Markets have defined and specific cycles. This is because investors and traders are emotional – whether we choose to be or not. Everyone has the best of intentions when entering this business right? We all want to make a ton of money with as little risk as possible – who doesn’t.

Where some traders fall short is that they fail to recognize that there are predictable the repetitive stages. The markets do not exclusively depend on company or industry specific data and earnings. If it did, then stocks would trade exactly at their value and there would be no movement at all.

Uncertainty Creates Subjective/Emotional Traders

Instead, every stock has a component of “Future Value” which is completely and 100% subjective. What will the value of the cash flows of the company be in the future?

We can always calculate the value of a company today – that’s easy. It’s trying to determine what the company “might” be worth in the future that creates movement in the markets! As such, investor’s feelings and emotions drive this variable.

Master Emotions And You’ll Master The Market

To me this is the never-ending quest as a professional trader. I want to learn to control my emotions at the same time that I learn how to recognize the herd mentality. Continuing to tweak and perfect my trading system is a weekly process, but well worth the effort.

Understanding that traders have specific emotions which have varying magnitude, is critical to learning how either you or another investor might behave. Thankfully there is a cyclic process of psychology that explains the relationship between our feelings and our judgments.

The knowledge of this cycle can help you tremendously in your own trading.

The 14 Stages Of Trading Psychology…

The chart below is a visual representation of the 14 stages that I’ll cover below. This would be a great visual to print out and put in your office or desk to remind you to ask yourself: “Where am I right now?”

1. OPTIMISM – It all starts with a hunch or a positive outlook leading us to buy a stock.

2. EXCITEMENT – Things start moving our way and we get giddy inside. We start to anticipate and hope that a possible success story is in the making.

3. THRILL – The market continues to be favorable and we just can’t help but start to feel a little “Smart.” At this point we have complete confidence in our trading system.

4. EUPHORIA – This marks the point of maximum financial risk but also maximum financial gain. Our investments turn into quick and easy profits, so we begin to ignore the basic concept of risk. We now start trading anything that we can get our hands on to make a buck.

5. ANXIETY – Oh no – it’s turning around! The markets start to show their first signs of taking your “hard earned” gains back. But having never seen this happen, we still remain ultra greedy and think the long-term trend is higher.

6. DENIAL – The markets don’t turn as quickly as we had hoped. There must be something wrong we think to ourselves. Our “long-term” view now shortens to a near-term hope of an improvement.

7. FEAR – Reality sets in that we are not as smart as we once thought. Instead of being confident in our trading we become confused. At this point we should get out with a small profit and move on but we don’t for some stupid reason.

8. DESPERATION – All gains have been lost at this point. We had our chance to profit and missed it. Not knowing how to act, we attempt to do anything that will bring our positions back into the black.

9. PANIC – The most emotional period by far. We are clueless and helpless. At this stage we feel like we are at the mercy of the market and have absolutely no control.

10. CAPITULATION – We have reached our breaking point and sell our positions at any price. So long as we can get out of the market to avoid bigger losses we are content.

11. DESPONDENCY – After exiting the markets we do not want to buy stocks ever again. The markets are not for us and should be avoided like the plague. However, this rare point marks the point of maximum financial opportunity.

12. DEPRESSION – We drink, cry and/or pray. How could we have been so dumb we think to ourselves. Some start to correctly look back and analyze what went wrong. Real traders are born here, learning from past mistakes.

13. HOPE – We can still do this! Eventually we return come to the realization the market actually does have cycles (shocking). We begin to start analyzing new opportunities.

14. RELIEF – The markets are turning positive again and we see our prior investment come back around. We regain our faith (although small) in our ability to invest our money. The cycle start all over again!

What Stage Are You In?

Add your comments below and let me know where you are in this cycle on a current trade. Don’t be afraid to recognize which phase of the cycle you are in so that you can understand how your feelings will dictate your judgments and choice.

Nothing major to discuss today so I wanted to post a couple charts that I think are worth looking at. Take from this what you will but I think it’s a great representation of how support and resistance continues to be a great trading tool.

