I think we can all agree that habits are what determine our success or failure in any endeavor, trading included. So, how do we go about developing the type of habits that will lead us to profitable trading?
The answer: Routine.
Proper trading habits do not just magically appear out of thin air (unfortunately). They can sometimes take years to form. However, luckily for you, you have the power to put into motion a plan that will bring forth the proper trading habits sooner than otherwise possible. The development of positive habits, the ones that lead to success in any field, is something you can make a conscious effort to achieve simply by implementing consistent daily routines.
When you think about your daily trading routine, what do you think about? Do you even have one? Are you aware that ALL professionals, whether it’s a professional trader, athlete or doctor, have strict routines whether they realize it or not? They follow these plans and routines like clock-work, everything from diet, exercise, sleep and meditation. One thing that any successful professional has in common is that they have gone from daily routines to ingrained habits that virtually guarantee consistent and on-going success in their field.
“Look at the lives of famously gifted and creative people—including Freud, Beethoven, and Georgia O’Keeffe, to name but a few—and you’ll see that many of them optimized their daily lives to get on top of their games. Routine was their secret weapon.” – headspace.com
Once an effective daily trading routine has turned into an ingrained habit, it has essentially become a part of you and at that point you are effectively on success ‘auto-pilot’.
The power of daily trading routines…
Let me get this out of the way early: Without a daily trading routine, you won’t make it.
I am not talking about just having a trading plan either, I’m talking about what you do from the time you wake up to the time you sleep, this is all part of your daily trading routine.
Professional traders have developed a daily routine that maximizes their ability to trade properly and successfully. What does this look like? Well, it inevitably will vary from one trader to the next but many of the elements of a daily trading routine will be universal:
Get a good night’s sleep, ideally 7 to 8 hours.
Eat a good, healthy breakfast.
Identify the daily chart trend of the markets you trade at week’s start.
Identify key horizontal support and resistance levels at week’s start.
Check your favorite charts once in the morning, scanning for price action signals that have confluence with the daily chart trend and / or a support or resistance level.
Check your favorite markets once again after the New York close, again scanning for any obvious price action signals that may have formed.
If a trade setup formed meets your trading plan criteria, set the trade up and walk away until tomorrow morning. If no setup was there, walk away until tomorrow morning.
If you have an open trade, check it in the morning and just note what has happened, do not take any action unless there’s an obvious, logical reason to do so. Most of the time you should just be observing, remember, set and forget.
Whilst brief and simple, the above is an example of a solid trading routine. The biggest thing to notice about the above routine is that we are not spending a lot of time analyzing the market or entering trades. Instead, we are approaching the market the same way and at the same approximate times every day, this way, our brains are primed to begin turning this low-maintenance, simple routine and trading approach into a positive trading habit.
It’s important that you develop your own trading routine, one that makes sense with your schedule and daily life. The same routine will likely not work for every trader.
The lifestyle of an ‘end-of-day’ trading routine
In a recent article I wrote about end of day trading, I discussed some of the many benefits of this trading approach, but one thing I didn’t touch on very thoroughly was the lifestyle of an end-of-day trader.
Not only will trading in an end-of-day manner improve your trading, it will also allow you to have a better life and enjoy the ‘fruits’ of trading.
The trading routine that myself and many other successful swing traders implement, like the one outlined above, allows us to have a lot of time away from the charts each day. After all, part of the reason any of us get into trading is to not have a regular 9 to 5 monotonous time-consuming job, right? So, if you want to really have that freedom, you need to trade end-of-day and make it a routine.
I typically only spend about an hour a day analyzing the markets and looking at charts. So, that obviously leaves me a lot of time to do whatever else I want or attend to other tasks and businesses.
All you need is your laptop and an internet connection when you trade ‘end-of-day’ with a set and forget trading routine. You could, if you wanted, be a coffee shop trader and trade from anywhere in the world since you do not have to be in front of your charts more than twenty or thirty minutes at a time once or twice per day.
The science behind routines
If for some super strange reason, you are still not convinced of the power and importance of implementing a daily trading routine, let me share with you some information on the science of why routines are so powerful and effective…
As pointed out in an article tiled The Secret Benefit of Routines…
“Daily practice is a game-changer for creativity. Among other things, it keeps projects constantly percolating in the unconscious mind—and research shows just how powerful the unconscious mind is, helping us to reach better decisions than active thought
As Marty Nemko told me: “Having a routine helps ensure you do things well. For example, if your routine includes a daily shower, you’ll continually get better at it.” Sure, it’s harder to perfect your prose style than the way you wash your hair, but the same logic applies: daily practice is where the magic happens.”
A routine not only helps you naturally because it keeps you in-tune and intimately connected to the most important things you need to do each day (like analyze the charts), thus making you better at them (think practice), but it will also give you the best chance at implementing your trading plan successfully and following your rules of engagement in the market (since you will already be behaving in a consistent and disciplined manner – following the trading plan becomes more natural and easier).
It’s always good to remember why we got into trading in the first place. For me, it was to escape the 9 to 5 ‘grind’ and monotony of work, bosses and what I call modern-day ‘slavery’. So, it’s important to keep that in mind so we don’t end up turning trading into the same exact thing we were trying to escape. Trading is about freedom, so don’t become a slave to the markets and your charts.
Perhaps one of the trickiest things traders must figure out all too often through trial and error, is that to achieve the type of trading lifestyle they dream about, they must first realize that the only thing they can control is themselves. Spending a lot of time in front of your charts does not mean you are going to be a successful trader. The trading routine required to become a successful trader who doesn’t over-trade and become emotional about trading, is a laid-back, relaxed and minimalist type routine.
In my trading course and members area, I teach my students the importance of implementing a trading strategy and following a plan, but more importantly, I teach them the importance of sticking to an end-of-day trading routine that yields both improved trading results and improved lifestyle.
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