Create A Daily Trading Routine For Maximum Results

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The ability to focus and be disciplined are among the most important traits that a trader can have. But for most beginning traders, this is not easily achieved. One way to instill and reinforce these characteristics within yourself is by creating a daily trading routine. We’ll discuss why it’s important that you have such a routine, and then dive into some important items that should be included within each trader’s daily checklist.

Download the short printable PDF version summarizing the key points of this lesson….Click Here to Download

Why Should You Have A Daily Trading Routine?

A daily trading routine is essential in keeping a trader focused and disciplined during the trading session. A daily routine should be clearly written down in a checklist type manner to ensure that each important task during the day is addressed properly. It should be part of a larger trading plan that each and every trader should have.

A detailed daily routine provides us a repeatable process for tackling the markets. It will help us to have a clear workflow that will contribute to enhanced efficiency, and help prevent oversights and unnecessary mistakes. Even though you may be confident in your daily trading process, it’s important to actually take those thoughts and processes and write them down.

This will help reinforce your trade habits and contribute to a productive process for you to follow throughout the day. The act of actually writing down your process on paper or a word doc will help minimize errors throughout the day, and help contain urges you may have to skip a particular task. And so, as I mentioned, you should think of your routine in terms of a daily checklist, with specific tasks, to be performed in a specific order, and at specific times throughout the day.

Many new traders who come into the market believe that they need to stay glued to their computer monitors throughout the day. And by so doing, that they will be able to react to market conditions in real time as they happen. They will often bypass any planning prior to the trading session, believing that, they will be able to react as and when the time requires.

Although, some experienced traders have seen success by trading from the hip, this is an exception rather than the rule. That is to say that most successful traders have a clear trading regiment that outlines how and when they will perform certain trade related tasks during the day.

Essentially, a daily trading routine should be viewed as a preparatory element that you rely on to stay clear headed and focused. The last thing that you need when you’re engaging in the markets are unnecessary distractions. With a clear daily routine, you will avoid falling into the trap of getting sidetracked.

Let’s now discuss some of the more important tasks that a trader should consider adding to their daily trading routine.

Getting Your Mind Right

There are many books that have been written on the subject of self-improvement and getting into the right state of mind. It has been noted that over 80% of high level executives and CEOs engage in some form of meditation practice. Whether meditation is your thing or not, you should at least be open to any mental activity that will enhance your trading performance. And, certainly meditation falls within that category.

Incorporating a meditative practice within your daily regiment can help you to calm your mind, and reduce your overall stress level. By deliberately adding positive thoughts into your mind, you can improve your confidence and reduce your fear of the markets. Additionally, by visualizing your trade set ups, from beginning to end, and rehearsing that activity in your mind, it will reinforce your ability to execute more seamlessly when you’re trading the markets in real time.

The act of visualizing is not new nor is it something that applies only to market traders. Many athletes engage in this activity as well, and for good reason. By replaying the process of executing, managing and exiting your trades based on your trading plan, you’re able to build a certain amount of muscle memory around that process, which will help you to execute better when the right opportunity presents itself.

There are many benefits that traders can gain from a daily meditation practice. It will help you to process your thoughts more clearly, and help you to stay calm and collected during the most challenges times in the market. Additionally, meditation helps to reduce anxiety, which can help you to overcome fear related to the multitude of decisions we must make as traders.

Meditation is also known to help our left brain activities. Our left brain is responsible for the more abstract and creative aspects of our personality. In other words, it can enhance our ability to analyze chart patterns and other visual patterns within the market as well.

Check Economic Calendar For Scheduled Events

One of the most important items that a trader should have on their checklist is checking the economic calendar for scheduled news events and newly released reports. If you’re not performing this task within your pre trading routine, then you’re simply trading in the dark. This is true whether you are a technical or fundamental trader. By knowing which events are scheduled on the economic calendar, you will get a better gauge of when you should expect increased volatility in the market.

Knowing this information is crucial in making the best trading decisions. For example, if you know that a high impact event, such as an NFP report, is scheduled to come out in the next few hours, you can use that information in a variety of ways. If you’re considering a new trade set up, it might make sense to wait until after the report has been released to avoid being stopped out by a possible adverse move resulting from the NFP numbers.

Along the same lines, if you’re currently in a position, you could consider tightening your stop, or exiting a portion of the position, or possibly the entire position, to minimize your risk exposure. There are many different ways that you could utilize an economic calendar for the purposes of containing risk around your positions.

