For Swing traders as well as day traders, the question : What is my plan for today ?, should be answered before the market opens.
For the day / swing trader in the Indian Stock market - the NSE, the key questions are:
1. What are the index / stock futures that I will be trading in ?
This list should be ready before the market starts trading. Traders should not search for futures to trade in while the market is open. The list should consist of liquid, low spread, high volatility stocks. In an uptrending market, search for strong stocks, while in a bear market search for weak stocks. It is possible to have a fixed list of favorites irrespective of the market. This list should be made once every week, with minor changes during the week.
2. What is the likely outlook for today ?
The answer is not as difficult as it may appear to be. If yesterday was an NR7, then expect a breakout in either direction. If the two period RSI was below 10 and the market is NOT in a strong downtrend, look for a buying opportunity. If yesterday was a trend day where the market or stock opened at one extreme and closed at the other extreme, look for a reversal in the short term trend. If there is a strong trend (ADX > 30) then look for a 15 minute breakout trade. The list goes on.
3. What is the mximum drawdown that you are prepared to accept for the day ?
The answer could be: Rs 15,000/- or Rs one lakh or whatever is your comfort level. If by chance, your losses for the day touch this level, stop trading immediately.
4. What will be your entry rule, exit rule & profit taking rule ?
You may have more than one rule for each of these tasks, but decide which rule you will follow for the day, then follow it with discipline.
Now that you have read this, take a paper and pen, write down the answers to the four questions discussed here. review your notes every day. After 15 days, you will feel the difference in your trading.