How do you prepare for the upcoming day?
Since no one knows what the markets will do, it makes sense to me as a day trader to concentrate on the things I can control instead of worrying about market support, resistance, VIX, RSi, tops, bottom calls and the like.
What I can contol are:
1. emotion
2. expectations
3. my trading plan
All 3 of these can be wrapped into 1. When you wake up in the morning, take a few minutes and go over in your mind what the market is capable of doing today. When you come up with the correct answer - "anything", move onto thinking how you will trade those up, down and sideways moves.
Visualize uptrends, downtrends and stalled flatline patterns.
Remember the success you had yesterday buying the pullback after the new daily high, remember the short sell when the trend moved below the consolidation. Think about your exit when probability was proven wrong and you cut your loser short instead of taking a big hit. Remember how you immediately saw another opportunity to trade and were successful . Remember how you took a big profit when the market offered it to you.
When you can replay the days trading scenarios calmly in your mind you will be better prepared to act on the right side of things when they are rolling across your screens in real time.
This preparation can give you an edge over the hoping, wishing and predicting crowd. They're watching the brain rotting CNBC and calling the bottom because stocks have "already dropped too far". You can become a consistent winner by eliminating emotions and thinking ahead.
It's very much a mind over market type of thing and the objective is have your trading plan firmly entrenched in your mind so that your actions are automatic. You have the appropriate responses because you anticipated the various scenarios in advance.
Recognize what the charts are telling you and trade the probabilities like a machine.
Thursday, November 06, 2008
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