Trading Process: Chart Analysis and Trade Execution

Here’s My Daily Trading Routine That I’ve Used For 10+ Years

After watching a Bill Gates documentary on Netflix, the one thing that stood out to me the most was that he did not achieve his position as one of the world's richest individuals as a result of good fortune or inheritance of large quantities of money. The man actually reads 8 volumes while traveling, has a reading speed of 150 pages per hour, and he ENJOYS his education. "Bill always knows more about any issue than the person with whom he is having a conversation about it," stated one of his close pals. What does this have to do with trading, you may wonder. Everything…

To become a successful trader, you must first understand how to trade correctly and then be continually disciplined in following an efficient trading routine until it becomes a habit.

Listed below is all you need to know about trading routines: Trading routines are the most important factor in achieving success in the market. There is no "magic indicator" or "algorithmic trading robot" that can instantly turn you into a millionaire trader overnight. Just as Bill Gates' pattern, which he followed each and every day for years, helped him achieve incredible financial success, your trading routine may do the same. However, if you do not have a trading routine or if your trading process is incorrect, you will never be a successful trader. Could Bill Gates have spent the whole day sitting in front of the television, munching on Cheetos, instead of reading everything he could get his hands on on business and programming? Sure. And you'd have no idea who Bill Gates was if he'd done anything like that.

Bill Gates has a "fire" inside him, a passion to learn, to grow, and to be a better version of himself that seems to be both natural and cultivated throughout his infancy. I am unable to give you with this; if you do not already have it, you must create it. However, I can provide you with the framework, or the "keys" to the "kingdom," as it were, but you must be in the appropriate trading mentality in order to be able to 'turn' the key in the lock. In that case, continue reading to learn about the daily trading regimen that has proven successful for me over the course of more than a decade in the market....

The Main Ingredients of My Daily Trading Routine

• In comparison to many other traders, my trading process requires very little interaction with the market. The following are the reasons why this works for me, and I have no doubt that it will work for you as well: Less stress, less time to make mistakes in your trades due to over-involvement, lower trade frequency, instills discipline, and you are in complete control of your transactions rather than trying to manipulate the market.

• As a general rule, I like to concentrate on end-of-day data, which means that I prefer to use daily chart time frames and that I will generally wait until the market closes each day before actually sitting down and taking a hard look at the markets on my watch list. This is what I refer to as a part-time trading routine, and not only does it provide the benefit of less screen time (allowing you to spend more time doing other things), but the very fact that you are spending less time in front of the charts will actually improve your trading performance over the long-term.

• First, I take a weekly perspective: Weekly chart time frames are examined, major levels are drawn in to get an understanding of the near-term and long-term patterns, and evident / big price action reversal signs are noted.

• Next, we'll take a look at the time span represented by the daily chart. Our primary focus is on critical levels of support and resistance, as well as current and previous market conditions: is the market trending or sideways? Last but not least, we are looking at the PRICE ACTION to see if there are any indications that have emerged around the important levels of support and resistance. Whether or if any signals have established after a return to a level Keep in mind that levels might represent horizontal levels of support or resistance, as well as EMA – exponential moving averages, or even 50% retracement levels.

• Given that this is a blog post, I'll skip over some of the more technical topics such as money management, trading psychology, stop loss placement and so on, but you can learn a little more about these topics by visiting the links I've provided above, and these topics are covered in much greater depth in my professional trading course.

• What is the GLUE that connects all of this together? What do you think of my complete trading process? Simple. It's RDH, which stands for routine, discipline, and habit. Allow me to explain this to you (since it is crucial) - Remember how I mentioned Bill Gates earlier in this article? It is likely that Bill Gates has better habits than you (or me, to be honest), and Warren Buffett as well. The world's elite, those men and women who have acquired big fortunes or otherwise achieved success in their field, reached that position via Routines that required Discipline and eventually developed into Habits of behavior. The amount of devotion required is incredible, but, honestly, that is all that is required. Instead than reading so many books because he dislikes it, Bill Gates does it out of true enthusiasm for the subject matter. As a result, if you want to develop appropriate trading habits, you must really like trading as well as the routine and discipline that go along with trading. When it comes to making money in the markets, it is your trading habits that will make the difference; there is no quick route or short-cut other than TRULY enjoying the process. And don't forget, I can show you my approach, the one that has proven successful for me, but it is ultimately up to you to LOVE it and be passionate enough about the process to make it work for you!

My Daily Trading Process: Chart Analysis and Trade Execution

I begin my trading day by getting a "bird's eye" view of the markets on my watch list, which is the first significant chart part of my trading process. Starting with the weekly chart time period and giving it a thorough once-over is typically the best approach. Market key levels, significant turning points, trends, and regions of consolidation are the primary things I'm looking for in the market to take notice of. I generally start with the important levels on the weekly chart and work my way down.

