The Perfect Trading Routin1

The perfect trading routine – Our complete step by step guide - Tradeciety Trading tips, technical analysis, free trading tools Rolf The best traders are very efficient at what they do while most amateur traders do not follow a set trading routine and have an inconsistent approach. Having an established routine is important and you can see it in many other areas: before a pilot takes off, he has to go over the same 100+ points checklist every single time; a surgeon has a very strict pre-surgery routine to follow and almost all professional athletes are religious about their pre-game routine. The benefits of a routine are that it minimizes mistakes – especially unforced mistakes – it allows you to add a professional layer of consistency to your approach, it makes you super productive because you avoid unnecessary tasks and it also calms you down because you know exactly what to do. The secret of your future is hidden in your daily routine. – Mike Murdock

Prelude – Your chart setup Being an efficient trader means automating as many tasks as possible and eliminating redundant processes and unnecessary tasks. We show you how to set up your workstation and computer so that you are best prepared for your daily trading.

1 – Charting vs. trade execution We have said it often and we will repeat it many more times: we highly recommend separating trading and charting. For charting, we use tradingview.com and for the actual trade execution we go to our broker’s trading platform. The reason is simple: traders who chart and trade from the same platform are always just one mouse click away from entering a new trade and they see their orders in front of them at all times once in a trade. This creates a sense of urgency and makes messing up trades much, much more likely. By separating trading from charting, you add a layer of friction and it’s not as easy to follow your impulsive trading behavior.

2 – Setting up Tradingview I – templates In Tradingview, I use different templates and profiles with pre-defined chart setups for different types of analyses. You can follow our Tradingview profile here: Tradeciety on Tradingview. To save a template and/or create a new one, you have to the on the template name in the top right corner as shown in the screenshot below. By clicking on “Load”, a list with all your templates pops up and you can create and save your set up.

Create and manage your profiles Here is how I organize my charts within the profiles. First, a general list of all the different profiles: 

Indices: here I use a 4-split screen with the major indexes I pay attention to (the S&P 500, the DAX, the Hang Seng and the Nikkei 225). Each morning, I first check what has happened during the overnight session in Asia and how the Asian markets performed to get a general feeling for risk appetite and investor sentiment – more on that later.

Index profile for the pre-trading market scan 

Commodities: Again, I use a 4-split setup and track Gold, Crude Oil, Silver and the DJ Commodity Index. Although I don’t trade Commodities, it is important for me to see how certain commodities behave; mainly the correlation of oil, AUD and CAD; and the connection of Gold for risk appetite and safe-haven flows are interesting.

Commodity profile Those two profiles are only used for the broader market analysis. The next profiles show the markets I trade actively: 

The Euro: the EUR/USD is among my most traded markets. On the left, I have the regular EUR/USD chart open. On the right you can see the DXY (US Dollar Index) and the Euro futures. I use both for additional information when forming trading ideas.

EUR/USD

profile

with

the

DXY and Euro futures 

My next profiles look the same. I have one for the AUD/USD and a profile where I track the Forex triad: USD/JPY, EUR/USD, and EUR/JPY.

Setting up Tradingview II – charting Tradingview is without a doubt THE best online charting solution at the moment. There is nothing you can’t do with Tradingview and the customization possibilities are endless. When it comes to charting, there are a few things to be aware of.

4 – Using templates for more efficiency To make charting more efficient, you can create individual templates for your drawing tools. For example, if you use different color coding techniques for your support and resistance levels or other tools, just create a new template and the next time you draw on your charts, just select it from the dropdown.

Create templates for your drawing tools After you drew your first trendline, you can see the dialogue box on your screen. Under “Template” you can create new templates or apply a specific template to a drawing tool. It really helps make your live much easier and charting more efficient. This works with all other charting tools as well – not only trendlines.

