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A Successful Trader's Routine

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A solid routine establishes comfort and allows one to feel confident in what they are doing.

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Each year I venture out West for a reunion and always stay in a quaint little town called Nevada City, California. Like others, the town was founded during the California gold rush and quickly became a booming mining town. Each year, I venture out to the local park and wade into the river in search of gold. Other than a few flecks here and there, I haven't found anything worth discussing, but the pursuit is exhilarating and something I always look forward to.

I never knew there was such a science behind panning for gold as my first year I simply picked a good spot and started sifting through the dirt. A few hours later, and with not even a hint of yellow, I was approached by an older gentleman who inquired just what exactly was I doing? I proudly stated that I was panning for gold. After exchanging pleasantries he instructed me that while it was entirely possible I would find gold doing what I was doing, I could increase my chances tremendously if I would move my position from just off the parking lot and sift through the dark dirt on the edge of the river. He pointed out an area where he had found his fair share for the day, patted me on the back and went on.

So often traders have the drive and the passion to become great traders but they don't know where or how to dig. Recently, someone asked me how I structured my day, and how I laid out my plan as they were struggling with some efficiency issues and wanted a second opinion. I thought it would be a great idea to relay my digging strategy for you.

1) Create a Master List: This is similar to a man's secret chili recipe and over time you will formulate your own secret methods of developing your list. I am willing to teach someone every nuance of trading that I know but I have only shared the secrets of my master list with one person and that person mysteriously disappeared moments later . All joking aside, I firmly believe every trader should have a master list of stocks that they are interested in and can periodically review for trading opportunities. I like to update my list each quarter due to earnings season and currently have approximately 500 names on that list. If you are new to trading, forget the idea of finding your own names. Borrow someone else's ideas and let them do the hard work. Start with the Investors Business Daily 100, then move onto the Value Line 100 and add an investing web site to your arsenal, like my site Tickerville.com.

2) Narrow the List Down Each Week: Go through your list each weekend and select the stocks that look the best for trading during the week ahead. Going through your master list each week not only helps you to reduce your list down to a smaller trading list, but it also gives you a good feel for what sectors are moving. When you go through your master list each weekend you will start to see patterns emerge and you will be amazed at how you start to spot sectors such as Gold, Semis or Biotechs starting to find favor before they are ever discussed in the general public.

3) Note the Stocks for Anticipatory Trading: Each week I will typically find a few stocks that may not be ready to move this moment, but are starting to really pique my interest for an anticipatory trade. I have been watching the housing stocks and added a few to my master list months ago. My recent trade in Toll Brothers (TOL) was a result of going through my master list on the weekend and recognizing a change in character with the stock. I made a notation and decided it was time to start moving in.

4) Set Daily Alerts: I don't know a single broker who doesn't have alerts within their trading platform. Each day I will take my smaller trading list and run through those stocks one by one. I will set an alert whereby I will start the stock should it trigger. At the end of the day I delete all my alerts in order to start the next day with a clean slate.

5) Avoid New Ideas: I learned long ago that through the course of the day I will be inundated with many new and great ideas. In order to stay disciplined with my strategy I try and avoid these new ideas at all costs. I try hard to stick with my game plan and not jump into something I haven't had the time to review. I always tell people that when the market is open it is game time. During the game it is hard to learn a new play. Why not wait until the market is closed to learn and perfect a new play rather than trying to learn it on the fly?

6) Go With the Flow: Because the market is always changing I will take what I see in a given day and allow this to determine the work I do that evening. If the market has been dropping and I have no feel nor do I see many stocks setting up, I relax and take evenings off. It is one of the only positives for me in a falling market. On the other hand, when the market is running and I feel that we could head higher, I may repeat my weekend process each night, making sure to have the best stocks ready the following day. If by chance something new does catch my eye during the day, I may research it that evening in order to possibly play it the following day or the next.

7) Be a Co-Pilot: I have a 6-month-old son who can't walk and when he wants to get from point A to point B, I need to carry him. Sooner or later he won't need my assistance in that regard but at this moment in time he has no problem with my help. If you are new to trading, find someone or someplace where you can ride along as someone else does the driving. Over time you will feel much more confidant and be able to go off on your own doing your own thing. Consider my opening story. There is a reason the older gentleman panned more gold in that morning than I have in several years.

Every trader should have a routine. It is my opinion that a solid routine establishes comfort and allows one to feel confident in what they are doing. Resolve to set a routine today and stick with it.
No positions in stocks mentioned.

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