What questions do you ask before making a trade?Jan 15th, 2013 | By Bella | Category: Mike Bellafiore's (Bella's) Blogs
I received this email question from one of our new female traders.
Yesterday I began to be really vigilant about asking myself a series of questions before each trade. I need to improve on answering each of them accurately and honestly (a goal for today), but I think the practice is hugely helpful. Is there anything you would add to this list?1) What is my reason for being in this stock?2) Is this the right entry? If not, what is?3) How much should I be risking before this trade proves me wrong? What is the probability of this trade?4) What is my target? How will I take profits?5) What other parties are in this trade? How would they react if X occurs?
I love this idea. When I am considering a trade I ask myself:
a) Where can I get out if I am wrong?
b) How big should I be in this position considering where I can get out?
c) Is this trade worth my intellectual and financial capital?
d) If the trade starts to work how can I get bigger?
I start to visualize what I want to see the stock do for me to get bigger.
e) Do I have to watch all the ticks in this stock or can I just let it go and find another good trading opportunity?
So I ask, what do you think about when in a trading position?
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