THINKING ABOUT TOMORROW

As you go over all your open trades, you need to keep thinking about them
in the future. You will want to draw up different scenarios for each trade
and make notes as to how you will react if that situation arises. I like to
think up different possibilities of what the market can do and draw up targets
and exit points for them. I’ll anticipate if I will add to or subtract from
a position. Doing this keeps me from getting surprised when something
does happen. Maybe there is an earnings report coming out, and there is
a chance it can cause your stock to move. As a good trader you will be
prepared for anything that stock could do the next day.

For example, if you were long in Figure 7.5 you could start preparing
for anything that could happen the next day and in the near future. You
may say, “If the market breaks above the double top line I will add five
contracts to my position, with a target of 14,300, and I’ll raise my stop to
under yesterday’s low to the Stop 2 level. However, if it drops below the

double bottom, I’ll exit all my longs and reverse and use the double top
area as a stop. If the market stays within the range it is in now, I’ll keep my
current stop (Stop 1) and do nothing.”

Planning out current trades will start to take the gamble out of your
trading as it’s much better to have all your scenarios planned out before
they happen and surprise you. You can get more elaborate and consider
what you will do if the market opens up 50 points and rallies or reverses
after the up open or what you’ll do if it opens below the support line. The
possibilities are endless and the better you have them considered in your
game plan the better you will do.

This isn’t an end-all list of things to look for when going over your
open trades. You may have special criteria you want to keep track of on
your own, or you may have things that are specific to the way you trade or
the markets you trade. I can’t come up with every little thing, but part of
trading is that you should always be learning and finding ways to improve,
so work a little on figuring out other things to look for when going over
your trades.