MSFT – Microsoft

GS – Goldman Sachs

F – Ford Motor Company

SLV – Silver ETF

And last but not least Silver – which I had told members a couple days ago looked toppy. Below is the intra-day chart which should continue to break lower.

Understanding option pricing and value is critical to becoming a successful trader. How can you know what something is worth (or what it could be worth) if you don’t know what factors go into its price?

Take gasoline prices for example. We all know that consumer demand, seasonal changes, crude oil prices, refinery productivity, state and local taxes, etc all affect the price you pay at the pump. At with prices nearly $4.00 per gallon lately, I’m sure you all are trying to squeeze more money out of each drop like I am…

Black Scholes Pricing Model

When buying or selling options, there is a system used in the market by which the market gives a price for any option. Most of the time it’s based on mathematical formulas like the Black Scholes model.

This is the most commonly used model in the market today and the formula looks like this:

Frankly it’s not important that you know exactly how to calculate it, but rather what variables go into the model. As any other finance professional will tell you, calculating this by hand back at the universities is painful and tedious but does help you understand what can affect option pricing.

Only 1 Variable Is “Estimated”

Six out of the seven factors used in valuing options are known, and the last – Volatility – is supposed to be an estimate. Of course this presents a big problem. Get the charts here.

Since volatility holds a lot of weight in valuing an option, and we always have to use an “estimate” it makes it impossible to calculate the true value of any option. More specifically, it’s the future volatility used in the model which makes it very hard price the option.

7 Factors That Determine An Option’s Price

1. Current Stock Price – Think logically here. If you interested in a call option that allows you to buy OEX stock at $390 per share, then you would naturally pay more for the call when the stock is trading near $390 as opposed to it trading at $410 right?

This is because the call option is now much closer to being ITM at $49 than it was if it was trading at $40. This works in the opposite for put options.

2. Strike Price – This is the price at which a call owner may purchase stock, and the put owner may sell stock. Like the example above, wouldn’t you pay more for the right to buy stock at say $380 than for the right to buy stock at $410?

Of course you would always prefer the right to buy stock at a lower price any day of the week! Thus, calls become more expensive as the strike price moves lower. Likewise, puts become more expensive in value as the strike price increases.

3. Type of Option – The value of an option depends on which type it is: Call or Put. Clearly there would be a difference depending on which side of the trade and market you are on. This probably is the easiest variable to understand.

4. Days Until Expiration – Options have a definitive life because of expiration. Therefore, an option will increase in value with more time. Why? Well, the more the time until expiration, the greater the probability or chance of a profitable move.

5. Interest Rates – This is really a small factor in determining an option’s price. When interest rates are on the rise, the value of call options rise as well. If a trader decides to buy a call option instead of stock, then the extra cash they have should theoretically earn interest for them. While this doesn’t necessarily work so easily in the “real world” the theory behind it does make sense.

6. Dividends – If a stock trades without giving the stockholder any dividend, it is said to be ex-dividend and its price goes down by the dividend amount. As dividend increases, puts are worth more while calls are worth less.

7. Volatility – The big variable right? In very simple terms, volatility measures the difference from day to day in a stocks price. I think of it as the “swings” that a stock has. Does it move back and forth violently or trading in a defined range with little daily movement?

Stocks that are volatile go through more frequent strike price levels than the non-volatile stocks. With these big moves, you have a higher chance of making money (i.e. moves outside the Blue area).

Thus an option on a volatile stock is much more expensive than one on a less volatile stock. Remember that even a small change in the volatility estimate can have a big impact on an options price.

There are some basic principles and rules that will make you successful trading regardless of what you trade. These are interchangeable for stock traders, option traders, future traders, and even forex traders. It doesn’t matter what you trade, it’s how you trade that makes you successful or not!

The 7 Day Challenge

Only about 5% or less of you all will actually do this but I’ll make the challenge anyway. I am already a strong believer in following a trading system or I wouldn’t keep writing and preaching about it. But once you have a reliable set of trading rules, your discipline can help you reap huge rewards.

Read these rules before your day starts for just 7 days! I promise you that your whole way of thinking and trading will change in just 1 week. Then come back and let us know how it went via the Facebook Comments.

