Success is not always a guarantee. But if you have a plan in place, you increase your odds significantly.
You see it’s not about having the “perfect” strategy.
It’s about the rule you abide by with each trade. Any one can trade a stock. But it’s takes a disciplined trader to trade that stock well. One of the biggest issues facing all walks of traders is a severe lack of discipline and structure in stock buying habits.
Many fail to use stop losses, or even protect gains with a simple trailing stop loss strategy. Others risk far too much.
If you’re my friend, John… let’s just say he’s lucky he’s not a permanent soprano. He once made 300% in a week’s time on a trade. Then he risked it all on the very next trade that cost him 90% of that 300% winning.
As we all know, that kind of risk can be a disaster if everything goes the wrong way.
It’s why checklists are essential with trading.
- With your next trade are you aware of your risk tolerance level?
- What are your set stop losses?
- Do you know when to walk away from a trade?
- What are you expectations from the trade, your target prices?
- Where is the stock in comparison to its 50- and 200-day moving averages?
- Are you trading on emotion? If so, rethink the trade.
- Are the bulls or bears currently in control of the stock in question?
- Do we see any existing chart patterns?
- What has happened at similar prices historically over six-months to five-years?
- Are the indicators I rely on confirming my trade idea?
- Is the stock at resistance or support?
- What kind of news is currently impacting my trade positively or negatively?
- How has the herd been reacting to a stock?
The market is not a sure thing.
But as long as you ask yourself these key questions prior to any trade, the more informed you are about the opportunity. Avoid such questions and you invest blindly. And as we all know that’s not a good idea at all.
Failure to plan can – and oftentimes will – lead to unnecessary loss.
Plan ahead and you’re ahead of the game.