Pre-Market Checklist: Be ready to trade every morning
It's 9:06 on a Monday morning and you are getting ready to start trading. You ask yourself, what direction will the market move today? Should I buy or write Nifty options this morning? Simple questions like these are crucial to every trader on every morning. Predict incorrectly and you end up paying heavily. Ride the right side of the wave, and you would have made your month's earnings in a few minutes. How do you figure out which way the market will move? I won't claim to say I know all the answers, but here are a few key things every trader should know before trading the market in the mornings. I call it my Pre-Market checklist.
Watch the SGX NIFTY
The SGX Nifty is the best indicator of where the Nifty will be in the morning. SGX Nifty futures start trading at 8:00 AM IST every morning Monday through Friday. Foreign investors are active participants in SGX and any economic event that happened over the weekend will be reflected in the SGX Nifty's movement in the morning. I consider this as my #1 source for pre-market guidance.
Keep up with local news
Did the PM announce a sweeping reform over the weekend? Did the FM announce changes regarding the direct tax code that may affect business sentiment? Along with the national government, certain local governments also have the power to influence market sentiment. States such as Maharashtra, Delhi, Uttar Pradesh are large economies that their rules can make or break industry stock prices. Personally, I follow EconomicTimes and MoneyControl for my pre-market numbers and read them on my phone before I get to work in the morning.
Monitor the currency
Foreign companies and investors show their sentiment towards India by trading the currency. If they feel the government rules are too rigid or don't suit their needs, they can pull money out of India driving USDINR futures to the top. Or maybe they feel that India's new reforms will push the GDP growth far higher than expectations and pump money in. India competes for dollars against other economies. If the US employment report shows better than expected growth, they will favor keeping the money there than risking it in other economies. USDINR starts trading at 9, which is 15 minutes before the general market opens. RKSV NEST allows you to trade and track currency futures so make sure you have it on your market watch as part of your pre-market routine.
Keep up with corporate news
We are in the middle of earnings seasons. If you own shares of a company that's about to report earnings, don't miss it. If you don't own shares of the company, but want to trade during volatility, don't miss it. Corporate earnings are when market expectations are met with the news of actual performance. There is almost always a guessing error, it's just a matter of how big it will be. If you want a quick summary of what's coming forward, subscribe to our Week Ahead videos. We release videos every Monday morning to keep traders updated with what they should watch for.
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What I listed above are just things that I check up on before the week begins. Other people may follow other indicators to help them trade. If you are a commodities trader, you would follow the price of crude or gold across the globe before pushing your morning trade on MCX. If you are a currency trader, you would be tracking events in Western Europe and US more closely every morning. Whatever it may be, make sure you have an agenda at pre-market that guides you to price the market in the morning.
Have your own routine that you follow every morning? Share it with the rest of us by commenting below. We would love to hear what you have to say.