Are you ready to make a trades? Here are 13 questions you should ask yourself before making a trade.
- Do you use a quantitative trading system for entering and exiting trades?
- Have you figured out a way to use historical price action to capture trends in your time frame?
- Have you thoroughly tested your system?
- Do you know what your trade setups’ odds might be based on historical price data?
- Is there a strong support system in place for you?
- Do you have family and friends who support your decision to become a trader?
- Do you have enough money to trade with? Serious active traders should have enough money to trade. In lower volume markets, low capital will struggle to overcome commissions and even the bid/ask spread.
- Do you have a trading strategy in writing? When the market is closed, make a written plan so you know what actions you’ll take when the market reopens.
- Do you have a thorough understanding of risk management? Before you begin trading, it is critical that you comprehend the mathematical risk of financial ruin. A good place to start is to never lose more than 1% of your trading capital on any single trade.
- Have you decided on a position size in which you feel emotionally at ease trading? You must trade with a position size that allows you to stick to your trading strategy. A position that is too large can cause you to become distracted and deviate from your plan.
- Do you have realistic return expectations? The world’s best traders earn 15 percent to 25 percent per year. Trying to become wealthy quickly is the quickest way to become bankrupt.
- Do you trust your methodology enough to trade it through drawdowns? You must be aware of the number of consecutive losses you can expect from your trading system and accept them when they occur.
- Do you believe in your ability to trade as if it were a business? You must trade like a casino, knowing that the odds are in your favor over time, rather than like a gambler who ignores the odds that are stacked against you.
In the last, ask yourself
Are you ready to make a trade?
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