Trading Routine

From Volatility.RED

All accomplished traders have a specific trading routine that they use over and over day in and day out in the markets. A well-thought-out trading routine is essential for success which is why we have put together an outline in this Wiki.

In this Wiki, we are going to break down your daily trading into 4 phases. Each of these phases incorporates the tools and the flow that we covered in the Trading Tools Wiki.

This Wiki is a part of our Essential Forex Trading Guide. Be sure to check that out HERE.

Trading Routine

The 4 phases that every trader should go through are:

  1. Knowledge Phase
  2. Analysis Phase
  3. Execution Phase
  4. Review Phase

Knowledge Phase

This is the phase that you have basically been in through the entirety of your learning to trade Forex. Knowledge is the first step in acquiring any skill and the key is making sure that you get the correct knowledge while you are in the delicate developmental stages of your career. It is our hope that you are receiving your knowledge from what we think is the best possible source here in our Wikis.

When doing your own research, be careful not to veer off into things that sound too good to be true or seem too simplistic. Trading is about understanding and being turned into what is going on in the markets and you cannot do that without effort and work.

Most traders that have been around the game for any length of time enjoy the process but it’s still a lot of effort and requires constant dedication. Our Wiki, The Essential Forex Trading Guide, gives you all the information that you need to make smart trading decisions but ultimately we can’t force you to come to your desk on time every day and follow what we have taught you. That is all up to you! There is no room for laziness in trading and you either do the work or you don’t.

Having the correct knowledge and then practicing this knowledge will indeed make you a better trader. Becoming a better trader may mean that at first that you simply lose less, and then you lose a little less until finally, you are at a point where you are roughly breaking even. This is normal trading progress so don’t be disheartened if you’re not profitable after a few weeks. Achieving consistent profitability over time requires dedicated practice.

The goal of your trading in these early stages is to simply increase your knowledge, internalize this knowledge, and define how it should all be incorporated into your process. All you need after that is practice practice practice!

Following along with the information and resources you are provided here will shorten your learning curve dramatically but your input and effort will be the most important element to your success. If you are lazy then no one can help you. If you think about it, laziness is a habit and you can change your habits by consciously forcing yourself to do the work until the work becomes a normal and easy part of your day.

What Knowledge do you Need?

You need to first understand the financial markets as a whole, why speculative trading exists, and why traders trade different assets and markets. This was all covered well in the initial sections of The Essential Forex Trading Guide. There is no harm in going back over those sections from time to time as it will only further help to solidify your knowledge. A good tactic is to independently research certain topics and concepts that you come across in your day-to-day analysis that maybe you don’t fully understand. Doing this will fill in your knowledge over time but will ensure that you are only learning things that are actually relevant and worthwhile.

This principle applies to all of the trading terminologies that you will come across on a daily basis. If you hear a word or something that you don’t recognize take the time out to use the internet and find out what they mean so that you are never without an understanding again. The chances are that we have a Wiki for that on Become a go-getter rather than someone who needs to have their hand held. You need to have the ablility to operate independently if needed.

Knowledge can be an ongoing thing but only in a focussed way such as what we provide in The Essential Forex Trading Guide. Once you understand the markets you should then understand how to approach Forex specifically and how to use all of the tools we have looked at. You then need to know how to correctly apply each of the 6 Elements of Professional Forex Trading into your own trade plan. Knowledge is a starting point but it’s very important to keep these points in mind also.

Each trade you take should be viewed as a lesson and you should attempt to learn something from all your trades if possible.

Analysis Phase

Before placing a trade the first thing you need to do is conduct your analysis and this means everything from fundamental, sentiment, risk, and finally technical analysis. It means that you have checked everything possible before risking your money, client money or Prop money to the markets.

In general, the better your analysis the better your results will be. If you get lazy with your analysis, no matter how good your results were up to that point, your trading performance will almost certainly suffer.

With so much to analyze we will break this analysis down into steps that you can follow.

The first step before the start of each day about an hour before the session kicks off should be refreshing your big picture view by researching the markets using the tools and resources that we have already looked at. You are basically reminding yourself what the big picture is for the major currencies.

Once you have done the above you need to identify the prevailing sentiment to figure out which currencies are moving and the reasons for those moves. The rule that you must always keep in mind is to find currencies with the opposite sentiment so that you can trade them as a pair and increase the chances of the trade working out successfully.