As technical traders, we focus mainly on price action signals to provide us an edge in the market. Nevertheless, it is essential to know where the pockets of high volatility are, so that we can best prepare for those times and trade around those events.

Now, we do not suggest purely trading the news events because that is a rather risky proposition. Instead, we suggest using the economic calendar for risk reduction purposes. In other words, we want to avoid those times in the market wherein our technical set ups are most likely to be overridden by increased volatility in the market resulting from a newly released economic report.

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Analyze The Current Market Environment

Before you initiate any new trade, you should take some time to analyze the current market conditions. This includes studying the price chart of the previous day’s session, along with the overnight activity. You should get a good sense of whether the market has been trading back and forth in a range bound manner, or is displaying trending characteristics.

Once you have a good understanding of the current market environment, you can then go to your trading arsenal, and apply the most appropriate technical studies to your price chart that aligns with the current market condition. This is a very important concept that all traders must understand. And that is to say that not all trading strategies work in all market conditions. As such, we need to do a thorough analysis of the existing market action in order to decide on the best strategy to employ within that specific market context.

For example, if you find that the trading activity over the last day has been range bound, then you might utilize a volatility breakout system to capture a potential price move out of that tight range. On the other hand, if you find that the market is displaying trending behavior, then you may opt to use a simple pullback strategy such as a price retracement back to a moving average line. The point being, that within the context of our daily training routine, we must incorporate a task related to studying the most recent market environment.

Along the same lines, it would help to take a look at related markets to see how they are currently trading. Remember, that the markets are essentially a mechanism for the flow of capital from one asset class to the next. And so, by understanding and performing intermarket analysis, we can have a better grasp on the pulse of the current market. For example, if you are trading the EURUSD currency pair, you should also take a look at the Dollar Index to try to get additional market information. This is because they tend to be inversely correlated, and the price action within each of these instruments can provide vital clues for future price direction.

Update Key Support and Resistance Levels

Support and resistance is one of the most basic yet effective methods for gauging price movements. Essentially, a support level is one wherein there is a zone of demand which is likely to result in increased buying activity. At the same time, a resistance level is one wherein there is a zone of supply, which is likely to result in an increased selling activity.

Each and every day before the trading day begins, you should update your major and minor support and resistance levels on the price chart. Major support and resistance levels refer to higher timeframe levels, which is typically defined as 4 to 6 times your trading timeframe. Minor support and resistance levels refer to levels that are plotted on your trading timeframe. Both of which are important to monitor closely, as they can change quickly based on the current market environment.

Typically, when updating key support and resistance levels it’s best to try to keep it as simple as possible. In other words, you may want to plot one major level of support and resistance, above and below the market. And additionally, you may want to plot one minor level of support and resistance, above and below the market.

By doing this, you can focus on the most important SR levels as it relates to the shorter-term, and longer-term time frames. It often helps to color-code the shorter timeframe levels with a different color than the longer timeframe levels. This will help you to quickly get track of which is which.

Regardless of the actual methodology that you use for plotting your key support and resistance levels, you need to build it into your daily trading routine. Eventually, this process should become second nature to you. It’s an important step within your daily checklist and one that should never be overlooked. It’s a top priority for me within my trading routine.

Manage Your Existing Positions

Before initiating any new positions during a trading session, you should always manage your existing positions. This includes evaluating the price action on the charts to see if you should make any adjustments such as moving your stops, moving your targets, taking some profits off the table, adding to your positions, or exiting the trade altogether. There are a whole host of decisions that need to be made around your current trading positions. Needless to say, this should be performed for each and every open position that you have on.

In addition to this, you should also be checking your daily balances to ensure that you are meeting your minimum margin requirements. It also helps to know your balance each and every day, as it will help you in making appropriate position sizing decisions on new trades that may emerge during the day.

One of the most effective position sizing models is a fixed fractional approach. Essentially, a fixed fractional position sizing model is calculated using a certain percentage of your overall account as the maximum risk allowed. For example, if on a specific day your account balance is $10,000, and your trading plan calls for a 2% risk per trade allocation, then the maximum risk allowed on the trade would equate to $200.

This is also a good time to check the correlation tables to ensure that your current open positions are not exposing you to concentrated risk. In other words, you may find that two of your positions are beginning to show a high level of positive correlation on the one hour or four hour timeframe.

