want to avoid taking a position on the opposite side of the bigger players.

Last but not least, I set up my hourly Step Profile indicator. If I am deciding whether to trade or fade a trend, I want to know where the value line is at. I want to see where most of the trading had taken place price-wise. This might help me gauge the balance between buyers and sellers.

Do I set this up every day? No. I automate the template. It is easy to do. Here are the instructions if you’re using Optimus Flow.

Prepare Your Daily Setup by Reviewing Your Performance Scorecard, Technical Score Sheet, and Trading Checklist

A little common sense here: if you don’t review your previous day’s scorecard, then you probably won’t know how your week-to-date or month-to-date performance is going. This can seriously impact your trading capacity if you have a weekly or monthly loss limit.

Imagine having a 10% loss limit for the month. You’re in week two, and you are already holding a 6% loss overall. Might that not affect the way you trade moving forward? Perhaps you may need to reduce your positions. If you’re trading more than one system, perhaps you may need to reduce the number of systems you’re following, keeping the more conservative and less frequently-trading systems in play.

On the other hand, if you’re up 20%, then you may be in a position to increase your number of contracts. In the end, it’s up to you, but hopefully, you understand why it’s so important to review your daily scorecard.

As far as your Technical Score Sheet and Checklist is concerned, these are your pre-trade rule-of-thumb principles that help guide your strategy. It likely differs for every trader. Do you have a scoring method for technical patterns? Do you score risk-to-reward scenarios, helping you decide which trades are worth taking? What about scoring fundamentals vs technicals?

If you have all of these evaluation methods built into your strategy, then you should probably combine all of them into a checklist. This way, you can be sure that every trade–win or loss–at the very least is done according to plan.

Need help coming up with a checklist? Here’s a helpful 8-point checklist that you can use as a starting template.

Set Up Your Profit and Risk Management Goals

Goal-setting is so common and commonly assumed that the mere mention of it is already a cliche. Yet, many traders tend to shoot before they aim. And over time, especially when it comes to losses (something not uncommon in trading), failing to aim can have dire financial consequences. If you are an experienced trader, you know what we’re talking about.

At the same time, when you are in the midst of a trade, fully engaged in opportunities unfolding right before your nose (literally, on your screen), goals tend to fly out the window. You’re too busy capturing an opportunity or potentially averting a loss.

Now, losses weigh more than profits (which can take care of themselves). So, what is a handy solution to managing risk mid-trade? Simple. Automate it. Set alerts to remind you when you’re breaching some sort of limit.

Optimus Flow’s automated PL Alerts feature

This can easily be accomplished using Optimus Flow’s automated  P/L Alerts feature. It’s easy for any trader to say, “I have a loss limit at x%.” Nearly every trader who has blown up an account has had a well-thought Profit/Loss limit. And for every trader who has lost big, either they did not stick to their limits, or they were just too busy trading, unable to “play defense” while they were engaged in an aggressive “offense.”

Disclaimer: The placement of contingent orders by you or broker, or trading advisor, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders

Automate it and make it another component of your trading routine and don’t worry about it until you get an alert. What better solution might you have?

Reevaluate Your Trading Day After Market Close

At the end of the day, either you made progress, or you were set back. But where exactly are you on the map leading to your overall financial goals? Now’s the time to celebrate your accomplishments, big or small, or lick your wounds and learn from your mistakes.

The “learning from mistakes” part is perhaps the more important of the two. Those of us who succeed (in anything in life) learn from failures. Those who can’t or refuse to are doomed to repeat failures that are avoidable with experience. Unless you learn from your failures, you can’t say that you have “experience” since you allowed yourself to be “blind” to it. Understand?

Live Your Life

Those who trade to live don’t necessarily live to trade. There’s a big difference. Trading is a physically, mentally, and sometimes emotionally tasking lifestyle. So, it makes sense to take care of your physical and cognitive health in order to be at your best when the situation calls for it.

When you’re trading in the markets, you can’t afford to not be at your best. So, take care of yourself–mind, body, and spirit.

Physical exercise is a must. No well-functioning brain can perform for extended periods of time if the body is weak.

As with exercise, diet is an essential component of health. Are you eating in a way that heightens your cognitive performance? Personally, I find that not eating (i.e. intermittent fasting) makes me sharper during the day. But this is my personal choice and isn’t recommendable to everyone (we’re not giving health advice here, as we’re not healthcare professionals; so, consult your doctor).

Some traders find it helpful to do yoga or meditation. And why not? Ultimately, you want to discover what works best for you. In contrast, being obsessed with the markets day in and day out, in other words, not “living life,” can be a big mistake. What’s the point of trading if you can’t enjoy what it is you’re trading for? Think about this. You may be a trader. But you’re a human being first.

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

Notable Replies

  1. Avatar for Ben_M Ben_M says:

    @Mod-MattZ love the part about prepping, specifically when it comes to research and analysis.

    So many times, just in the last few weeks, the levels and trends that I’ve drawn on my charts and kept there come up again and again. Sometimes even to the exact price, a once resistance level that becomes support is tested weeks later and just touches it.

    If you stop and think about that, it means that the bid went down to that exact spot, sellers traded into that without taking the whole price then it moved up.

    Yes, the market is unpredictable because PEOPLE are unpredictable, but some of the things I’ve experienced in chart analysis simply can’t just be coincidence, it’s proper planning.

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