I've mentioned this before and it's a routine I repeat almost every morning. I like to wake before the markets open, start the coffee pot and check the market updates on Yahoo! Finance. The news lets me know what's happened in the financial markets overnight and the futures let me know which direction the market is poised for the opening.
I like to check the 24 hour news channels to see if anything catastrophic has occurred that may interrupt the orderly flow of orders as the market opening approaches. I also like to check the balance in my accounts to see if any unexpected dividends came in that weren’t on my radar. That account balance is my ammunition for the day.
From there I start to cruise the net for information and data. I have several sites I look at and most of them are listed on the right side of this web page under the title of “Additional Resources”. One of my favorites is StockCharts Voyeur. It’s a stream of stock charts that people all over the country are currently viewing. It just gives me a idea of what others are interested in and allows me to see charts of companies that I probably wouldn’t have looked at on my own. It’s a fascinating and entertaining website and often provides me with some new ideas.
I’m not necessarily worried about those long term traders that are putting in limit orders. I’m concerned with those traders that are reacting to last night’s news events. The ones that have been in the chat rooms the night before and found a false consensus with other traders. They’re dangerous.
Once I begin to feel that the market has found an equilibrium in its order flow I start to look for trend breakouts. These are literally intraday highs or lows and they signal which way the market or an individual stock is probably heading for the day. This literally tells me if I should execute a trade or wait for a better entry.
I have used this strategy more times than I can remember. It’s simply waiting for a trend to form before jumping into one side of a trade or the other. It has saved me over the years from making thousands and thousands of mistakes. Perhaps this little idea can save someone else from jumping in too soon and regretting it.
Good Luck and Good Trading.