Hello Traders! There are so many items we need to be aware of as traders each and everyday the market is open. This Trader Insight will address when we get zeroed in on a specific item, such as only using technical analysis on stocks without having any idea what is going on with that particular stock, the industry or even sometimes the overall market!
In this post I’d like to cover some questions you should ask yourself (and hopefully answer) before the opening bell of each trading day. Questions like these should be part of your:
Here is a sample list of questions and answers:
Q: What economic news has come out this morning and is there any coming out during the trading day? What impact has the news had on the futures and on the market in general in the past.
A: Market is set to open with a gap down due to XYZ economic number being less than expected.
Q: What companies have reported earnings and what sector are they in? How is that impacting stocks in the same sector?
A: XYZ reported better than expected earnings and raised guidance. Stock is set to open higher. Other big names in the sector are seeing a bid in premarket.
Q: What companies have had any other kind of impacting news, such as analyst upgrade/downgrade from a major brokerage firm?
A: Company ABC received analyst upgrade to strong buy with a hike in price target. Stock is set to open flat.
The idea of these examples is to not only make sure you are in tune with what is impacting the market everyday, but also to learn how to read and react to that information.
Knowing the answers to the above questions is only half the battle. Through experience you will learn what to do with that information and how to trade off of it. In the examples listed there are situations where a trade is present and when one is not. It all depends on how stocks are reacting to it. But again, in order to recognize that you need to be aware of the information to begin with.
Again, items like this should be part of your trading plan. For a complete guide on creating a trading plan check out the Active Trading Blueprint: http://tradingeducationblogs.com/the-active-trading-blueprint-course/
Remember “Victory Loves Preparation”