In the Fundamental Analysis Wiki, we gave quite a lot of focus to all the various elements that can move the Forex markets. It may be worth going back over all of these until you can quickly identify the prevailing sentiment and approach it based on how we expect the markets to move.

The sentiment and the reasons for the sentiment will be the basis for how you approach your Technical Analysis and how you try and position yourself. This makes it vital to really ensure that you are fully tuned into what is happening in the markets.

When conducting your Fundamental Analysis for day trading you should always be asking yourself the same 7 questions throughout the trading session. These 7 questions are:

  1. What was the main sentiment driving the markets yesterday or which currencies had the strongest sentiment driving them?
  2. What happened overnight or in the most recent session prior to the one that you are trading?
  3. What did the market do at the open of the current session?
  4. What data is coming out and what are the expectations for that data?
  5. What has any recent data done compared to how it was expected?
  6. Why enter this trade now, why not later, why not tomorrow?
  7. What is actually going to drive the price to your target if you get in a trade right now, what specific reason does the market have for trading it right now?

By going through and answering these 7 questions you will give yourself a good overview of what is going on and will help you take yourself away from getting too wrapped up in taking a trade just because you saw one. If the trade still seems good then you can have more confidence in entering it and can then go to the charts to try and pinpoint your entries and exits.

When it comes to actually placing a trade you need to be clear on what your plan is for the trading session. Do you have a specific currency that you are targeting? Is there a specific setup that you are waiting for to get in? You should also be aware of the main risks of the trade. This includes checking the calendar for upcoming events. Just before you push the button you should always do a final check for anything that may have happened to cause your trade to not work out the way you expect it to.

This process will help you stay closely tuned in to everything that is going on and it will also help you from overreacting to certain events that may seem big at the moment but that do not actually change the overall view of the currency.

For example, there may be an economic release that comes out much worse than expected, causing the market to really sell off the currency, but because you are fully tuned into the big picture you are aware that most data over recent months has been very good and that the Central bank is not particularly focussed on the data that has just come out badly. This means that instead of getting sucked into the panic you are now looking for an opportunity to start buying the currency back because nothing has changed except it is now a much more attractive price.

One bad data point in a series of strong releases doesn’t change the big picture. This is just an example but it illustrates why you should be analyzing everything about the currency including the big picture everyday so that your mind is fresh and you can make accurate decisions at the moment.

It is also worth noting that your Technical Analysis is a part of this phase. We have just looked at how you need to be checking the fundamentals and all of the possible risks that you can be exposed to but after all of this, you will need to check your chart and identify whether or not the price action is suitable for trading.

There is no one way of conducting Technical Analysis and everyone has a slightly different way of analyzing the technicals but there is a basic principle that applies to most professional traders. The principle is that you are looking for a top-down approach. This means that you should not just be focussed on one time frame but instead check several time frames to get the big picture from a technical perspective as well.

For example, most traders will start on the daily or 4 hour time frame to see what the price has been doing in line with the fundamental trend and also how extreme the price moves have been in that trend. Next, they will move down to a smaller time frame such as the 15 minute chart to see what the price action is actually doing today in relation to the various measuring tools that you may use. They will then use these entry tools to try and identify an entry assuming that the Fundamental Analysis matches up with it.

If there is no good technical setup that doesn’t mean you shouldn’t take the trade, it merely means that the trade might be a little harder to execute and manage without that technical structure in place. However, many traders take positions in the markets based purely on fundamentals every single day. The point is that everything is much easier when you add in good Technical Analysis and this is especially true at the very beginning of your trading career.

To stay tuned in you simply follow this process every trading day from an hour or two before the market opens until the market closes. However, at some point, it is also healthy to take some time off.

Time Away from Trading

Traders take time away from their desks for a variety of reasons from holidays to family breaks but also it is good to take a break when you feel mentally exhausted or just tired. Staying tuned into the markets full-time is an all-consuming challenge and when you reach the point of exhaustion your trading results will suffer greatly. When you notice your results starting to slide this is the time to switch off and take a break.

A good routine for clearing your head and rediscovering your focus is to simply turn off the PC, get out into the fresh air, and do some form of exercise. Even mild walking is good enough to allow your body to realign and find its focus.

How long you take is up to you and it can be anything from a couple of days to a couple of weeks because your own mind will alert you when it is ready to come back. You will start thinking about trading and be excited to get back into the markets with your normal enthusiasm and will be chomping at the bit to get back to your desk. Make sure to pay attention to these internal signals because they are powerful signals for you to follow. We covered some of these processes in a previous Wiki on Trading psychology so it may be worth going back to that to refresh your memory from time to time.

