If you’re a trader of any experience level, having a game plan is your secret weapon. Whether you're a seasoned trader or just starting your journey, a well-defined trading session game plan is the key to success. This simple system is what I personally use on a daily basis, and what we talk about in real-time during our Premarket Prep Livestreams in the Trader’s Thinktank - It will keep you prepared for every trading day.
Anticipate the Stock's Movement
A quick guide to anticipate the stock’s movement
Before diving into any trade, take a moment to consider the expected movement of the stock. Will it be a trend day, a range-bound session, or a quick scalp? This initial assessment sets the stage for your strategy. Use market structure and multiple timeframe analysis to help guide your decision-making process for this step.
The Three Critical Elements:
Regardless of your chosen trading style, there are three vital elements you must always consider:
Ideal Entry Point: This is your gateway to the trade. Know precisely where you want to enter.
Designated Stop: Protect your investment with a clear stop-loss level. This is your safety net.
Target Levels: Identify one or two target levels in line with your trading strategy. These are your objectives.
Remember, missing any of these elements categorizes the trade as an error, even if it turns a profit. A successful trade is one that adheres to the plan. Read that again - Just because you make money on a trade, does not mean it was a good trade!
Mark Up Your Chart
Now, it's time to mark up your chart. Highlight key levels and pay attention to any after-hours or pre-market activity that might impact your trade. This visual representation will serve as a roadmap during your trading day.
Capture Your Game Plan:
Don't skip this crucial step. Take a screenshot of your preferred time frame (chart) displaying the precise game plan you intend to implement. This simple act can save you from impulsive decisions that often lead to unfavorable outcomes.
Review and Reflect:
At the end of your trading day, take a moment to reflect. Compare the game plan you crafted in the morning to the end-of-day chart. Ask yourself:
How closely did you adhere to your plan?
Did you execute your trade plan and trades as intended?
Were there any instances of trade mismanagement?
What improvements can you make in execution?
Enhancing your game-planning skills can take your trading execution to the next level. Ultimately, review and reflection are one of the best ways to improve trading execution and trade plan efforts.
Document Plan Changes:
If you have been trading for any length of time, you know that conditions can shift during the course of the trading session. If you deviated from your initial game plan, document what you observed in the market that prompted this change. Proper documentation helps you distinguish between accurately reading market changes and reacting impulsively.
Stick to Your Routine and Plan:
Traders thrive on discipline. Stick to your routines and plans unless unmistakable shifts in market conditions necessitate adjustments. For new and developing traders, it's usually wise to adhere to the plan you created before the session starts, despite any changes you might observe during the session. Generally speaking, if you’re a new trader you want to stick to a firm system while learning the ropes.
In conclusion, mastering the art of trading begins with a well-structured game plan. It's a simple yet powerful system that keeps you prepared, disciplined, and ultimately more successful in the trading world. So, take the time to plan, execute with precision, and watch your trading skills soar.