Rule 1: Follow Your Written Trading Plan.

If you didn’t guess that this was the first rule then you haven’t been reading my blog long enough. This is the #1 reason why traders fail. It is human nature to want to vary or break rules and it takes discipline to continue to act in accordance with the established rules.

Write out a plan, even if it’s simple at first, and follow it religiously.

Rule 2: Keep Learning On A Daily Basis.

The markets are changing every single day and the strategies that you may have used 5 years ago might not work now. You need to continue to educate yourself on a daily basis.

Read an article or watch a video tutorial, and overtime you will build a huge knowledge base that is fundamental to successful trading.

Rule 3: Don’t Let Losses Compound.

Per your trading plan you should already know when and where you will cut your losses. Whether it’s a technical failure or percentage move doesn’t matter as long as you have something in place to mitigate risk.

Some traders have an even lower tolerance for loss than you might have which is fine. The key point here is to have set points (stop loss) within the limits of your tolerance for loss.

Rule 4: Never Set A Price Target.

Hear me out on this. Don’t set a price target and automatically get out of good trades. If you are long a Call and the stock hits your “target” don’t just automatically exit! Let profits run wild. Place a trailing stop loss order and see how high it can go from there after locking in gains.

Realistically, I can never pick tops and neither can you so why exit? Never feel a stock has risen too high too quickly (or fallen too low too quickly either).

Rule 5: Master One Strategy At A Time.

Never jump from one trading style to another. Master one style and strategy first rather than becoming average at several. Focus and work hard to completely understand every angle, abnormality, risk, reward of say Credit Spreads and then move on to Iron Condors.

Don’t be a jack of all trades when it comes to options trading until you have experience.

Rule 6: Listen To The Charts (My Favorite).

In case you didn’t already know, you cannot affect the market. Sorry, but you just can’t. Praying, pleading, and even giving up your 1st born son won’t even help. So stop hoping and wishing already!

Everything is reflected in the price and volume when it comes to technical analysis – this is why I favor it over any other system. Master the charts and let them guide you.

Rule 7: Don’t Make Excuses, I Have No Pity!

We live in a period of time where there is limitless opportunity to build massive wealth. The wealth of information and training online today about trading is incredible – and for the most part free.

I don’t pity anyone who gives me an excuse as to why they are not successful! Work hard now and the reward will be great at the end of the day.

Rule 8: Stop The “Analysis Paralysis”

Start trading more often and stop analyzing the markets to death. Now of course don’t take this over board and become a day trader right. The point here is that you set up a system and continue to make trades – even if they are small trades (1 or 2 contracts at a time).

Most people just analyze and analyze but never get in! How are you ever going to learn? Start small but keep trading. If you learn to master trading with only a few shares, then trading a couple hundred or thousand shares will be much more successful.

Rule 9: Walk Away From The Computer.

My own personal morning routine includes this element and it’s essential for clearing your mind. Successful trading isn’t solely about trading – it’s also about being emotionally and physically strong.

Reduce the stress every day by taking time off the computer and working on other areas of your life – especially family. A stressed out trader will not make it in the long run.

Rule 10: Be An Above-Average Trader.

We all trade for 2 simple reasons: Money and Freedom. In order to succeed in any market you need to set your expectations high. Don’t settle for mediocrity.

Stay motivated and set realistic and achievable goals that continue to take you to the next level. And finally, ask for help from others, get a coach, or join a trading forum to keep you accountable.

Ready To Take On My Challenge?

They say that writing down your goals is half the battle. So add your comments below and let everyone know that you are taking this challenge and describe your goals!

Calendar Spreads are becoming more popular even though I don’t really favor them. It’s that not that they are a “bad” strategy, my trading style just favors others. Calendars are however a great tool to have in your portfolio and as part of your overall trading arsenal.

Why Use Calendar Spreads?

Calendars are a great alternative for traders who believe that a stock will remain in a relatively tight trading range and want to benefit from the power of time decay. The goal of any Calendar Spread is to take advantage of time decay. More specifically you want to exploit the more rapid rate of time decay in shorter term options.