5 – Create alerts

Not every trader uses multiple screens – and to be honest, from my own experience I know it’s not necessary if you know how to organize yourself. However, to make sure you don’t miss any important price behavior, you can and should use the alerts function in Tradingview. You can see the general alert settings on the left. Again, you can fully customize the alerts to your needs. You are not limited to price alerts only, but you can also create alerts based on moving averages, price channels or %-price movements within specific time intervals. Alerts at price levels do not necessarily signal a trade entry; price alerts are usually set at price levels that could potentially signal a trade, but where some discretionary thinking is required. Thus, a price alert should just draw your attention to a specific chart and should not be confused with a pending order. If you use support and resistance levels, you can simply click on the level on your chart and by clicking the alarm clock in the dialogue box you can create an alert for that level.

Create price alerts directly for your drawing tools I highly encourage you to use alerts as often as you can to make sure you don’t miss price moves.

Step 1: The night before After you are done setting up your charting and organizing yourself, let’s take a look at the daily trading routine. I find that a surprising portion of what sets up traders for success during the day is what has happened the previous night. – Dr. Brett Steenbarger Especially if you are not a full time trader yet, it is important to use your free time effectively. Preparing your next trading day in advance is one of the best things you can do for yourself.

1 – Chart preparation The evenings should offer enough time to sit down and perform a thorough market analysis. Go through your charts one by one and analyze what you see. Update your levels, evaluate your indicators, perform a multiple timeframe analysis and zoom out a little to get a better perspective.

2 – The trading plan If something catches your eye, write it down in your trading plan. You can download our trading plan template below. The trading plan includes your price observations, the most important price levels and why you have them on your charts. In it you also create if-then entry criteria triggers. Here you can make use of the alerts as we have described above.

Step 2: Good morning. Pre-market preparation 1- Your daily dose of news

Although we are technical traders, we have to know what is going on in the world. Fundamentals set the tone and they provide a lot of information that is absolutely necessary. For example, when uncertainty is very high, when the VIX rises and when investors run to safe haven markets,

you can usually see that support and resistance levels tend to break and don’t hold. Whereas, during risk off days, you typically get much more rational price behavior. Of course, that’s just a very general and basic way of looking at fundamentals, but it highlights the importance of following fundamentals. Here is our list of sites we visit every day in the same order. You’ll see that news often overlap since there is only so much going on in the world. We read a mix of broad market news and some independent market analyses: 

Bloomberg.com/markets

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Reuters markets

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Market Pulse

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BK asset management Insights

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Ashraf Laidi

Of course, we keep track of the news for that day. We use the Forexfactory news calendar and Nasdaq’s earnings calendar – although we don’t trade stocks, corporate earnings are a key driver for markets. To make the process more effective, I bookmarked all sites and display the menu in my browser so that I can just skip through the individual sites. To give you an idea, 30 – 45 minutes is really all you need to get a good enough picture of what is going on.

2 – Overnight international trading activity Although the news often give you a pretty good idea of what has been going in, I now briefly scan some of the indices and other markets that provide important information for my trading day with the profiles I set up on Tradingview. Indices Often, risk appetite is carried from one trading session to the next. And, furthermore, there is usually one dominant market theme most investors are paying attention to at any given moment. A negative performance during the Asian session often leads to uncertainty during the Europe and the US session as well. Thus, pull up your Tradingview profile for market indices and scan the markets. As we have said above we watch the S&P 500, the DAX, the Hang Seng and the Nikkei 225. Commodities Depending on the markets you trade, it is usually necessary to analyze the commodity markets as well. The most important commodities are typically: 

Gold – Gold is a good risk-barometer and quickly shows investors’ sentiment

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Crude – Crude is an important commodity for traders in almost all markets. Commodity currencies (mainly AUD and CAD) have a high correlation to crude; energy stocks are even more correlated to crude; consumer spending, inflation and other macro variables are affected by oil prices as well

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DJ Commodity index – a broad market measurement for the performance of a basket of commodities. Especially important for Forex traders with exposure to the US-Dollar

Bonds We just briefly take a look at the Bond developments as another clue regarding risk sentiment and risk appetite. Unless there has been a major move, we don’t pay much attention to it >> Finviz Bond overview

Step 3: Immediately before you start trading 1 – Update your trading plan Now, pull up the trading plans you did last night and cross-check if anything happened that would cancel your trade idea. Also, if you can see any new developments on any other market, create a new trading plan. Then, place the trading plans next to your trading desk where you can see them all the time. Together with your price alerts, the trading plans will add a whole new level of professionality to your trading. If you have problems with missing trades or a lack of focus, this approach will help your trading get to the next level.

