15 Steps to Get Ready for the Market Day

Your daily routine in the pre-market hours sets the stage for the rest of the trading day. Gathering usable information, picking fights carefully, and making the right moves while your competition is still in dreamland can mean the difference between a very profitable session and a losing nightmare.

The most interesting pre-market activities take place ahead of big economic releases, such as Friday's monthly labor report. They also occur after notable trend or reversal days, where price surges into the close. Many traders get trapped in these events, and then try to extricate themselves before the next morning's opening bell.

Traders have a tough time interpreting early news and its eventual impact on the upcoming session. But the process of pre-market preparation isn't as hard as it looks when you organize your wake-up efforts into key zones of market action. Start with these 15 tips and techniques to get ready for the market day.

1. Check CME index futures:
Pull up the S&P 500 (SPX) and Nasdaq-100 (NDX) futures and note current price levels. Then look at the overnight action, marking out the highs and lows posted through that period.

2. Review macro forces:
Catch up on oil, currencies and precious metals to see how the rest of the world is trading them. Check out Asia and Europe to find out what moved their bourses while you were asleep. These hot spots establish key themes for American traders when the market day gets started in the Big Apple.

3. Filter the news flood:
Focus first on news that affects your open positions. Upgrades, downgrades and earnings all trigger volatile spikes that can hurl prices well above or below closing levels. Then look at Tier-1 (top broker) activities to find out what's hot and what's not.

4. Watch other players:
Many broker interfaces let you watch ECN price action three or four hours before the New York open at 9:30 a.m. Use this quiet time to observe how other players are dealing with big news or overnight shocks.

5. Note levels:
Price levels that come into play in the pre-market can turn out to be major pivots during the regular session. (Please see chart above.) Reversal pivots at this time often hide big players trying to set boundaries, or get out of oversized positions. Jot down these numbers and keep them close when the real action gets underway.

6. Watch support-resistance:
Take note where price moves in the pre-market, relative to daily support or resistance levels. Specifically, does good news send price above or into obvious resistance? Conversely, does bad news drop price into or through obvious support? A pre-market move that can't trade through a major barrier often prints the high or low for that day.

7. Look for safe exits:
Early birds can find safe exits or hedge losing positions when shock events hit the newswires. The best escape route comes right at 8:00 a.m. (EST) when traders using discount brokers get their first quotes of the day. Post a pretty bid for them to execute before they realize that Armageddon has struck the markets.

8. Establish a first bias:
Compare early price action to the prior day's close, and think about who will get trapped and who will benefit from the imbalance you're looking at. This quick analysis will help you avoid weak-handed plays at the opening bell.

9. Respect daily seasonality:
Follow the trend when Monday's pre-market leans in the same direction as Friday's close, but fade it when Tuesday's pre-market tracks Monday's close. Look for continuation of the trend on Wednesday and Thursday, followed by a battle of opposing wills as the week draws to an end

10. Find the day's theme:
The majority of stocks on your screen won't do anything that day, so it's your job to uncover the handful of issues ready to move. Triage the list by watching pre-market volume because it shows where other traders are risking their money.

11. Think irrationally:
It doesn't matter if pre-market news is good or bad. More importantly, how does it shake up expectations? If you can't figure this out for yourself, find experts you trust and listen to them.

12. Place deep limit orders:
Place all kinds of limit orders in the pre-market session at prices where no one in their right mind will hit them and give you the bargain of the century. Then sit back and watch these get filled because other traders panic or just haven't woken up yet.

13. Have a plan:
Bulls and bears make money, while pigs get slaughtered. If you take passive approach to the trading day, you set yourself up to get played by other traders. So determine, (a) who has the upper hand, and (b) how aggressive you want to trade after the market opens for business.

14. Avoid the crowd:
Traders chase news-triggered momentum into pre-market positions and then get burned in the first hour of the regular session. A better strategy is to stand aside, let the stock establish an early trading range, and then enter on a range break.

15. Cover dips and sell spikes:
Speculative groups, like small biotechs, can jump big percentages in the pre market, when they report drug application news. These spikes often print the daily highs, so use them to take profits and wait for reentry at lower prices.

Back To Top

Trading Systems Guide

Trading systems are very popular in trading now. They have simplified many steps of it and have given a great opportunity to save one's time and money. According to trading systems definition, they are sets of rules, parameters, and indicators that allow to determine entry and exit points during trading. It is very important not to make a mistake, otherwise it can lead to significant losses.

