Thursday, May 14, 2009

Three Questions For the Start of the Trading Day

Here are three questions to ask at the start of the trading day:

1) Am I bringing baggage to the day's trade? Am I carrying over frustrations from losing money or missing opportunity? Am I feeling particular pressure to make winning trades? Am I locked into a view of markets because those views haven't been paying me?

2) Am I prepared? Have I identified significant price levels for the day? Have I gained a feel for how various markets have been trading overnight? Do I know if economic reports are scheduled for the day and what the expectations are?

3) What am I working on? Do I have goals for the day? What have been the mistakes I've been making that need to be corrected? What improvements have I made that I want to cement? What kinds of trades have been working best for me, and am I prepared to actively look for those?

The idea is to become a good self-observer: it's harder to get locked into negative patterns if you're standing apart from those patterns. It's also easier to enact your best trading patterns if you're fully aware of them. Just asking where your head is at when you're trading helps you interrupt patterns that hurt your trading.


Michele said...

These are excellent questions to ask yourself at the start of every day no matter what business you're in.

Gangineni Dhananjhay said...

Dr Brett,

These questions saved me from the brink of disaster in many trading days. Self Observation and feedback from your own self definitely helped me from self sabotage. I observed that a strange person takes over when I am Indulging in Revenge trading, Regret Trading,Trading for entertainment, Trading to avoid boredom, Trading to prove a point to others. Sometimes I observe that trading demons are taking over my true self still i am unable to resist. Best course of action is to cut my position and get away from the screen for the trading day at least. This is to just remind myself. Everday I strongly remind myself " How much Damage I am capable to do to my account " and then start the day.

jeremy said...

Another excellent post. An equally invaluable post would be "Three Questions For the End of the Trading Day" (i.e, Daily Review).

Brett Steenbarger, Ph.D. said...

Good point, Michele: the really good questions are the ones that guide us to positive performance in any field of endeavor--


Brett Steenbarger, Ph.D. said...

Hi Gangineni,

Those reminders to yourself will be very helpful in avoiding overconfidence and blowups; great point.


Brett Steenbarger, Ph.D. said...

Thanks, Jeremy; done!