“As a trader, you have to decide what is more important—being right or making money—because the two are not always compatible or consistent with one another.” -Mark Douglas
Only 2-3% of total traders are profitable in trading on consistent basis. If you are trading without having an edge you fall in category of 95% losing traders just randomly trading what you like with no real underlying system, method or planning then unfortunately your odds of success in the long term are slim. Trading a winning methodology is what creates an edge in trading.
While preparing to Trade any day, answer these key questions before you start your trading day.
- What’s the worst that could happen on this trade?
- What is the underlying trend of the market ?
- Time Frame you will trading ?
- Am I trading on my system rules or Impulse or emotional trades
- Is my Position size correct as per my Money and Risk management rules
- How much Profit will I make if trade goes in my favor.
- How much Loss will I make if trade goes against me.
- Am I suffering from Hindsight bias ie. Knowing the outcome of the trade
- AM I suffering from Confirmatory Bias only seeking out information that confirms your open trades
- Am I suffering from Recency Bias — The Recency Effect – How it affects Trading