A Trader’s Daily Routine

A Regimen for a Daily Trader

To a large extent, a trader’s daily routine is determined by the kind of trader he or she is. Some market experts claim there are eight different types of stock market traders, differentiated by the time frame of their trades. Timing is common to all traders and investors as well. The time frame for investors tends to be short-term while for investors the time frame is longer term. While both traders and investors look to make a profit from buying and selling stocks, the similarity ends with the timing of the buying and selling. Investors will buy a stock and hold it, in some cases for years. Some traders begin their trading day owning nothing and end their trading day owning nothing, closing out each buy by the close of the market.

For traders, planning for the week begins on the weekend.

The Weekend

The Australian stock market follows the lead set by action in the US markets. An Aussie trader uses the weekend to study the prior week’s activity in the US, from  economic news to market reactions to economic reports and company specific news. This is not to say reviewing market action on the ASX is unimportant, only that much of what happens here depends on what happened there.

US financial websites begin covering upcoming economic news for the coming week on the weekend. Traders take the time to study what is coming to look for opportunities that might arise from the kinds of economic news to be released. There are a variety of excellent sources, from yahoo finance Australia, to Bloomberg.com to reuters.com/markets.

Weekends are the time traders can do some in depth reading without the swirl of activity happening while markets are open. It is the time to plan trades based on expected or potential events during the upcoming trading week.

Pre-Market

Aussie traders will be tracking the US futures trading for trade opportunities on potential strengths and weaknesses at the open. US analysts and market experts will begin their coverage of market expectations for the trading day and on into the trading week. Listening to live morning financial news coverages is a must.

Any news, positive or negative, about specific stocks or business sectors opens the door for trading opportunities. The economic news calendar for the week is reviewed to see which potentially market moving reports will be released during the day. Traders review trading plans prepared over the weekend and add preliminary trading plans for the day, with targeted stocks and entry and exit points.

Traders incorporate potential trades into their online trading platforms, placing orders into the queues with entry and exit points and stop losses. A tech check to make sure everything is working prior to market opening is a must. Scanning software can identify trading opportunities from stocks hitting 52 week highs or lows in the last trading session.

Traders set watch lists for when targeted stocks hit their pre-defined criteria for a trade.

Morning Session

At the opening bell most traders will wait to see which the way the market is trending before making their first trade. Few seasoned traders buy at the open, preferring to wait patiently on the sidelines while the market settles in before executing their first trade of the day.

Trading plans in place have specific entry points which when met will trigger the first trade of the day. Trading plans also set an exit point at an acceptable profit level. The game traders play differs significantly from the investors game, with the trader after smaller, quicker, and more numerous profits.

Trading platforms allow seasoned traders to input multiple potential trades at multiple entry and exit points and stop losses to preserve profits.

Typically institutional traders take time for lunch so midday trading activity often slows considerably.

Afternoon Session

There is often an ebb and flow to market activity so as trading activity picks up in the afternoon session traders can monitor successful and unsuccessful trades and look for opportunities presenting themselves based on market movements taking place in real time. Watch lists may point out surprise movements in targeted stocks that bump the stock from the watch list to the buy list.

As the market closing time approaches, traders need to move quickly to enter new trades in order to reach the desired profit level before closing. Day traders will begin to close out morning trades, cancelling all unfilled orders before market closes while momentum traders may carry a profitable trade over into the next trading day. Stop losses can protect moderately profitable trades from turning unprofitable.

Post Market

Seasoned traders establish a trading journal, a written record of all trades, including stock code, entry point, exit point, and profit percentage. For most traders, the trading journal is an extension of the pre-recorded trading plan.

After the market closes, the journal is updated to reflect completed and cancelled trades, and trades that emerged during the trading day not originating from the pre-market trading plan.

A well-developed trading journal will include the reason for the trade, the reason a trade was cancelled, and any notes about why the trade was successful or unsuccessful.

Along with updating the trading journal, seasoned traders will spend time after the market close listening to financial journalist commentary on the events of the day, focusing on what drove the market. Expectations for the rest of the trading week begin opening the door to possible new trading opportunities based on what market trends develop.

A final post market step is a review of trading plans and watch lists that did not make it into the days order queues for possible addition into the follow day’s plan of action.

To a newcomer to share market investing, a traders daily routine might seem a burdensome task, and so it is. But it also differentiates a seasoned trader from an amateur trader. The routine begins on the weekend and continues from the pre-market to the market close on the first trading day of the week, continuing through week’s end. The routine is a series of activities designed to identify specific market buys, including a purchase price, a sale price and an acceptable profit level, and a safety valve (stop loss) to prevent a loss.