The following is a guest post from Michael Lamothe of Chart Your Trade.
Having a trading routine is as critical to long term trading success as breathing air is to being alive.
Successful trading is consistent. Successful trading is an ongoing learning process. Successful trading can be boring at times. Successful trading is a routine. Once you have a method that works, successful trading is simply doing it again, and again, and again!
There are lots of ways that you can structure a trading routine. However, the 3 most crucial elements to a SUCCESSFUL trading routine are:
- The trading routine fits the trading strategy you are attempting to employ
- The trading routine fits your capabilities and lifestyle
- The trading routine is done consistently
If any one of these keys are missing, the routine will ultimately fail.
Here’s an example of what I mean:
The Trading Routine Fits the Trading Strategy you are Attempting to Employ:
Suppose you set up a routine that says you will analyze the market and look for trading opportunities once a week, on weekends. You’ll place buy stops on Sunday night and attach sell stops to them.
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This may work for an intermediate term strategy but if you are looking to take action intra-week, you may have a hard time and need to increase the frequency of your analysis. If that doesn’t work for you, then you may need to look for another strategy.
The Trading Routine Fits your Capabilities and Lifestyle
You can have the perfect routine laid out for a trading strategy, but if you’re unable to execute the routine, it’s worthless to you.
Let’s continue with the earlier example.
You set up a routine that says you will analyze the market and look for trading opportunities once a week, on weekends. You’ll place buy stops on Sunday night and attach sell stops to them.
You intend to use this routine for an intermediate term strategy… so far so good.
Now it’s time to implement…
Is this something you’re capable of doing consistently? Does it fit your lifestyle? If you’re someone who works every weekend and doesn’t have the time to do the analysis yourself, then this routine probably won’t work for you.
So what do you do?
Do you throw your hands up in the air and give up..? I hope not!
You come up with something that works for you and your lifestyle. You can adjust strategies and routines to suit you. The important thing is that you are actively taking steps toward your own personal financial freedom!
The Trading Routine is Done Consistently
Whatever routine you come up with for yourself, it has to be done on a consistent basis. If it isn’t, you don’t have a routine. You have something you do every once in a while and your results will be those of someone who only does this once in a while.
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In the earlier part of my trading career, I ended up screwing myself numerous times because one of the above keys was missing.
As you progress in your trading journey, you may find that you want to use multiple strategies for different purposes. That has been my experience.
I have three strategies that I follow:
- A swing trading strategy.
- An intermediate term trading strategy.
- A long-term strategy I use for my retirement account.
I have a slightly different trading routine for each and there is some overlap. Here’s a high level view of what my trading routines look like:
|
Swing Trading |
Intermediate Term |
Long Term |
|
| Find stocks and ETFs that I will trade during the week every weekend. |
X |
X |
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| Gauge market health toward the end of each trading day. |
X |
||
| Gauge market health at the end of each week. |
X |
X |
|
| Analyze which industry groups are heating up and which ones are cooling off every weekend. |
X |
X |
|
| Check positions at the end of the day and take action on any rules/signals being triggered. |
X |
||
| Check positions at the end of the week and take action on any rules/signals being triggered. |
X |
X |
|
| Check positions at the end of the month and take action on any rules/signals being triggered. |
X |
X |
X |
| Enter buy stops and sell stops on potential new positions each weekend. |
X |
X |
|
| Plan entry and exit for every potential trade and calculate my position size. |
X |
X |
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| Log every entry and exit into the trading journal as they occur. |
X |
X |
X |
| Perform post analysis of all trades once per month. |
X |
X |
X |
Whatever your trading routine is, make sure that it has the three crucial elements noted above. You’ll be on the right track for success.
I hope you enjoyed this post from Michael, be sure to check out his site https://chartyourtrade.com/
Trade Safe!
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