The reason they called “calendar” spreads is because the strategy requires the buying and selling of options with different expiration months. The strategy can be built with all Calls or Puts. Generally speaking, if you use Calls then you are long-term bullish and vice verse with Puts.

Profit From Near Term Time Decay

Since time decay occurs faster for near month options than those other long-term options, the near term options lose their value faster while the far term options manage to retain close to the same value. At expiration, if the near term options are going to expire worthless, the trader can choose to hold onto the long-term calls/puts, and continue to potentially profit from any further move in the stock.

Setting Up A Calendar Spread

Rather than attempt to write out how to set up a Calendar Spread here, I decided to do a quick video in YouTube HD.

Have You Traded Calendar Spreads?

Add your comments below and share your experiences (good, bad, or the rare ugly) trading Calendar Spreads. If you have specific questions on my video or anything else ask them in the comment section as well.

Calendar Spreads are becoming more popular even though I don’t really favor them. It’s that not that they are a “bad” strategy, my trading style just favors others. Calendars are however a great tool to have in your portfolio and as part of your overall trading arsenal.

Why Use Calendar Spreads?

Calendars are a great alternative for traders who believe that a stock will remain in a relatively tight trading range and want to benefit from the power of time decay. The goal of any Calendar Spread is to take advantage of time decay. More specifically you want to exploit the more rapid rate of time decay in shorter term options.

The reason they called “calendar” spreads is because the strategy requires the buying and selling of options with different expiration months. The strategy can be built with all Calls or Puts. Generally speaking, if you use Calls then you are long-term bullish and vice verse with Puts.

Profit From Near Term Time Decay

Since time decay occurs faster for near month options than those other long-term options, the near term options lose their value faster while the far term options manage to retain close to the same value. At expiration, if the near term options are going to expire worthless, the trader can choose to hold onto the long-term calls/puts, and continue to potentially profit from any further move in the stock.

Setting Up A Calendar Spread

Rather than attempt to write out how to set up a Calendar Spread here, I decided to do a quick video in YouTube HD.

Have You Traded Calendar Spreads?

Add your comments below and share your experiences (good, bad, or the rare ugly) trading Calendar Spreads. If you have specific questions on my video or anything else ask them in the comment section as well.

Iron Condors are a great strategy for option traders. But like all things in life, there are some key points that you need to understand completely before jumping in with both feet. Iron Condors are a relatively conservative, non-directional trading strategy that when used properly can produce some very nice monthly returns.

As the payoff diagram above shows, this strategy profits as long as the stock or index you are trading stays within the two upper and lower spread positions. Sounds simple and easy right? Just find a market that is in a trading range and BOOM, you have a profit. Well, it’s just not that easy.

Our RUT Iron Condor Problem

Just last month we had a problem Iron Condor trade. And as always, I’m never afraid to talk about these “bad trades” because we can all learn from them. We had to make an adjustment to the position which cost us money and threw the trade into a slight loss overall. So what went wrong?

When I entered the position I was being extra conservative (as always) and had a very wide Iron Condor. But what happened on this particular trade was that I left more downside room anticipating a continued sell-off.

Below is the exact chart that I sent out with the trading alert…

Looking back now, I still would have done the same thing given a second chance. The markets can always fall much faster than it can rise. So leaving room for downside movement and volatility is a must!

Where this trade when wrong was that we got just the complete opposite. An unexpected and relentless move higher only seen a few times in the past couple years of this magnitude.

Being as the trade was getting close to the upper spread, I decided to roll the upper spread higher and take a small overall loss on the position at expiration. Looking back of course the market move lower right after we put moved our spread higher and had we not done anything we would have had a completely profitable Iron Condor.

Oh well, it was still the correct trade to make!

What Did We Learn?

Iron Condors are effective when the market or stock is trading in a tight range. Of course as traders we can never know for sure where the market is going which is why I’m so conservative in my own trading. The closer you place the spreads to the current price of the stock, the higher the returns, but this also dramatically increases the risk of a loss on that spread.

Iron Condor Money Management

Money management is always important with trading but more so with Iron Condors. This strategy naturally requires more adjustments with all the moving parts. I use my own set of adjustment rules and a strong discipline to strictly follow them in times of market volatility.

