It is no secret that for successful trading it is necessary to prepare for every trading session and create a trading plan in advance – it helps to avoid spontaneous deals. However, not everyone has a clear understanding of what criteria this plan is based on and what it gives to a scalper.
Trade planning is necessary on a daily basis, and it is advisable to make a trade plan in accordance with the actions of market professionals, which can be determined by the dynamics of open positions and the price chart. There should be several scenarios, because both growth and decline can unfold non-linearly. As the trading day progresses, the plan should be adjusted to make subsequent trades more statistically correct.
The basic principles of preparation for trading
As a rule, it takes the scalper 1.5-2 hours to make a trading plan, i.e. if trades start at 10 am, the scalper has to be at his workplace already at 8 am. Moreover, the beginning of trading is a very volatile period which must be analysed in order to catch up with price, so it is necessary to prepare in advance, not in the process.
The basic principle of scalper preparation is to determine the most probable price movement scenarios, and there must be several of them. If the trader has prepared one scenario and the market begins to trade differently, he will either have to make unprepared transactions or spend extra time on “re-planning” in one of the most interesting periods in terms of volatility – in the first hour of trading. It is reasonable to build scenarios taking into account the actions of professional participants during the previous day, because the scalper’s task is to join the price impulse prepared by market professionals, because these impulses contain the maximum potential.
To make a trading plan, the scalper determines where and under what conditions these impulses are most likely to occur. Often newbies when talking about a trading plan have an association with detailed predetermined scenarios for the whole next trading day. Realizing that such planning is extremely difficult, many begin to ignore the construction of the plan. But here’s the good news: you don’t have to write the trading plan for the whole day in advance. Each new trading day is a continuation of the previous day, and once started it writes its own trading history. Therefore, the trading plan is built in stages, which contributes to the maximum relevance of the scenarios. Thus, the first part of the trading plan is built on the opening scenarios.
How to make a trading plan for a trader?
First of all, a scalper starts constructing a trading plan with analysis of the news background. It is important to know what happened in the world after the previous trading day. Studying the news helps to understand the general background of participants’ moods and the calendar of upcoming events that can set the markets in motion. Often it is enough to look at the news headlines and read the most important ones.
The next step is to look at the macrostatistics calendar on some aggregator, the evening and overnight statistics, and the day ahead, writing out for yourself the time of release of the most significant information and expectations for it. Once the news and statistics have been analyzed, the scalper looks at the dynamics of foreign indices, which show how these regions reacted to all the events that took place overnight.
Then it is necessary to redraw the trends of the underlying and correlating assets, as they might well have changed during the evening session, as well as new significant price levels might have appeared, which is advisable to highlight on the charts of the assets additionally.
The next step – to review at what prices the maximum volume entered the market during the previous day, and where the most active set of open positions on the charts of assets was made. These levels should be highlighted as key levels, which can also include significant extrema of the current trends. As a rule, the main battle between the bulls and bears takes place exactly for these price zones. It is also necessary to determine at what prices the largest deals were made, which is convenient to do with the help of the trading history on the traded instrument.
After that it is important to read the analytical review for the coming day. At least reading the analytical review will help to refresh the list of upcoming events in your memory for a more complex analysis.
The next step – on the basis of all the above information, mark out the perspective zones where potentially interesting trading situations can occur, and write down (better on paper), where and in what situations it is advisable to conduct transactions, both at their breakdown or, on the contrary, at a price bounce from these levels.
As the trading day progresses, new potentially promising zones will appear, which you should also write out in the process and work out the patterns that arise in them.
And the final step in preparation for trading can be a certain 10-minute break, during which you can drink your morning coffee and tune in to the trades.
Some tips for beginning scalpers
Trader’s preparation for trading is the main stage in trader’s development and development of his own profitable strategy while keeping self-control in trading. We provide a lot of information on this topic on our scalping course. A strong misconception of beginning traders is that they sit down at a computer and think that analysis should be done only during trading without looking at the history. The obvious sign of a weak trader is that he thinks he knows and understands everything on the exchange, thinks his system is perfect (but without any results for some reason) and does not take additional information. It’s a shame that this trader is fed up with all useless information and just does not want to waste his time.
The consequence of all this is that there is no developed decision-making system, a strategy, so the trader does not know the way out of positions, not to mention the entry points. Of course, his psyche is shaken, there is no self-control completely, and any sharp market movement knocks him down instantly, and he watches his loss-making position go against him. All this happens due to lack of vision of price movement targets.
