Aside from being a Market Taker Mentoring coach, I publish daily newsletters to guide traders in the futures markets. I started doing this in the late ’80s as a broker, and to be competitive I had to adapt to different conditions and client requests. It forced me to develop strategies for equities, treasuries, precious metals, energies, currencies and even grains. I started my analytic career as a technician and soon realized that a fundamental view of the markets was just as, if not more, important than charting techniques.

The road to becoming a well-rounded broker/trader/educator forced me to develop a list of tasks that I use faithfully before entering a trade. My checklist…

• Sunday or early Monday preview event risk (fundamentals) for the coming week
  • Economic releases, supply and demand reports, Fed policy, global events, earnings
  • Prioritize events that will affect interest rates
    • Movement in rates is often connected to the dollar and stocks that may have an impact on metals and energies. Understanding the relationship between financial sectors is vital when creating strategy.
    • Current tendencies…treasury, gold and yen move inversely to equities and energies
• Get a read on momentum from a day view
  • Day direction indicators
    • 30-minute chart to check first hour high or low during regular trading hours
      • If low made in first hour, bulls are in control
      • If high made in first hour, bears are in control
      • Extension higher after first hour high leads to higher prices the next day
      • Extension lower after first hour leads to lower prices the next day
      • Close above first hour high often leads to higher prices the next session
      • Close below first hour low often leads to lower prices the next session
• Gauge the speed of the recent move
  • If overbought/oversold think containment trade (mean reversion)
    • Better for speculators and short-term strategies
    • Short options to collect theta
  • If in a consolidation phase
    • Recent day ranges below average with decreasing volume
    • Apply breakout strategy
    • Long options
• Select support/resistance (entry/exit) areas
  • Markets often reverse when retesting very high-volume prices and very low-volume areas
• Set risk
  • Risk is an unexpected change in momentum
    • If bullish define price where buyers gained control, set stop loss just below it
    • If bearish define price where sellers took over, set stop loss just above it
• Project profit using ATR
  • Find the point where bulls/bears gained control of momentum and use the average range to measure profit potential for chosen time frame (day, week, etc.)

Great traders create a methodology and apply it to every trade. Overthinking can hinder opportunity, especially when volatility is high. Design your own set of rules and practice them often. Eventually, you will react to market conditions almost instinctively.

John Seguin, Market Taker Mentoring