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.
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? Is the stock in an uptrend, or downtrend for example?
Are the indicators I rely on confirming my trade idea? These can include Bollinger Bands, MACD, relative strength, and Williams’ %R for example.
Is the stock at resistance or support?
What kind of news is currently impacting my trade positively or negatively?
The market is not a sure thing. So, such a checklist is a necessity.
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.
However, plan ahead and you’re ahead of the game.