Tuning Back into the Markets

When you have had a break and are ready to come back the question is how do you tune back in quickly?

Getting back into the routines is important and to help with this we have broken the tuning in process into 3 key steps.

3 steps to tuning back into the markets:

  1. Read the main feeds of each site in your reading list for all of the highlights or headlines that stand out. For example, all of the sites from your reading list offer great front pages where you can check out all the recent activity and news. Some of these sites also offer analysis and opinions about each event so that you can start to build a picture in your mind of what seems to be going on across the market rather than trying to figure out if one article is more important than another. We are looking for a general theme that everyone seems to be talking about.
  2. Once you have read through the headlines you will then click and read each article in full to get a real flavor of what is being said and how it’s been moving the markets. This allows you to determine what is important and what should be ignored. After doing this you will have several currencies that stand out to you that you can focus on heading into your first day back at trading.
  3. The final step is to make sure that you read any new articles or new points that are released between now and your first trade to make sure that the dominant themes in the markets are intact and that you are tuned in correctly.

As you can see, the steps for tuning back into the markets are very much a case of finding yourself back into the big picture first and foremost. This is best to do the day before you start trading again so that your mind has time to digest and reset back to a trading mentality. Once you have done this you can then resume your normal analysis routine on your first day back at your desk.

Now that you understand how to properly analyze the markets you can start implementing this routine every day on your account. Over time this will become an almost unconscious practice that you do without any thinking or planning.

Execution Phase

After you have done your analysis comes the time to place your trade and this is where we enter the execution phase. This phase begins when you push the button and actually enter the market by placing a live trade.

Once you have entered the market it’s arguably just as important for you to keep an eye on the news feeds and be aware of the audio squawk. This is where those services become the most valuable because if the price is moving against you or if anything suddenly happens to move the markets you can react quickly and manage your risks.

While in the execution phase, it’s imperative to be focused on the risk management elements while keeping an eye out for any change within the market sentiment.

Constantly monitoring the markets for things that could change your plan is the first step in this phase. However, you should also be looking for known information that could change the sentiment or impact the currency pair you are trading. For example, there may not be anything happening today but what about tomorrow? Are there any upcoming risk events or Central bank speeches that the markets could potentially react to?

Part of this process is about looking ahead and constantly being aware of information that could potentially impact your trade. Keeping ahead of the curve will help you have a plan to deal with any potential impact on your trade.

Particular attention should also be paid to your trade management at this point because if you did miss something then you should also have a backup plan in place. This backup usually comes in the form of a stop loss. If the worse case situation did happen and you are unsure or confused then you already have that stop to take you out of the market automatically.

With this in mind, it is important to be aware that the stop loss should be placed in a position where you feel it will never get hit under the current conditions if your analysis was correct. This will protect you from random market moves or the typical noise that is generated on an intraday basis. At the same time, having this stop should not expose you to large losses should the conditions quickly change and your trade plan becomes invalid. If your stops have been placed with this in mind then there is absolutely no reason to adjust them after you have executed your trade. If you do sustain a loss due to random moves it means you might need to practice where you are putting your initial stop loss placement because it might need to be placed further to avoid this type of event from happening too frequently.

Remember, every trade, win or lose, is a lesson in itself and should be viewed as such. The decisions you make when your analysis is fresh and your head is clear will always be the very best ones. When the markets change and you become unfocussed then the quality of your decisions will suffer as well. Pay attention to this and work on improving your initial decisions over all others and your performance will improve exponentially.

This leads us nicely to another concept that we looked at in the Wiki on Trading psychology which is monitoring your own personal state. It’s important to monitor the markets and the position itself but you should also keep an objective eye on your own personal state. This means monitoring things such as your moods, actions, attention, and energy levels. Are you tired or hungry? Are you angry after a losing trade? These are all clues that could impact your psychology and your state. This is where you can use some of the techniques we looked at in the psychology Wiki to help you in monitoring and controlling your personal state.

Most traders that lose significant amounts of money do not do so because they have no trading skills. Rather, they do so because they get sucked into a black hole of emotions and start trading for the wrong reasons with no thought about risk management, the prevailing fundamentals, or what state they are in. This is why it’s so important to take the time when you are in a position to constantly monitor and ask yourself how you are feeling and what is driving your emotional state more than anything else.

