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After Hours: Trading Prep When the Markets Are Closed

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February 16, 2016
Better late than during: try doing your trading prep and research after hours each day

The markets are closed. Is it time to pull out a good bottle of red and kick back in front of the fire? Maybe. But some traders will say that the trading day is just getting started.

Post-U.S. market hours trading prep can be invaluable time to analyze your past performance, study potential opportunities, and plan the specifics of future trades without the turbo-charged emotions and excitement that real-time price action can create.

Unless you’re an intraday scalper, many traders aren't well-served by ad hoc, unplanned trade entries during active market sessions. You've probably heard it before, but it bears repeating: Consider taking the time to plan out your trades with specific entry points, targets, and stop-loss levels before you enter the position.

"When you’re in a trade, it's not the time to be figuring out where weekly support is located," says Dr. Gary Dayton, president of TradingPsychologyEdge. "You become distracted by a preparation activity when you’re executing a trade. Trading performance could definitely suffer."

Routines and Habits

Establishing and following a set routine after the markets are closed could pay off with more focus, planned and thoughtful trade entries, and perhaps even an extra dose of self-confidence.

"Watch any professional tennis player about to serve the ball. They all have a routine they use to calm jittery nerves, focus, and ready themselves to play the next point. Wise traders will have a routine, too," says Dayton.

There are several things to consider when developing a routine that works for you. Perhaps one of the most important factors is consistency. If this routine can become habit, you can work through the points quickly and efficiently and can help keep your trading on task. Think of it as a mini "performance review" that you give to yourself.

Consider These Four Moves

Dayton suggests four things a trader can incorporate into an after-hours trading routine:

1. Evaluate your trading performance. Assess where you did well and also where you fell short and why that happened.

2. Analyze each individual trade you initiated. Did you follow your rules and your trade setup, or did emotions take over and get the best of you? Use a journal; writing things down makes them stick. Other things you can ask yourself: "Did market conditions add to or detract from the setup? Is there anything you can do to better execute the trade? What did you learn from the trade?" Dayton says.

3. Prepare for the next trading session. "Use what you’ve learned from evaluating your performance and bring it into your next trading session. How do you see yourself acting to address where you fell short today?" Dayton says.

4. Identify where you see trades setting up in the next trading session. Write out potential trading spots with entries, objectives, and stop-loss points. "You can get good at this. Some traders can accurately locate trades in three out of five trading days. That’s a real edge," says Dayton.

Then, after the next trading day is over, do it again. Developing a trading routine to study both your performance and plan for potential market entry points can become an easy habit to embrace. "This routine is the tried-and-true way for continuous improvement and self-development," Dayton says.

To take your trading game to the next level, prepare like an athlete. No professional athlete would ever think about stepping onto the playing field without prepping for the game, says Dayton. "The athlete’s edge lies not only in their athletic ability but in their preparation. This is true for traders, as well. Having a routine outside of the trading day to prepare for trading will allow your trading abilities and skills to be used to their fullest advantage." 

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