Establishing your Iron Condor position sometime in the range of 30 to 40 days until expiration is best. This will optimize the time decay feature of the options and still allow you enough time to get far from the market with the premiums. Anything inside of 30 days forces you to get way too close to the market’s current price.

The precise time is not critical of course, but suggested. Different market conditions will yield different opportunities and you have to balance the risks and rewards. If you enter the position earlier then you can get higher premiums and therefore increase your monthly income. However, the more time you give the market, the more risk exists for the market to move against you right? Experience really helps in this area.

Choosing The Right Strikes

I have learned over the years that probabilities are your best friend. Knowing what the likelihood is that the market will move to such and such price really helps determine if the trade is worth risking the money. And it’s these probabilities that keep me profitable overall.

With Iron Condors, you should apply some basic statistics when deciding if strike prices are “far enough” out of the money and safe. The classic “bell shaped curve” is something we have all seen in various areas can also be applied to the stock market.

If we assume that future moves of the market will be random and similar in frequency then we can calculate the probability of the market reaching a particular price point at some time in the future.

It’s this constant trade-off between risk and reward that we have to look at as option traders. I would suggest that you start out trading the spreads that have 80% probabilities of being successful and tweak your trading plan as needed from there.

IMPORTANT NOTE: Keep in mind that the “normal bell curve” may have fat tails in the stock market. These fat tails are the “Black Swan” type events that are rare but can cause huge losses.

Summary

The Iron Condor strategy is a great conservative, non-directional tool for options traders. If you focus on trading high probability spreads and stay away from the high return trap that some beginners fall into, then you will be well on your way to success.

Take your time with these as a beginner and learn how each part works when building the Iron Condor position.

Credit Spread Strategy: 4.33%

What a great month for the Credit Spread strategy – very profitable. We had a good mix for March with 2 positions on either end of the market creating a very net neutral portfolio. Moreover, we did a great job before selling Call spreads right before the sell-off. Just great timing and luck really.

To re-cap this month’s income, let’s look at what we made in premium vs. our required investments (in margin). Here are the positions we had with corresponding PROFIT/INVESTMENT and RETURN:

NDX 2,520/2,525 CALL SPREAD – $20/$480 = 4.17% Return

RUT 710/705 PUT SPREAD – $25/$475 = 5.26% Return

SPX 1,180/1,175 PUT SPREAD – $25/$480 = 5.21% Return

NDX 2,475/2,480 CALL SPREAD – $20/$480 = 4.17% Return

With regard to TOTAL INCOME and RETURN, the February portfolio produced $90 of income after investing just $1,915 in margin. That means we saw a total portfolio return of 4.33% this month based on our model allocation.

Naked Puts/Calls Strategy: 0.86%

An okay month for the Naked portfolio – we didn’t get to enter as many trades as we would have liked but a gain is a gain in this business. This “missing” 4th trade slightly skewed our final performance figure. But, we still didn’t close any trades at a loss for another month running and our April portfolio is looking very well early on.

To re-cap this month’s income, let’s look at what we made in premium vs. our required investments (in margin). Here are the positions we had with corresponding PROFIT/INVESTMENT and RETURN:

DIA 126.75 CALL – $16/$1,248 = 1.29% Return

SPY 115 PUT – $14/$1,150 = 1.22% Return

IWM 87 CALL – $15/$1,230 = 1.22% Return

With regard to TOTAL INCOME and RETURN, the February portfolio produced $45 of income after investing just $3,628 in margin. That means we saw a total portfolio return of 0.86% this month based on our model portfolio.

Iron Condors Strategy: 5.21%

Good month for the Iron Condors. Again market conditions limited us to only 1 complete condor this month but we didn’t have to make and adjustments or rolling positions which is great. With such low volatility early in the expiration cycle it didn’t make sense to “force” positions into the market.

