The Habits and Routine of a Successful Price Action Trader
Trading success is a result of discipline, and having a daily routine is a key component to becoming a disciplined Forex trader. It is so easy to fall off track and start making emotional mistakes as a trader, and you really need to consciously stop this from happening by having a daily routine that you go through every day. A daily trading routine will add a degree of order and stability to your trading, which is very important to your mindset and thus to your long-term profitability. If you do not currently have a set daily routine for your trading activities than you need to start developing one, trading absolutely cannot be a haphazard endeavor. The more objective you can make every aspect of your interaction with the market, the less likely you will be to commit emotional trading mistakes.
Avoid Short time Frame
The right trades at the right times Recognizing the “right” trade will mean that you know the difference between a good potential situation and ones to avoid. Too often, investors get caught up in the moment and believe that, if they watch the evening news and read the financial pages, they will be on top of what’s happening in the markets. The truth is, by the time we hear about it, the markets are already reacting. So, some basic steps must be followed to find .
Limit screen time to a certain period of time and time of day
The first task in developing a daily trading routine is to know what times during the day you will be analyzing the market. You will obviously need to work around other responsibilities such as your current job and your family duties. If you find that the only time you have for checking the market is an hour before you go to bed, than you must work with that time period. The best times to analyze the market are around 4-5pm EST (New York time), which is the New York closing, and then around 1-2am EST, which is just prior to the European opening. Now if you can’t stay up until 1 or 2am EST, that’s OK, just make sure you analyze the market at the same time each day.
Once you have decided on the time period you have available for market analysis you then will need to decide on how much time you want to devote to scanning for price action trade setups and(or) for monitoring any previous open positions you may have. Limiting your screen time to a specific time allotment is very important to your mindset and hence trading success. Trading off the daily charts is the best time frame to trade because it filters out the “noise” of the lower time frames while also providing you with some high-quality trade setups to trade each week. Once you become skilled in price action analysis you can scan each currency pair that you trade during your given time period each day. If there is no setup than you move on to the next pair, if you find no setups in any pairs than you are done for the day! Any further analysis beyond this point will only hurt your chances at Forex trading success. You will start to over-analyze the market and dig up reasons to enter a trade and enter low-probability trades; I promise you this will cause you to lose money over time.
Follow a Price Action Trading Plan
If you are a price action trader you know what setups you are looking for each day in the market. Since this is the case you should have a written out and clearly defined trading plan of what you are looking for each day during your given time period and allotted time. If you do not have a clearly defined and tangible trading plan than you need to get working on this right away. Keeping your trading plan “in your head” doesn’t cut it either, you need to read it, every day. A clearly defined trading plan should include entry signals, exit strategies, risk management plans, as well as long term goals; these are factors your forex trading plan needs to include at a minimum.
Following an objective trading plan will give you precise setups to look for each day, it will help you focus harder and give you a guide to follow each day while analyzing the market. Market analysis needs to be structured; most traders have no structure to their daily routine which is a result of not having a trading plan. How can you become a structured and disciplined Forex trader if you don’t even have a plan for what you are doing? Would a builder build a house without blueprints? No, of course not, it would fall apart, very fast. Yet, almost every person that attempts to become a forex trader approaches the market with no trading plan or sense of why one is necessary. Operating in a structured manner in the uncontrollable Forex market is simply a necessity to you making money on a regular basis. Luck will only reward you for so long before it punishes you, there is no room for luck in the consistently profitable trader’s vocabulary, simply put; professional traders do not need luck because they have a clearly defined trading plan.
Keep a trading journal
Keeping a daily trading journal is important for a number of reasons, but not for the reasons you might be expecting. Many trading books and other educational sources will mention trading journals briefly and say that you should write down the parameters of each trade you take so that you can analyze what you did right and what you did wrong. While there is some value in recording this information I feel that it misses the point. Forex trading success is almost entirely dependent on how well you manage your emotions. The real value that a daily trading journal can provide to you is feedback on how you are feeling each day about your trading activity as well as feedback on your day to day emotional state.
It is very important to right down how you feel before entering a trade and after wards. Write down if you won or lost on the trade and then write down how you are currently feeling. This will do two things; it will give you a task to do right after closing out a trade which will give you time to calm down from a big win or a loss so as to help keep you from jumping back into the market. Also, it will begin to paint a picture of how emotion is tied to trading success. If you are honest in this trading journal about how you are truly feeling before and after a trade, you will begin to see solid evidence that the degree to which you are emotional in the market is the degree to which you lose money.
The other helpful feature of keeping a daily trading journal is that you can write down (or type) your own daily forex market commentary. This will allow you to keep a running tab on market conditions and will generally just make you more aware of what is happening in the market. It is helpful to stay connected to Forex price movement each day and to have it take on some context in the broader market picture. If you are going to be away from the market for a few weeks don’t just come back and jump right into a trade. Give yourself a week or so to record daily market commentaries so that you can get a feel for the current ebb and flow of price movement, it’s important to stay in tune with the Forex market.
Cleanse your mind and body rather than putting extra time into market analysis
As I briefly stated earlier, too much time spent analyzing the Forex market beyond what you have previously allotted for yourself will usually work against you. A previous article I wrote called “Set and Forget Forex Trading” explains this concept in greater detail. If you find yourself with extra time on your hands and you start looking at charts or analyzing economic data outside of your allotted time slot than it’s time for a hobby. Starting working out regularly, any regular exercise will help you focus better on all of your daily life tasks; it will make you feel better both mentally and physically. Time spent exercising is much better than spending extra time analyzing the market; you can control your body and your mind but not the market. If you still have extra time after exercising, then read a book that expands your horizons on some topic, it doesn’t have to be trading related, it can be anything, reading exercises your brain and keeps your cognitive wheels greased. Remember that your daily routine is paramount to long term success in the market, don’t underestimate it. Forex trading is a business and should be treated as such, any successful business operates under strict routine, you should be no different as a Forex trader. For more information on the habits and routine of successful price action traders, checkout my price action trading course for more.