If you find yourself slipping into a negative state then you should stop trading immediately and take a break as outlined in the analysis phase previously.

Above all else, the execution phase is about following the plan you made when you were not in the markets which is when you were thinking with the most clarity. When money is on the line your emotions will always be impacted to one degree or another. This is just human nature and something that we have to live with as traders but having a clear plan that is laid out step by step will really help you see whether or not you are trading professionally or with too much emotion. The more you deviate away from that plan the more your risk increases and the less likely you are to make a profit.

Your trade plan is a guideline or structure to the trade you are placing so you can rationalize exactly what is going on in the market and how you are going to manage it. This is something tangible that you can refer to while in a trade.

Let’s now have a look at a sample trade plan below.


Review Phase

We are sure that you have heard that 95% of new traders lose money in the markets and fail to become consistently profitable traders. While there are many reasons for this, one of the biggest reasons is that they fail to pay any attention to the review phase of their trading.

Reviewing your trades and then recording what you uncover for future reference can have so many benefits to your long-term success. For example, you can look back and chart your progress if you wish. You will easily be able to see the common things you did wrong which resulted in losses time and again. When you see these issues you can work on and perfect them so that they occur less and less.

As with any progress from bodybuilding to weight loss, consistency is the key. If you make just one small step of improvement every day, mastery is an inevitability. Not only does it pay to review your trades each day but it also pays to review your trades monthly, quarterly, and yearly so that you can really build up a clear picture of your progress.

Some traders like to get very technical and make complex spreadsheets to track their progress which is fine if you have the time and the knowledge of how to do this. However, there are some simple things that if you do will add an incredible amount of value to your trading results and give you clear conviction.

What is in the review and how should you conduct it?

  • The first part of the review is all about making sure that you can see your progress and your weakness.
  • The second part is seeing how closely your trades followed your actual plan.

Over time you should see the flaws in your plan. This is perfectly natural and as you iron those flaws out not only will your adherence to the plan improve but the plan itself with become so much more solid and your Trading_psychology#Conviction_in_your_Trading conviction levels will increase exponentially.

One of the more common issues for new traders is that they call the market correctly but place their stop losses too close to the entry or trail them too close or move them too soon as the trade enters profitability. The markets then come back and stop them out before taking off in the direction that the trader had his trade.

When this happens it can cause a huge amount of frustration and a feeling of hopelessness. However, if you can see that this is the most common cause for your losses then you can focus on this issue specifically rather than feeling like you need to change your entire system as many retail traders do. You now know that your major issue is trailing stop loss placement and knowing this you can make a plan that over time your stop loss placement will improve and your profits will increase.

Of course stop loss placement is just an illustration but your trading issues could be anything that is holding you back from your goals. The point is that unless you have a log for you to review it is highly unlikely that you will be able to pinpoint the problem easily so that you could make meaningful changes.

Let’s take a look at this process in more detail. The following image is an example of a follow-up on a trade so you to come to grips with the concept. This is the follow-up to the trade plan on the AUDUSD that we showed previously in the execution phase.


As you can see the review phase is vital for your ongoing improvement and perfection of your trading skills over time. This process takes time and practice but once you do reach mastery using the tools and following all of the processes here, the amount of money you can earn is unlimited. You can take your career as far as you wish to go depending on how much of your life you are willing to dedicate to the business of trading.

Daily Routine

Some questions to consider and what information to look for each trading day are:

  1. Which currencies are moving?
  2. In which direction are these currencies moving?
  3. What are the reasons for these moves?
  4. What expectations do other traders/analysts have regarding these moves?

Assess Price Movement

Step 1: Research

Read and scan through the following websites (or your own preferred websites) for potential trade insights and analysis using the above questions. Only pay attention to the articles that give specific and certain information about a particular currency as everything else is just speculation and noise.

If you have paid for a premium audio squawk such as the following then open and scan any information they have provided. It is not necessary to have one of these in the beginning but once you have a good process these tools can really help you get up to speed quickly and are worth the investment.

Step 2: Open Trading Platform

  • Assess open positions and adjust stop losses and take profits as necessary.
  • Assess the technical situation of the currencies that were identified as potential trade candidates.
  • Set pending orders for any new trades if needed.
  • Enter any trades from your analysis and manage according to the targets, stop losses, and trade bias.
  • Monitor live news feeds for any sentiment changing news throughout the day.

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