To re-cap this month’s income, let’s look at what we made in premium vs. our required investments (in margin). Here are the positions we had with corresponding PROFIT/INVESTMENT and RETURN:

SPY  119/120-139/140 Condor – $11/$190 = 5.79% Return

With regard to TOTAL INCOME and RETURN, the February portfolio produced $11 of income after investing just $190 in margin. That means we saw a total portfolio return of 5.21% this month based on our model portfolio.

Not exactly the start to earnings week that the market was probably expecting but I think it’s good to see some profit taking after such a huge run. The S&P 500 in particular has been really great these past couple weeks, trading nicely between the support and resistance levels I’ve gone over before.

In this video I wanted to also cover the Crude Oil sell-off and my thoughts on Goldman’s “real plan” as well as Google’s earnings and possible future move in the stock.

Add your comments (via our new cool Facebook feature) and tell me which company you think’s earnings are going to completely stink!

Finding new trading ideas is hard work. Trust me I know, I’m constantly looking for the “low hanging fruit” when it comes to stock and options trading. I don’t want the trades that I have to over analyze and look at 100+ times over to confirm something. There are hundreds of securities to trade and we want the easy trades right?

High probability trading is what I try to teach my coaching students. Find the trading set ups that are “most likely” to make you money. Again I didn’t say 100% or anything close to that. Trading for a living is about winning on a consistent basis.

But I know how hard it can be hard to dig for new ideas, so here are 5 tips to help you get started. As always, it’s best to have some sort of a system in place to keep you accountable.

1. Choose High Volume Stocks

Quit the penny stock stuff people – it doesn’t work long term and is not consistent. Take that long list of stocks you think you look at each day and narrow it down to 20-40 stocks that have a lot of trading volume and liquidity. If there is light volume on the stock then there is bound to be light volume on the options.

I prefer the indexes and the major ETFs.

2. What Stands Out?

Below are two charts. Which one stands out more to you? The 2^nd of course! The huge move in the stock screams opportunity. Depending on your analysis this could be a great trade for multiple reasons. The 1^st chart is a stock that isn’t moving and likely has minimal options activity.

Again, look for the low hanging fruit. What jumps out of the screen and begs you to analyze it more? This can help really narrow your trading down.

3. Momentum Indicators

Stochastics, MACD, Volume, Moving Averages and RSI all play a key role when deciding on a new trade. The basket of indicators you choose, whether lagging or leading, may depend on where you get your education. Try to keep it simple when first starting out, using too many indicators in the beginning is a ticket to the land of big losses.

Get very comfortable using one or two indicators first, and then add more indicators slowly.

4. Fundamental Analysis

Yes I said to do some “basic” fundamental analysis. Where is the company going? What news has come out that could affect it? Are earnings coming up soon? What about the industry or sector? There are so many questions to ask but the main idea here is just to get a general idea of what’s going on outside the charts. If you are trying to buy calls on a stock that just announced a major layoff or poor earnings then you are in for some big losses.

Sometimes a little homework now can save you thousands over time.

5. Set Up Price Alerts

One of the most underutilized services of most brokerage platforms are Price Alerts. On thinkorswim, you can set up price alerts that get emailed directly to you when the criteria are met. Why wait around for a stock to get down to $50 or whatever when you can have an alert sent out.

Make your trading systematic people! Spend 1 late night this week and set this up for the next couple weeks and it will save you hundreds of hours staring at your trading screen.

Guess How Many Indicators I Use?

I don’t use that many indicators when looking for new trading ideas, but the few that I use are very powerful. Add your comments below to guess how many I use. (Bonus points for guess WHICH indicators)

I’m a morning guy. I like to wake up early and get started right away on the day’s work. I just feel more productive in the morning and as some of you know, it’s not rare that I’m emailing members at 6am or even 5am sometimes. That’s just me of course.

Every option trader has a routing in the morning to prepare for the day’s trading. Some people are more serious than others because they have more to lose. Since I trade at home and my income depends on my trading, I take this very seriously.

And others just don’t have the time in the morning with kids and work to get a lot done – I understand that as well. But regardless of where you are in your trading, you need to make a schedule so that your morning is productive (given whatever time you have). If you want to trade for a living or even start just making some additional monthly income then you have to commitment now.

