Becoming a Better Trader: Preparation is Paramount
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Today, we discussed the importance of preparation and how to plan for each day and week. First and foremost, each trader should have a trading plan, one which they can quickly read through at the start of each week to keep them stay focused on the process they follow to identify, execute, and manage trades.
It is good practice to have your charts marked up and themes which you are tracking organized. Having themes or trade ideas in the queue keeps you focused on only those opportunities you want to take advantage of. It also gives you a higher sense of conviction when factors in your analytical process do finally line up and you are ready to place a trade. I call it ‘scenario trading’. Many scenarios won’t ever come to the point of execution, but when they do you will have a clear plan of attack.
Knowing what key events are happening for the week is important as well, even if you are a purely technical trader. You want to know when and why volatility may arise from a risk management standpoint, as well as if a particular event ends up triggering a trade you want to be in.
Knowing what your drawdown point is, is something we discuss often. If things aren’t working out and you start hitting a bad stretch of trading you need to be prepared to slow it down and mitigate risk until the market starts making sense again.
At the end of the day, we can’t control how markets move, but we can control how we approach them and how we react. Having a plan in place at all times is key to being able to navigate with a clear mind.
For the full discussion please see the video above…
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---Written by Paul Robinson, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.