The primary similarity between traders and carpenters is that both have, or should have, a detailed blueprint, and then they simply execute this blueprint. Therefore, the first step in preparing for the trading day is to look at your blueprint.
Examine Your Trade Plan
The fact that you should have a detailed trade plan written out goes without saying. Assuming that foundational block is already laid, it is good to briefly review your trade plan each morning before you even open your charts. Refresh in your mind exactly what types of setups you are looking for. Although you know this already, a brief review of your trade plan will further emphasize and reinforce proper trading behavior to your subconscious, which is very powerful.
Open Your Charts
Next, open your online forex brokers trading platform and spend as much time as you need analyzing the market according to your style of technical analysis. Pay attention to all the price developments that have occurred since the last time you had your charts opened. Have certain key levels been broken? Have certain key levels held? Where is the order flow bias? Is the overall market bearish or bullish? Is risk on or off? It is essential that you are in sync with the market flow. Remember, you are not looking to take a trade yet, you are simply conducting analysis. This point is very important. If you conduct your analysis as you are looking for rates, your analysis will be skewed.
Review The News
Take a look at all the major news developments that have occurred over the last few hours in order to identify what is currently driving market sentiment and order flow. Did any news releases come out during the overnight session? If so, how have they affected the market? Also, make sure you are fully aware of any key economic data that will be released during the day while you are trading. This is essential. You never want to get caught with open positions during a major economic release such as Non-Farm Payroll or a Federal Reserve Interest Rate Announcement.
Begin To Look For Setups
Once you have spent adequate time preparing for the day by following the preceding steps, now you are ready to begin trading. However, if you skip through preparation, and simply sit down at your computer, open your charts, and open a trade within a few minutes, you are playing with fire. That is a very dangerous approach to financial markets. Remember, fx trading is a business, and it must be treated as such.
Preparation is Key
There is a saying in construction: measure twice, cut once. This holds up in trading quite well. If you are going to err, err on the side of preparation. You may miss a few trades over time, but you will also keep free from overtrading and trading without a plan, which are two of the most common causes of failure for many traders. Reviewing your trade plan, conducting technical analysis, and briefly reviewing the news to determine key economic drivers will help place you in the proper mindset for trading.