• Daily Trade Journal Entry
• Support & Resistance Profile Levels
• Daily Bar Chart With Volume
• Expected News Announcements
• Current, Relevant Events
• Scenarios

Now let’s talk about each of these a bit more to explain them.

Daily Trade Journal Entry

This really is the most important thing an aspiring student should be doing.  You hear every guru tell you that you should do this and I’m pretty sure most of you don’t.  I could probably spend numerous entires just on the journal alone, so I will save this topic for another blog segment.  The importance of including this journal in your nightly market homework is quite high because the journal is how you keep tabs on what you’re doing during the day.  You can see how you executed trades based on your homework.  Your homework is your strategy for the day and having a journal entry allows you to bring a certain level of accountability to the process.  The journal can easily show your mental breakdowns and breaks in discipline as well as reinforce good habits when you do things properly.

Support & Resistance Profile Levels

As I’ve said before, this is where it all starts for me.  Without this, I’m blind.  I believe mapping out your support and resistance levels pre-market is so important.  I’ve already done a detailed video tutorial on how I do my profiles levels.  If you’ve missed that segment, please dig through the Balancetrader Outlook archives and go through it.  I spent a few weeks doing this process every day so there would be a good tutorial on how to do this.  If you learn one thing from all of this, this is what you want to take home with you.  It’s the best, free information you’ll ever get.  I promise.

Daily Bar Chart With Volume

There are times when the larger time frame pattern is so obvious by looking at this chart that you’ll wonder how you avoided it all this time.  My main concern when looking at this chart is to get an idea regarding how the market is currently conducting its business.  The first thing I’m looking at are possible areas of balance and larger levels on the daily chart and note them down.  Most importantly, I’m looking to get a grasp of how the market is conducting the auction process and the type of volume accompanying it.  Are we moving in the current direction on increasing or decreasing volume?  What is volume looking like as we test a large level?  This sounds so obvious but you really will be surprised some times how the market will be screaming something to you and if you didn’t look at this chart you wouldn’t see it.

Expected News Announcements

Now, if you know me, you know that I’m the biggest ignorer of news in the trading business there is.  I can’t stand news.  I refuse to pay attention to it.  I don’t avoid trading around news like most gurus tell you.  In fact, I welcome news.  News drives the market participants’ perception of value, which drives the nice moves we want to be on board for.  Without news, the market goes nowhere.  More often than not, news is the catalyst that gets things moving.  You don’t want to be afraid of news.  You want to embrace it.  You don’t want to exit a position because news is due out.  You want to hold the position to see if the news will propel the market in the desired direction.  This may seem completely backward compared to all those other gurus out there so I’m going to ask you to trust me on this one.  If you take the time to look at the data, you’ll see that trading with news will skew your risk / reward ratio more in your favor.  The important thing to remember, however, is that we aren’t going to interpret the news.  That’s pure suicide.  We all know that the market will sometimes process good news and go down and other times there will be bad news, yet it goes up.  We’ll let market structure and the auction process dictate the bias.  What’s important is knowing that news will be coming out and when it’s coming out.  It’s not our business to interpret it.  If we’re not at least aware of it, however, then we’re going to get caught off guard and we don’t want any surprises.

Current, Relevant Events

This section is more speculation than anything else.  What’s going on with the economy?  What is driving the market?  Maybe interest rates are the big thing right now.  Other times it might be the price of crude oil.  The market is a very fickle thing.  One minute it cares about a happening in the Middle East and the next thing you know the market is more concerned with home sales.  This isn’t the most important part of your homework, but thinking about these things and documenting them will bring you closer to the market, especially when you’re more of a novice.  It will help you to better grasp the drivers in the market and get a better feel for how it does its business.

