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Prepare for Your Day

Although I prefer to prepare for my trading day early each morning, some traders are not able to do this or prefer making their preparations the day before either after market closings or in the evening. Either approach is acceptable as long as there is some degree of organization and preparation in what you are doing. I have found that many of my trading blunders occur when I make impulsive decisions. This is not to say that unplanned-for decisions cannot be made during the day; however, it is important for traders to have a very general overview of what to do the next day.

For those who are trading the gap systems, the preparatory work is very clear indeed. Go through the markets prior to opening (either the night before or that very day) and find those markets which have closed very close to their low price for the day or very close to their high price for the day. Jot down market and contract month and watch these marВэkets for possible gap openings the next day. This will allow you to preВэpare for possible trades and to filter out those markets in which you will have no day-trading interest due to either their lack of volatility, thin trading volume, or characteristically small price moves. Do not assume that any given market is an unfit candidate for gap trades. Frequently, markets which have been known as sleepers spring to life following an opening price gap.

Support and resistance may also be determined in advance using the MAC method and the intraday charts. I strongly suggest that you do this work in advance as well. As you can see, my preference is to study the markets in advance whether for potential signals, developing chart patterns, or to find approaching support and/or resistance levels.

Determine If Any Important Reports Are Scheduled. Although many traders enjoy the thrill of watching markets respond to major govВэernment reports and/or news items, I am not impressed by the above and actually prefer avoiding the markets until the dust has settled folВэlowing the release of such reports. Market response may create certain trading opportunities, but I think that the average trader is far better off waiting until the news has been digested and then entering his or her day trades.

I have found that those trading signals which occur after the first hour of trading, after overnight news has been assimilated, after important reports have been released, and after the trading participants have had an opportunity to express their sentiment by buying or selling tend to be more reliable. I have also found that signals which occur toward the last 1 to 2 hours of each trading session tend to be more reliable. I have no hard statistical evidence to support this assertion or observation, but I urge you to study the markets and make your own observations.