If you want to trade in Stocks/Commodity/Forex you need to know what you’re getting into. Trading is not for gamblers but for professionals.For many novice traders trading looks easy but after few trades harsh reality of trading comes out. To make your job easy i am discussing few important question you need to ask yourself before taking the trade.
Here are the list of most important question to ask yourself before you put on a trade.
- Does this trade fit my chosen trading style? Trade I am taking is Intraday or Positional trades.
- Does this trade is it just based on my own fear or greed or impulsive behavior. Trade is taken as per my trading system or Based on your intuition.
- How big of a position do I want to trade? Am I limiting my risk to 1% or 2% of my trading capital? Am I using excessive leverage ?
- What are the odds of my risk of ruin based on my capital at risk? Can my account goes bust with this trade?
- Why am I entering the trade here? What is the entry trigger to take the trade? Is this a quantified entry on my trading plan?
- How will I exit with a profit? A price target or trailing stop? Am i following my trading system?
- At what price will I know that I was wrong? Where is my stop loss based on the position size?
- Will I be able to admit I was wrong and exit the trade if my stop is hit, or will my ego make me hold and hope? Can I trade this position size and keep my ego out of the trade?
- Is the risk small enough that I can emotionally handle the loss without blaming the market or myself? Is my risk small enough to keep my mind and trading plan in control?
- Can I really risk this money or do I need it for upcoming bills? Trade with risk capital not living expenses.
- Am I committed to staying disciplined and following my trading plan on the trade? Free-styling a trade that is losing is usually a formula for disaster.
I believe the answers to these questions will determine your success in any one trade more than anything else.