Making a game plan for the coming week is an excellent practice for traders. A professional athlete would never think of stepping onto the playing field without having a game plan. Traders would be wise to follow the athlete’s practice in their trading.
Of course, no one knows how the trading week will unfold in the market you trade. Nevertheless, you can make some assumptions and lay out a game plan for next week’s trading.
Making A Trading Game Plan
You might, for example, see that during the past week selling has come into your market. It’s turned the immediate trend bearish. At the end of the week, however, a small rally occurred. You anticipate that there may be some upside follow-through early next week, but that because of the larger selling, you expect to see that rally die, and the market then start to move lower. It would be a good location to enter a short trade.
Should this happen, and the market fall, you can also anticipate where the market is likely to fall to by assessing lower support levels. If the market holds at a support level, it could set the stage for a rally later next week and a location to initiate a long trade.
You can see how valuable a game plan can be.
The High Value of the Day Trading Game Plan
Its value lies in the map it provides. It really doesn’t matter if the market follows the map. If it does, great! You’ll have the confidence to take good trades as the market does what you expect.
If it doesn’t, well, that’s great, too, because it immediately tells you that the market is doing something different than expected. This is just as valuable.
Here’s an example: Let’s say your analysis for the week turns out to be wrong. Instead of dying, last week’s rally continues. Support levels start to hold. By your game plan, you would anticipate support to break, but it holds instead. Well, if it holds, you want to play long and not fade the rally.
Can you see how having a well-thought out plan puts you on the right side of the market no matter what happens? It’s what I call a High-Value Trading Action. Of course, you need to be mentally flexible and not locked in to a bias. That’s where psychology comes in. Being able to override your game plan when the market tells you to do so is another High-Value Action.
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