Here Is What My Typical Morning Looks Like…

-> Wake Up Early Before The Market Opens

I’m on the east coast here in Virginia and so the market opens at 9:30am here. I’m usually up by at 6am at the latest. For those of you readers out west (and Hawaii too) then you just have to go to bed early and wake up even earlier I’m afraid. Waking up early and eating a quick breakfast is great for me and allows me to prepare for potential market surprises, or create a strategy for the day.

If you are up three minutes before the bell then you won’t have time to do anything.

-> Respond To Member Emails

If I haven’t already, I’ll respond to emails from you all. Most of the time I think I do a good job of working through the emails each day but sometimes there is just not enough time. I have created some awesome relationships with the readers here and I really do enjoy trading ideas and thoughts back and forth.

Keep them coming and be sure to stop by our Facebook Fan Page as well which boasts nearly 4,000 members now!

-> Read Today’s News

I like to check out FINVIZ for the major market headlines each morning just to get a feel for what’s happening in the market. I don’t read everything (who could) but I do breeze over the articles and pick and choose.

I also read the only publication worth delivering each day – The Wall Street Journal. This is the most read newspaper and therefore I want to read what the herd is reading as well. Plus they do the best job (I think) of provide great market information and analysis.

As always with any news source, be sure to take everything objectively and with a grain of salt.

-> Pre-Market Futures Trading

Both currencies and futures trading through the night and this is almost a necessity if you’re a day trader. For the options trader, the main purpose is to get a preview of what stocks are moving and where any “trouble” might be if you have close positions. If you have to go to work for a living, then checking the pre-market futures can help you place contingent orders to take profits or you can move up your stop-loss orders and lock in more gains.

-> Check The Economic Reports

For members, we offer this cool economic calendar that gives you fresh information each morning on the day’s reports. What is also cool is that it gives you the past numbers, charts, and current expectations.

Most of the time I glance over these quickly each morning but as a trader you do need to know when the more important reports are coming out: Jobs numbers, Fed interest rate decision, etc.

-> Analyze My Current Portfolio

Each morning I take a hard look at my current positions. Where can I reduce risk? Where can I take more profits? Should I close this trade early? It’s this analysis AFTER I have done my morning research that has been very beneficial for me.

If you look at your portfolio and then check out the news, market data, etc – you are probably going to have to go back and re-adjust your thinking. Even if you have positions that are clearly going to be profitable you can always look for more options to make your money work better.

Once you feel good about your current portfolio start looking for more trades according to your trading plan.

-> Walk Away From The Computer!

I clearly want to see the market open each day and avoid trading during the first 30 mins. But after that I like to walk away from the computer for a couple hours and clear my mind. I don’t need to follow each and every tick because I’m not a day trader.

And if you “schedule” time to NOT trade then you will become much more efficient and productive.

-> Go To The Gym, Read A Book, etc.

The whole idea behind trading in the first place is to make money right? Have a solid plan in place, trade the plan, and let the market move already. Sometimes I go to the gym early in the morning (yes DURING the trading day as crazy as it may sound to some of you) and other times I’m just doing other things around our house. I give myself some freedom to do the things I want to do and I don’t let the markets control my day.

Staring at the screen all day is not going to make things happen faster. Plus you are going to become even more attached and emotional. What’s the point of trading if you are just trading the day job you hate to be tied to your desk at home all day as well?

What’s Your Morning Routine?

Add your comments below and share your morning routine! What has or hasn’t worked for you?

Earnings season kicks off today and I’ll really be interested to see how things start shaking out. As I mentioned in the Weekend Trading Video, crude oil’s rally will eventually start to effect consumers and companies negatively. Rather than looking at the actual numbers, I think that the company guidance will be more influential.

Will the company management look favorably on the new quarter ahead? I’m sure there will be some strong comments about Crude Oil and the Dollar.

Here are the more important reports coming out this week…

A Word On Expectations

I think its going to be a little harder for companies to beat earnings on a Yr over Yr basis this time around. It was relatively easy last year because companies where comparing earnings from 2008-09 when things were still picking up. Now that they have had great rebounds, will they be able to keep the same pace? What to do you think?