ALWAYS BE PREPARED

Trading decisions are best done when the market is closed, giving the
trader something to work with when the market opens. When I used to
day-trade stocks I’d go home every night and review the market. I make a list of which stocks I’d want to buy and which I’d want to short. I already
had trading strategies, now I just needed to find trades and setups.
I’d look for trend lines and areas of support and resistance or breakout
levels, where I wanted to be involved. Plus, I also planned where I wanted
to get out or reverse my positions. The next day when trading, I’d already
have a list of what I wanted to trade and at what levels and both targets
and stop areas; this was my game plan for the day. My trading plan told
me what my stock criteria was, for example, stocks trading above $20 a
share with average daily volume over 500,000 shares and an average trading
range of over $1.00. It told me how much I could risk and what technical
indicators I would use to confirm these trades. But on a day-to-day basis
the game plan was what I used to trade with. I always reevaluated my game
plan at lunchtime and made any adjustments to it should the market have
changed. I tried to identify new opportunities to trade in the afternoon and
reevaluated my risk levels and stops on open positions so that I was always
prepared. I now trade mostly the Dow Jones and S&P 500 futures indexes
but the idea is the same. The market has been in a strong uptrend the last
four months as I write this in November 2006, so I don’t do much in and
out trading during the day; instead, I hold and monitor my trades, moving
stops and adjusting risk and trying to figure out when the market may top
and what I will do when it does. But as part of my game plan, I look for additional
buying opportunities when the market opens lower, and I’ll make
a day-trade after 3 P.M. if the market is strong.