2 – Review your past 10 trades

Every trading session should start with a brief review of your previous trading day. It’s not necessary to get too much into the details at this point, but you want to get an idea of where you are with your current trading: 

Am I in a losing streak and is it influencing my behavior and thinking?

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Am I in a winning streak and should be cautious of over-confidence?

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Have I been over-trading lately?

Edgewonk’s trading journal comes with a lot of emotional trading analysis and the “Tiltmeter” visualizes your current state of mind and how well you have been respecting your trading rules: 

A green Tiltmeter shows a disciplined approach

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A red Tiltmeter shows that the trader has repeatedly made mistakes and broke his trading rules

A short look at your Tiltmeter can provide information about your current mindset and how well you have been trading lately. If you notice a lot of emotional and behavioral problems, maybe you shouldn’t trade for that day and work on your mental game to sort out what is causing your problems. Disclaimer: Tradeciety is behind Edgewonk.com

Step 4: During your trading day Everything we have done so far leads to the perfect trading session preparation. Once you start your actual trading session, there is typically very little to do if you have done your homework. You have to wait until price reaches your price levels and then re-evaluate the situation; keep an eye on the news and how they impact your trade scenarios and how other markets behave. The problem with sitting at a desk all day watching the markets is that sometimes you do things you don’t really want to do simply out of boredom. – John Porter

1 – Sit back and wait. Minimizing screen-time The myth of screen-time is a very dangerous one. Staring at a screen all day, flipping through timeframes and hunting signals almost always leads to bad trading behavior. With the help of pre-defined alerts and your trading plan, trading becomes a waiting game.

2 – Journal your trades taken A trading journal has many different purposes and one is to keep you busy. Once you have taken a trade, go to your trading journal and make the new entry. You can easily judge how serious you are about becoming a professional trader by looking at your trading journal. A journal is not “nice to have” but an absolute must have as a trader.

3 – Update your trading plan Throughout your trading day you will see markets move and depending on what happens on your charts, you need to update your trading plan. Often, price moves will cancel your trading scenarios or moves that occur too fast won’t lead to a trade entry. As you can see, there is really not much to do during your actual trading sessions once you have done your preparation. The professional athletes practice thousands of hours, they create a very detailed game plan, but once they step on the field, they just have to execute their plan and make small adjustments along the way. This is how professional trading should look like.

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” – Abraham Lincoln Being stressed, bored or uncertain about what to do are clear indications that you haven’t done your homework.

Step 5: After you are done trading 1 – Complete your journal Journaling your trades as long as your memories are still fresh is usually the best approach. Set aside 20 – 30 minutes and enter all your trades into your trading journal.

2 – Review your trades Now take a closer look at your performance and behavior: 

Did you follow your trading plan?

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Did you miss any moves and if so, why?

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How did you execute your trades?

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Did you make any mistakes or managed your trades in an inefficient way?

A complete performance review should be done over the weekend, but a short review of your trading day is a must so that you can be aware of negative behavioral patterns or weaknesses in your trading immediately.

3 – Evaluate if you want overnight exposure If you have open trades going into the market close, evaluate if you really want to risk the overnight exposure. Especially during uncertain and volatile times, carrying trades overnight can bring a lot of additional risk; this is especially true for weekend exposure. You might want to take some profits, close trades altogether or adjust your orders – but don’t forget about gap risk.

4 – Prepare your next day’s trading plan And here the circle comes complete. Perform your market analysis, update your trading plan, draw levels and make sure you are prepared for the day ahead…

If you want to be a professional trader, you have to act like one You probably say that this sounds like a lot of work. But think where your current trading approach has led you. The problem we see with amateur traders every day is that they lack guidance and consistency in their approach. Instead of straying around, do yourself a favor and start following a serious routine. You’ll see the benefits within a few weeks. “Discipline is the bridge between goals and accomplishment.” – Jim Rohn