[Sledge]

All-
Wanted to see if I could spark a discussion devoted to your pre-trade checklist. This sounds absurd, but I have a loosely mental checklist and am trying to put it down onto paper and having a hell of a time getting it into a "decision tree" type format.

Since the markets are made to be in such a way that we may have to "roll with the punches" the idea of making some highly rigid list of things seems to be that nothing may ever line up and trades aren't taken at all- or so loose that you are in too early, experience a bad drawdown and get out with a little scrap of profit.

Here are the factors that I am trying to put together into some type of useful format:
-Be sure Daily Trend and 4 Hr Trend are in agreement (These are my timeframes I use)
-Where is the market in relation to S/R levels?
- If at a S&R level or close- how is it acting? Does it appear it will bounce or crash through?
-What is the news tomorrow? That may push to or through an S/R level

I'm looking to organize my thoughts- but not have a 60 minute per chart checksheet to see if a trade is good or not. Wondered if anyone has overcome this mind-block and been able to get these down for themselves. Seems simple enough to me- but having issues nonetheless.

Also be interested in seeing what others do look at- how did they narrow what was relevant and what was fringe data that is a tad less important to making the trade.

Thanks,
Sledge

[james_gsx]

This is what I do every night.

ES - I write down all the important levels on the ES. This means the previous high/low/close and then close by long term support/resistance levels or whatever could come into affect that day. I plot those lines on the chart and wait for possible setups around those areas. Then I check out the daily chart and write down possible scenarios that could play out the next day. I try to keep my mind open so I don't focus on one possibility, I like to be open to various moves - it is after all a game of numbers and probabilities.

I then write down all possible trades and what trades I want to make for the next day. I have a notebook where I can write each option play I exercise. I write down my plan for that position including risk/reward and how I might adjust that strategy depending on how the position plays out.

For a very basic explanation, let's say I own 10 SPX puts for a longer term position. I check out the daily charts and decide the next day has a higher probability of moving up. Since I know volatility will eat alive my long puts, I will buy calls to hedge against the move. If I didn't already do this at the close, I will do this in the morning if the setup is right. This way I can hedge my position and protect my profits.

Let's also say that stock XYZ is forming a bearish descending triangle and I think it can move $10, I want to make a speculative play. I would then write down a possible play for this stock, for example I look over the various options and greeks and decide to buy 10 puts with a strike $10 away from the current price. I would write this down in my plan, then list a few ways I could adjust the strategy if I gain or lose too much too fast. I would then enter this position at the market open.

Now let's say I have a position and I think I have captured the whole move, I would simply write down that I want to exit that position at the open.

Then I write down a to-do list for the day, and leave the last 3/4 page of my notebook paper open for intraday notes.

Overall, I find this to work very well for me. It allows me to be discretionary, but I still follow some rules and I have a firm grasp of what is going on. It's like any sort of fast paced sport. There are many things happening at once, and I constantly adjust. I have found if I don't use a plan like this every night, I tend to get lost and lose my grip and subsequently lose money.

hope it helps.

[Sledge]

James-
The idea of looking at it from differing "What if" scenarios is an outstanding idea, and one I had not thought of. This may really offer a breakthrough for myself as well as others. If I look back in my memory bank I have looked at a particular instrument and said "Ok I see that this will most likely be moving northward very soon (say within that trading day) but that it will still have to get its supply on the bottom out. So I have made those plays in my head- but to approach it more from a "It could do this" or "don't be surprised if it does that" is a much better approach than getting in and saying "What the hell" when you see that it went opposite your trade.

I think that people in general get into a position because of the criteria they have set and to them it looks like the proper position to take- or they wouldn't have taken the position. But a perspective-taking stance of not being so surprised because of multiple scenarios is a very beneficial exercise!
Thank You.
Aaron

[Jaronimo]

I do my pre-market filtering in the morning. I look to see what the overnight markets did. I scan through the futures markets to try to get a feel for whats happening.

I look at trendlines and relative strength and weakness to get a feel for whats going on. Is it a strong trend or weak trend?

What news is coming out today?

I look to see the support and resistance levels and how close we are to levels that were defended with high volume.

I then figure a basic reward to risk level and also try to set exact numbers where I know if we hit them I am wrong.

For the past few months the only markets I trade are the NQ and Euro.

I have a large spreadsheet for premarket checks, but I find I do not use it as much anymore. I just want to get a "feel" for whats going on. It seems to me that even with the checklist it only gives a "feel" anyway and does not seem to be more accurate than what I am currently doing.

[Sledge]

Jaronimo-
Thanks for your reply, that sounds very on-par with what I am attempting to do. My theory is- if I can make it "elementary" by having to run through this routine say 100 times, then I can also just have it be done "second nature" instead of having to check every single trade off. I'm sort of already there and going at this backwards- but for some reason I want to write it down and have my criteria in black and white.

I never wrote down my "edge" because I was still trying to define what my "edge" even was!!

Sounds horrible- but If I were to die tomorrow- I'd want something my wife could follow and trade without knowing much about the market (a little over simplified, but I'm sure it makes the point)

Aaron

[Jaronimo]

I think writing it down is one of the most important steps in clarifying what it is you are actually trying to accomplish. If you are not writing it down, you are probably doing it a little different every time. Writing it down forces you to clarify what you are actually doing. I have had more than a few processes that I thought were brilliant, then upon writing them down I realized I may be an idiot.

I would never try to get a system my wife could follow. because she won't. End of story. But I do try to explain what I do to my kids. Just explaining things to people is the same as writing it down, it forces you to be clear about what you are doing. And when they ask questions it forces you to be even clearer.

Thats how you know you are on the right track, because you can stand up to the hardest questions and scrutiny and it does not fall apart.

[Sledge]

Originally Posted by Jaronimo »

I think writing it down is one of the most important steps in clarifying what it is you are actually trying to accomplish.

Exactly! Took the words right out of my mouth!

Originally Posted by Jaronimo »

Just explaining things to people is the same as writing it down, it forces you to be clear about what you are doing. And when they ask questions it forces you to be even clearer.

Yes indeed, that is why I work to try and "give back" someplaces like here on the TL, I am a fairly versed VSA student and attempt to give back as so many people had done for me when I had all my questions (and at times still do)

Originally Posted by Jaronimo »

Thats how you know you are on the right track, because you can stand up to the hardest questions and scrutiny and it does not fall apart.

My son is only 2 and a half- but hopefully I'll have him as a sounding board once he gets older
Aaron

[GammaJammer]

My morning list (no real order, just stuff I normally would prefer to be aware of)....

O/N developments - price action, tech levels, fundamentals
Upcoming Data
Order Book (mine and others - where are all the stops likely to be etc)
Market Positioning
Options Expiries (NY cut only realistically, unless there's something ginormous and well publicised for the TKYO cut)
Fixing Rmrs / M+A stuff etc
Other seasonal / struuctural stuff (e.g. specific passive equity related month end fixings, Uridashi issuance / redemtions, MSCI re-weightings that kinda thing)
Rumours / Geopolitics
Desk related stuff (options expiries, whether or not all the toys are working when I sit down, that kinda thing).
Holidays (both current and upcoming in next say 48 hours)

I'm sure I've missed a bunch of stuff off here, but thought would throw something brief together to illustrate what the wholesale person would typically look at.

GJ