Does
this trade fit my chosen trading style? Whether it is: swing trading,
momentum, break out, trend following, reversion to the mean, or day trading?
Does this trade fit into the parameters of who I am as a trader, or is it just
based on my own fear or greed?
.
How
big of a position do I want to trade? How much capital am I going to risk? Am I
limiting my risk to 1% or 2% of my trading capital? Knowing where my stop will
be how big should my position size be to limit my risk?What are the odds of my
risk of ruin based on my capital at risk?
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?
.
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.
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