- Market outlook – How do you feel about the stock market during the lifetime of your trade?
- Fundamentals – Do you feel comfortable with the sector, industry and company? Why did you pick this particular company, sector?
- News – Any news is coming out during your trade?
- Charts – Did you consult your charts in different timeframes?
- Volatility – Did you check the volatility chart? Is volatility favorable to your trade?
- Liquidity – Do you feel comfortable with the trading volume? Is it easy to get in and get out of the position?
- Target – What is your price target?
- Probability - Use the probability calculator to see if your price target is realistic.
- Trading strategy – Do you feel comfortable with this trading strategy? Is this strategy going to work under the above mentioned conditions?
- Position size – Do you feel comfortable with the size of this position relative to your account?
- Buy signal – What is your buy signal? You only enter the trade if certain conditions are met even if you have to wait.
- Sell signal – What is your sell signal? How much profit do you expect and how much loss are you willing to take?
It is important to at least mentally go thru important steps before entering a trade. It’s even better to write it down and make a sort of checklist. It will be your “pre-flight” checklist. Just like you wouldn’t jump into an airplane and take off you don’t enter a trading position without preparations. Here are some basic steps you want to consider:
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