This is a Guest Post by Dante Vincent you can find him on Twitter @DGTrading101. His website is dgtrading101.blogspot.com.
Routine & Extraneous Influence – How Important are they to your Trading?
Routine. This is one of the most important tools in your trading arsenal and you don’t even know it. What you do day in and day out in your personal life has a direct effect on your trading – I believe that 110% and have seen it unfold in my own trading.
If you roll out of bed at 9:15am 15 mins before open, slug over to the PC and quickly scan your local chatroom or Twitter to give you some quick ideas for the open – I hope you didn’t plan on making any money. The saddest part about that is I would venture to say that more people than not actually do this. It will NEVER work!
For some reason, most of the traders I talk to just think of trading as this “thing,” I guess is a good way to describe it. Meaning that almost everyone is not trading full time, they are aspiring traders, who either already have another job, are unemployed, or whatever the situation may be – but trading is not their main source of income. So I think that a lot of people treat trading as like a lottery ticket. A “hope,” a “man that would be nice,” you know what I mean. But the one thing they don’t consider it as…is A JOB!!! It’s a job! Just like any other job. Treat it that way.
If you were a consultant at Deloitte and you and your team had to give a big presentation to a company at 9:30am Monday morning, would you be rolling out of bed at 9:15 and slugging over to the meeting? Would you be showing up with no prep work done, and just turn to a team member right before you walk in and say “Hey I’m here…so what are we pitching today again?” Of course you wouldn’t. That would be lazy, irresponsible, you’d never get the sale, and you’d probably get fired. Trading is no different! If you have a lazy morning routine with no prep work or structure, you’re probably going to lose money – which is the markets way of slowly telling you as you bleed your account down: “You’re fired.”
Its a job. Approach it as such.
Here’s my morning routine. I’m on the East Coast.
I get up at 6:45am every day, I do some sort of cardio workout to wake my ass up, whether it be going for a quick run, jumping on my stationary bike or my row machine. I do that for about 30 mins. 7:15 – 7:30ish I’m done, I take a shower, get dressed (don’t sit at your desk in your underwear like a slob), and go make some coffee and breakfast. Around 8 – 8:15 I’m ready to go. I’ll sit down at my desk, turn on CNBC to see what the talking heads are blabbing about, look at futures, and start my morning scan. (Note: I’m not looking at Twitter or a chatroom for ideas yet. Find your own ideas. That’s important. Then scan your favorite idea source once you’ve done your own due diligence) From 8:15-8:30 I’m just jotting down any gappers with volume from my scanners. Then 8:30-9:15 is “research time” – as in I’ve got my momo list, now I’m briefly skimming through the news causing the moves, looking at the daily charts, checking some quick fundamentals on Yahoo Finance, etc. That usually cuts the list down to 2 or 3 names I’m really interested in, and then the last 15 mins or so before open, I’m game-planning exactly what I want to do with those names, thinking about possible entries based on daily resistance, deciding whether or not I want to attack early, or let them play out for 15-20 mins into open before making a decision and setting a bias, things of that nature. By 9:25 or so I’m good to go on that, that doesn’t take long, and then I’m now ready for the open. I’ve got my own ideas, I know the news causing them to do what they’re doing, and I’ve got a game plan of how and where I want to attack.
Once the market is open, you want to have all the “thinking” done – you should be on auto pilot now, waiting for ideas to come to fruition. Not scrambling to react to some crazy new runner that you just saw while trying to watch 3 or 4 other things at the same time that you kind of half-ass understand the news, if you even looked up the news at all and bothered to read past the headline.
If that describes you, then you probably already know how that strategy works out. Not well!
If you’re not doing at least I’d say…75% of what I just described above, you have zero business trading the open. Zero. You’re just asking for it – and long term, you’ll be a loser.
Also in addition to a good morning routine – what’s going on in your personal life is very important as well. If you’ve got lots of stress elsewhere in your life, it’s going to bleed into your trading without question. If you get into a big fight with your girlfriend – you probably shouldn’t sit down and trade right after. There is a very, very slim chance you make good, rational decisions when you’re annoyed or upset. I can look at my PnL and see a distinct dip in performance for about a two week period 3 months ago, and I can directly line that up to when I was moving. It was stressful, I was back and forth between two places, on the phone with this guy, that guy, the closing date got moved, delayed, etc. If you’ve got these big things going on in your life that distract you from the task at hand, trading, and you find yourself daydreaming about other obligations – you’re not operating at peak performance as a trader.
So take that into account – if you’re in some kind of transitional period or stressful time in your life, then that is not the time to pursue a career in trading.
If you are really going to give yourself a fair shot to become a successful trader, a few ducks need to be in a row.
1) Have a financial foundation to fall back on. Do not trade with your last dollars.
2) Be a disciplined human being, that’s how you become a disciplined trader.
3) Have a routine & a purpose. Don’t be lazy and look for handouts on Twitter or in chatrooms.
4) Have a clear head, and a stable personal life. No big outside issues weighing you down.
5) At some point, trading needs to be the only focus. You shouldn’t try to balance trading & a second job – that’s noncommittal, and day trading is not a noncommittal profession.
If you can line those five things up – then and only then do I think you give yourself a fair shot at this game. Anything less, you’re stacking the deck against you right from the get-go and asking to become another statistic and part of the 90% who try and fail.
Get your ducks in a row. If you’re gonna play the game, play it right. Good luck.