It is always useful for a trader, especially novices, to learn how to manage your risks by preparing for a trading session properly.
A good trader fully understands the relationship between their session preparation and the trading account’s balance once it has been completed. The quality of a transaction will depend on how thoroughly the market conditions have been analyzed.
When a person steps into total darkness in unfamiliar territory, they will be very hesitant and try to find support around them. The same applies to trading.
The Market Does Not Forgive Weaknesses
If we don’t look at and interpret the news, as well as reports of important economic statistics and new trends, we would be taking a big risk that may well land us in the situation where we misunderstand the market completely.
Experienced traders agree that under these conditions, it is always better not to trade. Beginners may however fall under the “wheels’ of the market and it does not forgive the lack of preparation.
In this article, we’ll briefly look at a system you can use to prepare for a trading session. It should be noted that this is not a strategy that should be used independently, but rather a tool that can help you increase the probability of earning profits in a session.
Don’t Act Impulsively
In a typical trading scenario, you’ll open a trading session, study your favorite assets’ charts and prepare your workspace. You may for example analyze the current market conditions by using various technical analysis tools.
Up to this stage, everything is going well and you are making the right moves. The problem comes in if you now suddenly see a deal that seems very attractive and the indicators scream at you that you should start a transaction. It is extremely difficult to not start trading at this stage.
It would however be premature to do so as your preparation has not yet been completed. Preparing for your trading session is an independent activity and it should not include entering into any transactions.
Longer is Better
While preparing, you should only concentrate on personal trading planning and analysis. This analytical component of your work should be separate from the trading process.
Once you have completed your preparation, you should be able to answer the following questions:
- Which trading strategies will I use?
- Which important news is due for release today?
- What trends are prevalent in the market, e.g. the USD weakens against all currencies?
- Which asset should I pay focus on, e.g. if the S&P 500 shows the strongest trend, it may be the most suitable for trading?
This type of preparation before a trading day will prevent you misunderstanding the market and indecisiveness. Preparation generally should not take more than 20 to 30 minutes.
Although it may seem as if experienced traders take less time to prepare, this is not necessarily true. Professionals in the market often devote more time for preparation as they tend to strive for perfection.