Date: 4/20/2021
Author: Chris Hood
Be sure to check out new episodes of my video podcast each week, where my ace pupil Brian Jones and I talk the ins and outs of options trading- and give you insights and strategy that you can immediately put to work for you in the markets.
I have a question for you.
What’s your routine before the market opens and after it closes each day?
If you have an answer, then you’re on the right track towards trading success. If you don’t, then you’ve got some work to do.
Consistently profitable traders, whether professional or not, all have specific and consistent pre- and post-market routines.
I go through the same process EVERY single day!
Your planning and evaluation should take place while the market is closed.
For most traders, planning during market hours leads to EMOTIONAL decision making. Decisions based on emotions are always bad decisions.
It pays to do your prep work after hours.Reserve the 9:30 am – 4:00 pm EST time slot for EXECUTING your plan.
The less experience you have the more important this is!
Even day traders, who must make snap decisions while the market runs, must plan before the bell.
Which stocks will they watch?
What are those stocks likely to do?
Which trade types seem appropriate?
Now, I can’t GIVE you a routine.
Your trading plan and lifestyle will determine the specifics of your pre-and post-market tasks. However, I can give you a set of guidelines to help you out.
We’ll do this in reverse, and consider the end of day routine first.
The reason is simple – your actions after the market closes determine what you’ll do the next day.
Once you hear that bell, trading is over. You’ve already banked your wins and taken your losses. It’s time to get ready for tomorrow.
The first step is daily accounting!
Ensure all your trades, open and closed, are entered into your tracking software or spreadsheet. Know exactly where you stand from a P/L perspective.
Figure out which positions need attention tomorrow and which you can ignore.
Assume it’s Monday, and you have 10 positions.
The call butterfly on AMZN and long call on F are expiring Friday, while the rest of your trades have 30-100 days to go.
You really only need to worry about the first two.
Do you need to exit and take profits, cut losses, or make any adjustments? Perhaps one leg of a trade must be closed, or a put spread rolled out for more time.
Sure, give the longer-dated trades a look to make sure the structure of your trade is intact, but you have plenty of time.
Don’t get caught up worrying about those.
Now plan your trades for tomorrow!
Note the condition of the market at the close. What does it tell you about the likely open of the day tomorrow?
Does it look set for a strong run, or is it overextended and ready for a pullback?
Are there any foreseeable catalytic events like a Federal Reserve press conference that might influence tomorrow’s market landscape?
Is tomorrow a historically bullish day or a bearish one?
Check your watchlists, identify potential trades, and decide what actions you’ll take.
All of this information is available if you know where to look. It’s something I teach all my coaching clients.
After hours is the time to study the charts and make your most important decisions, not while the open market distracts you!
We’ll assume you’ve done your post-market chores and are set for tomorrow’s trading.
What should you do before the bell?
First, think about yourself.
Did you get any sleep?
Is there something in your personal or work life that’s so distressing it might influence your decision-making?
Are you hungover or still drunk from partying last night?
Did you have your coffee?
Laugh if you want, but mental clarity is essential.
Your hard-earned money is on the line here! If your head isn’t in the game, maybe it’s better to stay away from the computer that day.
The market will be there tomorrow.
Never FOMO yourself into bad decisions.
Trade of a lifetime opportunities happen EVERY DAY!
Assuming you’re good to go, then check the market condition at open and review all your positions.
Look at the futures. Note where the probable open will be. Check the VIX.
Was there an overnight gap up or down?
Did volatility spike because of the news?
Are there any significant changes at all since yesterday?
Last night’s market assessment could now be completely invalid. Forget about your assumptions, and to what the market is actually doing.
Remember – the market doesn’t give a DAMN about your opinions!
Ask yourself, would you rather be correct about your predictions or make a profit?
Use this as a guide for building your personal routine and watch your performance improve.
Plan, assess, and watch your account grow.
Next time we’re going to cover index and sector trading, something that can turn the slow summer months into a winning season!
