It is critical to day trading success that when trading opens you hit the ground running. Any time spent familiarizing yourself with overnight activities whilst the market is open is lost time. By the time you are up to date with the market, the price you were seeking might no longer be available.
Whilst you may not think this applies to Forex, because Forex trading is 24/5, it is still very applicable. Even though forex trading itself does not sleep, there are definite times where activity and volume is highest for each currency. This usually correlates to the trading hours of the local share market, because most people trade their local currency. This is why there is generally accepted time zones mimicking the most important market times, Asia, London and New York.
Though the specific trading plan will determine which information is most important, there are a few things that most day traders will do before opening bell.
Probably the first thing that needs to be mentioned is the importance of a good night’s sleep and a solid breakfast. I won’t dwell too much on this, since everyone will have their own routine, but taking care of yourself will mean that you won’t leave your trading station or be distracted easily. The last thing you want to do is trade on McDonalds Corp just because you are craving a Sausage & Egg McMuffin.
You should know how long before markets open, you need to be at the trading station to prepare for the market open. Most traders need about one and a quarter hours for preparation, but each person differs.
Most traders say that they check their positions when they first get to their trading station. This is less relevant for day traders, who usually don’t hold positions overnight, but we won’t be militant on this point. Take a look at the charts you are following. For Forex, it is useful to see if anything unusual happened overnight. For share trading, checking the futures and after hours markets will give you an insight into what happened whilst you were asleep.
At this point it is probably helpful to begin the process of information gathering. Catching up on the news is helpful. You should be checking for, amongst others;
- Market analysis both general and ones relevant to the markets you trade.
- Overseas indexes to give you a sense of the mood of the domestic market at opening.
- EMini or VIX futures or other sentiment indicators
- The market calendar for upcoming news events
- Overseas news will give you a sense of which markets might see a lot of trading activity or might present opportunities.
- Earnings releases which will give an indication on individual stocks, but also potentially on a sector.
- Any other information that might be relevant to the market or sector that you trade including weather for certain commodities, or political news for certain regions, etc.
- Check technical indicators or technical analysis
- Look for suggestions or recommendations for trades.
After gathering the relevant information that will allow you to trade, the next phase is to prepare your day. Some people like to open pending positions, others like to update their spreadsheets of positions or begin reviewing the potential trade list for trades to focus on. Whatever your process, it is important to ensure that as many trades as possible be planned at this point, to give you time to think them through and execute.
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