Questions to ask yourself before entering a tradeThere is a set of questions to ask yourself before opening a transaction and we will talk about some of the common ones.
1) Are my entry criteria met?
Undoubtedly, everyone has his own style of trading. Entry and exit strategies should be included in each and every trading plan there is. Only if the entry criterium is met, should we enter a position on any security. No FOMO, if our entry criteria have not been met, we sit on our hands and patiently wait.
2) Am I being risk tolerant?
Am I risking my usual 1-2% per position or I am too confident in this setup and would rather go all in? If you see yourself risking more than you usually do on a single trade, pause for a minute and thoroughly reflect. Yes, you can have some winners while risking a big portion of your total capital on a position, but does that not make you a gambler? Always remember that it is a marathon and not a sprint .
3) Have I set a Stop Loss?
Many people will say that it is not mandatory to set an SL if you are a position trader. Let me tell you this: a trade without a Stop Loss is like jumping off a cliff without a parachute. No matter how confident you are in your analytical skills, you can never be 100% sure that a trade will play out thoroughly according to your technical setup. Use a Stop Loss and carry on!
While there are many more questions that you may ask yourself before executing a position, we have addressed some popular ones. Of course, it solely depends on your trading plan, but the aforementioned questions can be implemented in every strategy.