Major mistakes of the beginning trader
Trading without a plan
The vast majority of beginning traders start trading on the stock market without a plan. Regardless of whether you want to earn on the exchange on a regular basis or prefer a passive source of income, creating a trading plan plays an important role. Otherwise, investing and speculating becomes a losing gamble. The only exception, when you can do without a plan, is using a ready-made portfolio or the services of a financial advisor. In this case, you follow a developed investment strategy, so making mistakes will be minimal. However, to become self-sufficient in the stock market, the first thing you will need is a trading plan. We can help to develop a safe and profitable trading plan with our professional scalping mentor.
It is also a beginner’s mistake to open an “accidental” (ill-considered) trade. Any purchase or sale of securities should be made after analyzing the situation according to a trading plan. Before a trade, a forecast is made, which explains why the price may test this or that level with higher probability, at what prices to fix profits or losses and why.
Following a trading plan allows you to make transactions systematically and thoughtfully. Over time, your skills will improve, increasing the effectiveness of trading. You will learn to understand if you’ve made a mistake or if the market just didn’t behave the way it does most of the time.
Trading without preparation
Before you start trading with real money, analyze a number of charts. Observe price behavior by using technical indicators and identifying support and resistance levels. Try to find different patterns (shapes, Price Action or other patterns) on charts with different timeframes. Understanding technical analysis is useful not only for speculators, but also for investors, for whom it is equally important to open and close trades at better prices.
If your trading style is “swing trading,” you also need to understand the impact on the price of news. In medium- and long-term investing, fundamental company analysis and industry analysis “plug in.” Understanding what’s going on in the world markets as a whole won’t hurt any trader.
Getting their first income from the stock market, novice traders often have a false idea that it’s easy to make money. The problem is particularly acute if the trader has earned a large sum of money.
Often a beginning investor or speculator mistakenly thinks he/she can derive profit from almost any price movement. Overconfidence leads to opening of the transaction without necessary analysis with a “cold” head. When a position becomes unprofitable, the situation is exacerbated by a desire to win back, usually resulting in even greater losses.
For a variety of reasons, some investors single out stocks they find particularly attractive. This should not be done, because if the prices collapse, it will be difficult to get rid of them in time. In general, a growing stock can become unprofitable at any time. While you are concentrating on your personal “favorites”, you are missing an opportunity to make money on fast-growing stocks.
It is important to understand that a “great” company stock may well not grow in the short term. Often, promising stocks show mediocre price dynamics, revealing value only on the long-term horizon. This is because the fundamental analysis does not take into account the current market conditions, including investors’ interest in purchasing certain securities.
How to properly prepare for a trading day?
I trade in the morning or in the afternoon. Lately I have been trading at night. European session is just starting in the morning and American market is quiet, whereas Asian session is the hottest time. Scalper needs volatility and maximum profitability from this volatility to collect liquidity, to collect a breakdown and close transactions.
I open TRADINGVIEW and see which tokens have risen or fallen the most. These are the coins I will be most interested in, as they will show the best results when scalping. Next, I search for the closest levels near the price, search for technical analysis formations from which the instrument may exit in the near future. I use different setups, but mostly I trade breakdowns. Then I transfer levels to the instruments’ depth charts and set signals on levels.
Making a trading plan after preparation for trading is very important. The plan helps to be more consistent. The plan can be changed if the market situation has changed. If the changes are too strong, then it is better to step away from the computer and not trade. This carries certain risks, as you need to make a new plan first, and only then start trading. We give detailed training on our scalping course. Don’t hesitate, join our trading community and get constant support from our top traders.
What should be fixed in the trading plan?
A trader fixes the following key points: preferred trading style: scalping, intraday trading, swing trading or long term investing; defining maximal risk of transaction, acceptable daily and monthly deposit drawdown, relation of profit to risk for one position; rules of entering deals, several scenarios of events outcome.
Is it necessary to draw up a plan every day?
Trader preparation is based on analysis of daily market volumes, you see where strong levels are formed, you see how they are repulsed for a few days, then they are broken through and the price goes in the right direction, retest those levels again, get goals and quietly trade. This simple method of trader preparation is not suitable for lazy traders who can’t spare 30 minutes a week or 5 minutes a day for analysis. Join our course and we will show you how to make it quickly and efficiently!
Trader preparation is important because you do it manually, so you give importance to every volume going through the market, every stack of clusters. Yes! You can use special programs for this kind of analysis, but the focus will get sidetracked and you will not see many patterns. There are days when you can’t be at your computer and then, in your free time, you download a file with the history of the trading day and in your free time you prepare a trader and thus begin to see how the price moves in the market. A properly made plan allows you to see the market situation, read the charts correctly, trade calmly in the market and make a profit instead of worrying about every move.