If this occurs, then what that could mean is that those two positions are moving in the same direction in a correlated manner. This can open your account up to additional risk exposure in the event that the position goes against you. This is because the two instruments are likely highly correlated at this particular juncture. Such a scenario could essentially be seen as having one position with twice the risk, rather than two independent positions. 

Scan The Charts For New Setups

Once you have completed your checklist of all the above referenced tasks, only then should you begin to focus on scanning the charts for new potential setups. Unfortunately, most amateur traders tend to focus on looking for new set ups as their initial starting point. And they often do this without any thought or consideration of the prior steps outlined. They do this at their own detriment, and then often wonder why they are seeing subpar results in their performance.

Again, looking for new trade setups is the lifeblood of any trading strategy, however, you need to address all the other important aspects discussed first. This way you will have the most amount of information from which to base your trading decisions on.

Assuming that you have gone through the checklist process within your daily routine and have checked off each of the important steps leading up to scanning for new setups, you should follow some defined procedure for analyzing potential setups. This could be in the form of manually scanning dozens or possibly hundreds of charts to pinpoint those patterns that you have pre-determined to trade with.

Alternatively, you can set up a computerized scan within your trading platform to look for those conditions that would trigger a potential trade set up. There are many different ways that you can approach this stage within your daily trading routine. It will depend on your preferred style and level of expertise. In any case, you should have a well-defined procedure for finding and evaluating new trade setups daily.

Now, this is assuming that you are a discretionary trader that relies on some level of discretion to make and execute trading decisions. If on the other hand, you are a systems trader you would most likely bypass this task altogether, as your expert advisor or algorithmic system would be handling all of your trade entry and management processes.

trade journal daily trading routineReview and Journal Your Trades

One of the most overlooked tasks within the daily trading process is that of journaling your trades. Many traders bypass this because they either do not have a full appreciation for its value, or believe that it is an unnecessary burdensome task. This could not be further from the truth in reality.

It’s often been said that the only way to improve your results is by tracking and constantly refining your process. In the trading world, a trade journal provides us with the ability to track our trades, review them, and learn from any mistakes that we have made along the way.

Now having said that, your trade journal does not have to be overly elaborate, nor do you need a software to manage it. You can simply use a Word document or Excel file to track your trades. The point is that you just need to get started with journaling your trades if you’re not doing so at the moment. It will definitely help elevate your trading performance. You’ll begin to see trends in the data that show you where your strengths are and where your weaknesses lye. By isolating those areas that are causing you the most issues, you can focus on those problem areas to improve your trading.

And so, it’s important that you get into the habit of reviewing and journaling your trades on a daily basis. It should be a part of any day trading routine. Once you start, you will be amazed at how effective it is in helping you to sharpen and hone your trading skills.

For example, you may find that your results are better at certain times of the day, or that your strategy performs well in a particular market versus another, or that one type of trailing stop strategy works better for you than another. These are just some examples of the types of data that you can derive from your trading journal.

Prepare For the Following Day

Once the trading session has come to a close, it’s time to prepare for the following day. This could include some of the tasks that we have gone over already. For example, you could check the economic calendar for any news events or economic releases that are scheduled to come out. In addition, you may want to analyze the larger timeframe support and resistance level, and update them accordingly. Most traders will have their own routine as it relates to preparation for the next trading day.

So long as you have created your own checklist of items to include as your preparatory list for the following day, you should be ready for whatever the market throws at you at the beginning of the next trading session. One thing that’s also helpful to do at the end of each trading session, is to recheck any alerts that you have set within your trading platform and adjust them accordingly if you need to. This is quite useful to do just before going to sleep, especially if you need to check certain positions during the overnight session.

Download the short printable PDF version summarizing the key points of this lesson….Click Here to Download

Final Thoughts

We discussed some key aspects of a forex trader’s daily routine. However with some minor revisions this can also be applied to traders across many different markets including futures, crypto, and equities. Most successful traders will tell you that they have their own specific trading flow that they follow to stay focused and disciplined.

And so it’s important that you create your own trading habits, so that you too can concentrate on those tasks that are most relevant throughout the trading session. You want to avoid unnecessary distractions that will lead you to doing unproductive tasks. Although this seems fairly easy at the conceptual level, it is quite difficult for some traders to implement. For those that take the necessary time to outline a clear daily trade routine, they will be pleasantly surprised at the higher level of productivity that they will gain during the trading day.

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