The stock market is a mirror of society that reflects the economic, emotional and psychological impulses of the entire world. Many traders and investors find it difficult to succeed in the market because they are paralyzed, misled or confused about how to interpret this overwhelming amount of information. A trader's ability to understand the language of the market and then promptly execute a position is ultimately going to determine his/her success. Whether you use technical or fundamental analysis, it is very important to have a clear method for breaking down this code into usable information.

During the last 23 years of trading stocks, bonds, options and the S&P 500 futures market, I have developed a methodology through much trial and error that allows me to answer the most important question: Long, short or out of the market? As a 23-year veteran, I have tried almost every mechanical system, charting program and complex philosophy in search of a method that would allow me to trade the market consistently. I finally found my niche as a methodical trader using a common sense approach that consists of time of day, key numbers and a proprietary software program known as the RoadMap.

Time of Day
Because I trade the S&P 500 futures (a market that trades around the clock from Sunday at 5:30 p.m. until Friday at 3:15 p.m. Central Time), I knew that the first piece of my approach should be based on a common sense schedule for approaching the market. I knew that I had to sleep, eat and maintain somewhat of a normal existence. Therefore, I divided the market into time segments, so I could trade the highest probability times and "live" during the rest of the time.

My trading day begins between 3:30 – 4:00 a.m. Central Time as I examine the Far East (Hang Seng and Nikkei) and European markets (SWI, DAX, CAC and FTSE). I am looking for a trend common to these markets and the S&P 500 futures. Approximately 5 or 6 times a month, I can capitalize on trading the S&P at this time while much of the rest of America sleeps.

I also have a pre-determined schedule that I use to approach the day's market. I put my primary focus on the market 3 times a day: 9:00 – 10:15 a.m, 12:30 – 1:15 p.m. Central Time, and then again in the afternoon. Because traders get paid for the quality rather than the quantity of time they spend in front of a computer, it is important for them not to waste an entire day staring at the numbers. It is not only an inefficient use of time but also a great way to get bogged down by the monotony of the numbers.

Key Numbers
After forming a schedule that allowed me to clearly focus on the market, I knew that I had to devise a plan for clearly interpreting the numbers. A trader can easily get caught up in the minutia, so I formulated a straightforward formula for determining key numbers. Key numbers are support (the point at which buyers are stepping in) and resistance (the point at which sellers are stepping in) in the market. Many complex techniques determine key numbers, but one of the best sources is the market itself.

I gather key numbers each morning prior to the market's open and compile them in my Educational Update email message that I send to all of my students. These key numbers come from historical observation, common focal points in the market, the previous day's trading range and the RoadMap. For example, the previous day's 12:30 # is almost always my pivot number for the current trading day. Other key numbers of importance are the previous day's high/low, Globex high/low and the 3:30 a.m. #. It is critical to go into each day knowing the key numbers that are going to play a role in the market. Preparation allows me to make decisions at the drop of a dime and reduce the psychological stress that goes into entering or exiting a position.

The Trader's Roadmap
We have addressed the need for a daily schedule and a method for determining key numbers. Now let's talk about a strategy for interpreting market indicators. Both prior to entry and during a trade, it is important to keep track of certain indicators so that you can follow the direction of the market. That is why I developed a method for following approximately 8 key market indicators that directly influence the movement of the S&P.

This proprietary software (called RoadMap) is like the old-time tape readers. It is compatible with eSignal datafeeds and takes a snapshot of the market every 30 minutes. It allows me to evaluate the trend quickly and determine whether or not I need to take action. (By "take action," I mean exit a position or tighten my stop.) These indicators point to increased buying or selling in the market. Without the tracking of certain indicators, a trader will decrease his/her odds of being right.

Going into each day with a sound schedule, key numbers and a trader's roadmap helps me to understand the language of the markets. A well-thought-out game plan minimizes the emotional and psychological strain that causes many traders to lose focus. My RoadMap methodology allows me to determine the most important question that plagues all traders: Long, short or out of the market?

Thomas L. Busby, President of DayTrading Institute (DTI) (www.dtitrader.com), has been a professional trader and broker for more than 23 years. Tom opened DTI in 1996 to educate, train and offer continuous support to individuals interested in learning to trade the financial markets, specifically the S&P 500 Futures market.

Tom's unique RoadMap methodology, made up of time of day, key numbers and the RoadMap software, allows traders to consistenly answer the question that plagues all traders: long, short or out of the market. His articles have been published in Bridge Trader, Active Trader, Futures magazine and other popular trading journals.