Monday, March 02, 2015

Best Practices in Trading: Organizing Your Trading Morning

One of the best ways to ensure a sound trading routine during the day is to construct a sound routine during the morning.  How we start our day so often sets the tone for that day.  That means we can either start the day focused or distracted; disciplined or lax; prepared or unprepared.  I have long maintained that one of the best ways of identifying successful traders is to observe what they are doing when they're not trading.

Today's best practice comes from Steve Spencer of SMB Trading, and it involves establishing a productive morning routine:  one that prepares both the trader and the trading:

"I have a routine that begins from the moment I walk into the office each morning.  It is designed to both have me focused and prepared to trade the US equities market open at 9:30 AM.  It has evolved over the past few years as my responsibilities have broadened outside of my own personal trading to include preparing the desk for the day and dealing with non trading matters as well.

Here is the current list of things I do each morning after arriving at the office:

1)  Fill up my water jug (hydration is one of the keys to mental alertness)
2)  Restart computer
3)  Open Gr8Trade (proprietary equities platform)
4)  Open LiveVol (options platform); if any options trade ideas, open related Level II boxes
5)  Open eSignal (external charting software)
6)  Login to SMB RT (proprietary trading tools)
     6a)  Open game plan (form used to enter my trading ideas)
     6b)  Fill in 2nd day and technical plays (ideas based on prior research and preparation)
7)  Enter alerts for 2nd day plays into Gr8Trade (pop up alerts if stock trades at key prices)
8)  Open SMB Scanner (research tool for finding stocks in play)
9)  Complete game play sheet with Stocks in Play ideas
10)  Enter top trading ideas into journal (important for later review process)
11)  Ideas must include entries/stops/targets/risk amount
12)  Options ideas are entered in margin at the top of the page
13)  Conduct AM meeting (discuss market and top trading ideas for the day)
14)  Enter orders for Stocks in Play ideas discussed at AM meeting; input ideas into auto scripts to assist entries if market busy on open

The following items help bring me back into focus for the market open:

15)  Two minutes of breathing exercises
16)  Put on RT microphone (audio feed for desk and SMB community)
17)  Discuss top trading ideas and plan via audio
18)  Share any stocks/important levels from the chat that are interesting

So that is my entire morning routine.  The thing that has changed the most recently is my ability to enter various scripts that will allow me to trade a variety of trading setups during busy market times that I otherwise might have missed.  I find that in today's market, if you miss certain entries right at the open, it can impact your risk taking for the rest of the day.  The scripts are also a great tool to support me on days where other responsibilities pull me off the desk."

Notice how Steve's morning routine accomplishes two purposes.  First, it organizes his day and decision making.  He identifies and prioritizes opportunities during his preparation and thus is able to act quickly and decisively when trades actually set up.  Second, the routine enables Steve to process an unusually large amount of information in a concentrated period of time.  Note his use of custom tools for much of his preparation.  These enable him to screen for opportunities and program them for action (via scripts and alerts).

Finally, observe that Steve's routine is a combination of individual information processing and processing in a group.  His preparation enables him to bring ideas to other traders, but also sets up conversations that bring him ideas.  Over the course of a single day, Steve is simply encountering more trading opportunities than most traders--and that makes it more likely that he can focus on the best ones and maximize his results.

Further Reading:  Simple vs. Simplistic Decision Making in Trading