Why do people prefer to use trading systems? The answer to this question is a question itself: can somebody trade day and night for seven days a week? Does somebody agree to spend precious time calculating some mathematical tools? There is no point to waste time on the things that could be done by trading systems. It is convenient and simple (the second feature may be disputed by the newcomers, but after a certain period of time, they will also say that even forex trading system is simple in usage).

As each thing, trading systems have its own advantages and disadvantages. One of the biggest pros is that all emotions are out here. Human nature is inclined to worry, be afraid of losses etc. It prevents successful trading and solving the tasks properly. As it was already mentioned, trading systems save much time, because all processes are automated. The next point that we are going to present is double-edged sword. On the one hand, they save time, but only in usage. The development and testing trading systems are real challenge. It needs much time and skills to work out one system. That's why, if one doesn't have a desire to create his/her own trading systems, it is better to buy them. There are a lot of companies that offer their products for the clients. Be aware of scams that promise impossible things for reasonable price!

Struggling with debt? Get help with debt management.

If we speak about development, it means designing a trading system.Which steps and stages should be included to present good trading systems? The first one is proper data, a part of which is historical data. Why historical? The history repeats itself and trading repeats itself too. The analysis of the mistakes that were made earlier will be beneficial for those who want to avoid them in future. The thing that one should keep in mind is not to search for ideal and perfect criteria. It is one of the mistakes that is made by the developers during trading systems optimization. Trading systems must be flexible for changes that take place during trading.

The description of trading systems would be incomplete without trading systems tools. One of them is trading systems software. It is possible to fulfill trading without this component, but there is no reason for it. The developers create various software for different markets (Forex, stock and commodity markets etc). Other tools are numerous kinds of analysis that are used in trading: fundamental analysis, technical analysis, Elliot wave theory, Japanese candle analysis, chaos theory, Demark's approaches to technical analysis and more.

The periods, at which some trading systems are calculated, are such as follows: short term and long term trading systems. Short trading means opening and closing the positions during one day or several days. Long term trading lasts from several weeks up to several months.

Use Trading Systems for receiving high profits in short periods of time!

Back To Top

20 GOLDEN RULES FOR TRADERS

Want to trade successfully? Just choose the good positions and avoid the bad ones. Poor trade selection takes a heavy toll as it bleeds your confidence and wallet. You face many crossroads during each market day. Without a system of discipline for your decision-making, impulse and emotion will undermine skills as you chase the wrong stocks at the worst times.

Many short-term players view trading as a form of gambling. Without planning or discipline, they throw money at the market. The occasional big score reinforces this easy money attitude but sets them up for ultimate failure. Without defensive rules, insiders easily feed off these losers and send them off to other hobbies.

Technical Analysis teaches traders to execute positions based on numbers, time and volume.This discipline forces traders to distance themselves from reckless gambling behavior. Through detached execution and solid risk management, short-term trading finally "works".

Markets echo similar patterns over and over again. The science of trend allows you to build systematic rules to play these repeating formations and avoid the chase:

1. Forget the news, remember the chart. You're not smart enough to know how news will affect price. The chart already knows the news is coming.
2. Buy the first pullback from a new high. Sell the first pullback from a new low. There's always a crowd that missed the first boat.
3. Buy at support, sell at resistance. Everyone sees the same thing and they're all just waiting to jump in the pool.
4. Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover.
5. Don't buy up into a major moving average or sell down into one. See #3.
6. Don't chase momentum if you can't find the exit. Assume the market will reverse the minute you get in. If it's a long way to the door, you're in big trouble.
7. Exhaustion gaps get filled. Breakaway and continuation gaps don't. The old traders' wisdom is a lie. Trade in the direction of gap support whenever you can.
8. Trends test the point of last support/resistance. Enter here even if it hurts.
9. Trade with the TICK not against it. Don't be a hero. Go with the money flow.
10. If you have to look, it isn't there. Forget your college degree and trust your instincts.
11. Sell the second high, buy the second low. After sharp pullbacks, the first test of any high or low always runs into resistance. Look for the break on the third or fourth try.
12. The trend is your friend in the last hour. As volume cranks up at 3:00pm don't expect anyone to change the channel.
13. Avoid the open. They see YOU coming sucker.
14. 1-2-3-Drop-Up. Look for downtrends to reverse after a top, two lower highs and a double bottom.
15. Bulls live above the 200 day, bears live below. Sellers eat up rallies below this key moving average line and buyers to come to the rescue above it.
16. Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again.
17. Big volume kills moves. Climax blow-offs take both buyers and sellers out of the market and lead to sideways action.
18. Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers.
19. Bottoms take longer to form than tops. Fear acts more quickly than greed and causes stocks to drop from their own weight.
20. Beat the crowd in and out the door. You have to take their money before they take yours, period.

Back To Top