After that, I'll go down to the daily chart time frame and begin examining it in a manner that is quite similar to the previous one. Depending on the price activity, the important levels from the weekly chart may need to be tweaked a little on the daily chart, or you may need to bring in some new levels altogether.

The market circumstances in the short term are now being examined to determine which direction is the best to trade in and which local levels / regions are the most crucial to keep an eye on. I'll often utilize a moving average in this context, such as the 21 EMA or something similar, to assist me see the near-term trend and momentum. Identifying times of Higher Highs/Higher Lows as well as Lower High/Lower Lows will also be important skills to have, which you can read more about in my post on how to spot trending markets (click here for more information).

EURUSD CHART pic

Last, but certainly not least, I am looking for price action signals / potential trades. I am especially looking for “clean and obvious” signals that line-up with levels on the chart, in other words, that have confluence.

• It is a quick explanation of my weekly and daily chart analysis process, which I do for all of the markets on my watchlist, as seen in the charts above. If you don't already have one, you should read my post on how to create market watch lists for additional information.
• Markets move through many stages. Take time to study the markets on your watch lists that interest you the most, and you will grow to know them and get familiar with them. Simply peek at them and walk away, or don't look at them at all for a few days, if you see that some or all of them are in negative trading phases, or that sideways consolidation has become bumpy. The ideal trading phases or circumstances are when markets are trending or when markets are trading in extremely defined and big trading ranges, since these are the finest trading conditions.
• I can't stress this enough: I want you to remember this. Most traders lose money because they spend much too much time staring at their charts. The market is not intended to be a casino, and as such, it should not be treated as one. Don't let it become an addiction! Consider and use the market as a venue for you to demonstrate how well-organized, talented, and disciplined you can be, and you will be richly rewarded for your efforts.

How I Find a Trade, Set it Up and Execute It

Now, let's imagine you've completed the preceding procedures and you've identified a prospective transaction. Here is how I want to set it up, including the location of the entry, stop loss, and profit objective...

The "price action signal" seen below was technically a bearish tailed bar, and it was followed by a pin bar signal, which was also an inside bar inside the bearish tailed bar, as shown in the chart below. Price consolidated for a few days before finally breaking down in line with the current downtrend, as seen in the chart.

• Price had pulled back to resistance at the 21 EMA (blue line) and the 1.1250 horizontal level, so we had multiple points of confluence: level and trend.
• Traders could have netted 2R profit from this trade had they held on to it for 3-4 weeks after entry. This is why I always preach set and forget trading!

• This example shows a clear pin bar sell signal that formed at resistance (both horizontal and ema) and within a downtrend. This was a very clear and obvious trade for a savvy price action trader. Stop loss was just above the pin bar high and a 2-3R profit was easily achieved if you held the trade for a couple of weeks.
• An interesting “twist” on the last trade above is seen below. Notice the entry was made as a 50% retrace entry of the pin bar’s tail.
• This entry allows for either a tighter stop loss and hence increased potential risk / reward OR with a normal width stop you could give the trade more breathing room. In this case, we are showing a tighter stop with increased risk reward, 6R was possible here!

Conclusion

In today's session, I demonstrated how I personally study the charts on a weekly and daily basis, as well as provided you with a 'taste' of my own personal trading routines. With the help of today's lesson (and a few more, if time allows) you should now have a clearer idea of WHY you need a daily trading routine and How to establish one.

I believe that the daily trading routine outlined above serves as the foundation upon which all of my trades are built, and I believe that all aspiring traders should use this as the foundation upon which to build their trading careers if they want to have a realistic chance of making consistent money in the markets.

Many of you are aware that I provide a daily market commentary each day soon after the closure of the forex market on the previous day. However, what you may not be aware of is that creating these daily commentary (which are identical to the charts above) is also a part of my daily chart analysis and trading process. Even while I began putting down my views on the markets each day long before I launched this website, I have been doing it on a consistent basis every trade day for the better part of a decade. For me, it's almost an everyday routine...if I miss a day of commenting for some unusual cause, such as travel or a vacation, I genuinely feel 'off' and as if something is "missing." You, too, must arrive at this stage in your journey.

My daily commentary and members' analysis is a great example of how I perform my rolling (ongoing) analysis of the market in real-time conditions, and it is a great resource for those who need ongoing help and assistance with learning to trade, analyzing the markets, spotting trades, and developing your own personal trading plan. This is something that you may pick up from me and use in your charts as an example. I invite you to "look over my shoulder" each day as I examine the charts and plan my trades in the members-only daily chart analysis section and in my trade ideas email, which are both available to members only.