Skip to main content

11 Questions to ask Yourself before entering a Trade

If you are 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.

It is crucial that you create for yourself a system or methodology that enables you to trade in a way that historically wins, controls risk, and does not bring your ego and your emotions into your trading in a destructive way.

Eleven questions to ask yourself before every trade:

  1. How Do I define my trading style, swing, momentum, break out, trend following, reversion to the mean, or day trading?

  2. How big of a position do I want to trade? How much capital am I going to risk?

  3. What is my risk of ruin based on my capital at risk

  4. Why am I entering the trade here?

  5. How will I exit with a profit? A price target or trailing stop?

  6. At what price will I know that I was wrong?

  7. 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?

  8. Can I emotionally handle the loss with out blaming the market?

  9. Can I really risk this money or do I need it for upcoming bills?

  10. Am I committed to persevering in my trading regardless of the outcome of this or any other single trade.

  11. Will the Outcome of this trade won't effect my upcoming Trades?                                                                                  I believe the answers to these questions will determine your success more than anything else.

Comments

Popular posts from this blog

Pre - Budget Analysis (1st Feb 2022)

U.S Markets closed higher yesterday. Most importantly , S&P 500 VIX crashed 10%. There was huge Volatility in global markets due to Fed event. Markets remain volatile only when they have topped out or have bottomed out. Right now I feel we have bottomed out at 16850. Asian markets are slightly lower now. Dow futures are lower. SGX Nifty is at 17500. Finally , the most awaited day has come. Budget 2022 is going to be presented today. Expectations are of a good and stable budget. Reasons are the Elections coming up and LIC IPO in March. Govt very well knows if LIC IPO has to go through , Market sentiment has to be good. Without good market spending it would be very difficult for IPO to go through. Market had already fallen a lot before the budget. Although we have rallied in last 2 days but still we have some upside left. Though I feel it's not favourable to chase today's gap up. Today's gap up is a good opportunity to book profits those who carried longs. Bud

Pre - Market Analysis (17th Feb 2022)

U.S Markets closed flat yesterday. Right now Dow futures are slightly lower. Asian markets are slightly higher. SGX Nifty is near 17380. Suggesting a flat start for the day. Yesterday was a heavy Volatile session. Markets have moved all over the place yesterday. At one point of time Nifty rallied and at one point of time we were ready to cross 17500. Then news of Russia came that Russia has not fully taken back their military troops. This led to a drastic fall in the last 2 hours. Nifty crashed all the way to 17300. India VIX came to positive. U.S Markets at one point of time were down quite significantly yesterday. But later during the day they have recovered most of their losses. Most importantly , U.S VIX fell 5% yesterday. Here as well we can hope markets to stabilize and VIX to collapse. Premiums are quite attractive considering only 6.days left for expiry  1000 points away put options are also trading at 20-25 rs premium. These put option buyers you know are crazy peo

Pre- Market Analysis (5th May 2022)

U.S Markets closed higher yesterday. Asian markets are higher. SGX nifty is up 150 points. Yesterday was a very tricky and unexpected session. As soon as Market opened there was a continuous selling. Market was falling left , right and center without taking any support. I was wondering why is the Market going against the global cues Then we got the news about RBI Governer press conference. So some informed people already knew about this rate hike. Hence there was a sudden selling in the markets. RBI hiked repo rate by 40 basis points and Cash Reverse ratio by 50 basis points. Repo rate is the rate at which banks borrow money from RBI. When the rate is increased banks borrow money at higher cost and in turn loans also get costlier. This slows down the growth and liquidity in the Market temporarily. Cash reserve ratio is the interest free deposit money which banks have to keep with RBI. RBI uses that money without having to pay any interest on it. Increasing CRR means RBI is