Scenarios

This is where it all comes together.  You take all the above information, process it, and detail the possible scenarios the market may throw at you.  I believe that using a profile provides the unique ability to do this that no other methodology can provide.  We want to try to come up with every possible scenario we can think of for tomorrow.  Where can the market open, where can it go after it opens there, what trade setups can form in that scenario.  If this does happen, how do you want to handle it?  Will you trade it?  How will you execute the trade?  How will you manage the trade?  We’ll do this process for every scenario we can think of.  Don’t worry.  It’s not THAT bad.  There isn’t as many scenarios as you may think.  The importance here is to try to not get caught off guard here (note the key word is TRY).  So often you will see the market unfold one of your scenarios and because you’ve documented it in a detailed fashion, you remove the prospect of making spur of the moment decisions.  In that situation, all you have to do is execute the plan you came up with when you went through the scenario.  Then, when you do your journal, you can immediately either slap yourself for being an idiot, or pat yourself on the back for executing as planned.  This is that level of accountability I was talking about previously.  If you can’t fix your discipline issues like this, you probably can’t do it at all.  Now, there is no way we can foresee every single scenario that is going to unfold every time.  That’s just not possible.  We can, however, hit the nail on the head quite often.  And when we do, the preparation pays off.  If we miss the spot, then so be it.  Tomorrow is a new day.

Conclusion

Hopefully, you can see the importance that homework has in the trading process.  It does require some work unfortunately.  The way I see it, there are always people out there who are taking things to the extreme and if you don’t take it further than them, you’re going to get squashed.  Despite what people may say about trading being more of a personal fight, I think that a big portion of it is a war against the other traders.  I mean, if you lose money then some other trader took your money.  It’s that simple.  So doesn’t it make sense that being better prepared than the other trades will give you an edge?  Some people may argue this with me and I would be more than happy to have that debate.  Even if it were not true, doing homework in this fashion is going to help you dramatically in helping you fix your psychological issues.  Doing homework is really a win-win situation.

In the next entry, we will go over how I like to look at the daily bar chart with volume and as time goes on we will hit upon all these points in more detail.  After a few weeks, hopefully we’ll have finished a great guide you can use to get yourself doing some very serious and powerful homework.

See ya next time!

Frank Butera
Balancetrader.com

(this article was originally posted on the Balancetrader blog located at http://www.balancetrader.com/bt-outlook)

My plan this week is to get into ES mode again and do more "levels by example" posts.

I should have my feed situated when I get home later this evening and I’ll be posting entries every day this week.

Take care!

=)

Big break down today out of yesterday’s balance area.  Should have been shorting today coming out of that area as that was exactly what we were looking for today.

Short bias, intermediate resistance at 1263-1266 with big resistance up at yesterday’s lower balance area,  1276-1281.

1232 underneath us (remember that 4 day merge below) then ultimately 1200 at low of previous swing.

Take care.

Frank

RSS

RSS

I have heard back from a few people who have solved this issue by using a free web proxy located in a country which Veoh allows traffic from.  These people have told me it is very easy to find and use a proxy of his sort.  You can just do a simple google search on web proxies, find one, and start using it immediately from what I gather.

I do sincerely apologize for this inconvenience.  It is of utmost importance to me that the quality of media delivered is of highest quality in order to properly convey the charts at the highest quality possible.  If I do find an alternative to Veoh which compares to the quality, I will switch hosts.  Until this happens, however, I will continue to host my video blogs at Veoh.

Thanks for your support.

So sorry for the temporary content outage.

Frank

I am currently working to find a viable hosting site to replace Veoh so everyone can access the material that wants to.  The issue is really the viewing size of the video.  Veoh allows for a pretty high max resolution which is required to properly view charts.  If I use a site like Youtube for example, the viewing size they offer (320×240) is just too small to adequately view a chart.

I am currently looking at Metacafe as their viewing size is rather large.  When I find a solution to the problem I will send out an email on my newsletter (the link to join the newsletter if you’re not already on it is located on the Balancetrader homepage).

Thanks for your understanding everyone who cannot access the content.  Hopefully it will be taken care of soon.

Yea that’s right… my neck!  You can’t even make something like this up.  I’m typing this from the couch right now.  I had to have my girlfriend bring me my notebook because I can’t even hold my head up.  Yes I’m sure you’re all laughing right now well guess what?

IT ISN’T FUNNY!

=)