Trading Psychology – One Fundamental Habit to Improve Your Trading Ability

Successful traders become successful by developing positive habits that support their trading. One fundamental habit of many successful traders is “doing the numbers” each and every night.

It’s not enough just to look at charts. Writing down the important data of the markets you follow pays many trading dividends. We’ll look first at the kinds of data you should write down and then we’ll discuss some of the advantageous benefits you can derive by doing the numbers.

Key Market Data

Key market data would include such things as:

  • The High, Low and Close of the markets you follow
  • Important price levels of support and resistance such as swing highs and swing lows. Market Profile traders would want to track the Value Area High and Low, along with the Point of Control.
  • The values of the primary indicators you follow. These would include mathematical indicators such as a moving average, the MACD, or RSI. If you trade the US equities or financial indices such as the Dow or S&P e-minis, you might also want to note market internal indicators such as market breadth, NYSE Ticks, or VIX.

Keep it Simple

You don’t need to write down everything about your market or make copious notes. Get a notebook and just write down your most important market information. I personally trade the S&P e-minis and my notebook has the high, low, close, volume, range, the high, low, close of Ticks, and a rate of change indicator value. It’s pretty simple and quick. It takes less than 5 minutes each night.

Why Do It?

There are several important benefits to doing the numbers. Here are a few of the more important ones:

  • It keeps you in tune with your markets. In the S&Ps, for example, the high and low of the previous day are frequent areas where trades set up. Tracking the day’s close keeps me clear on the immediate trend. Noting the daily range is a short-hand way for me to keep on top of volatility and whether or not the market is becoming more or less volatile.
  • Writing down the numbers helps you remember them. It is one thing to see something and those with photographic memories may need to go no further. For the rest of us, the act of writing things down engages more parts of the brain and makes it more likely you store and encode what you write in your memory bank.
  • Doing the numbers immerses you deeper in the analysis process. As you write things down, you will think and study them more. You will find yourself, for example, comparing today’s range with the last few days and note shifts in the volatility. This will positively affect your understand of the market’s current behavior.
  • Your market-reading skills and confidence will improve. Doing the numbers every night can help you develop the almost lost art of tape reading. As you study price behavior along with key indicators, your knowledge, skills and abilities should improve. With diligence, you might be surprised at just how quickly your trading skills and confidence increase.

Source by Gary Dayton, Psy. D.

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