Trading stocks is a lot like conducting surgery – it’s great to have a checklist.
Also – you wouldn’t want to do either one without a great deal of preparation. You don’t want to “wing it”.
So, what’s the best way to prepare? For surgery, you need more advice than this article can give you. But for trading stocks, we have some questions you should ask yourself before conducting any trade – whether it’s stocks, options, or futures.
- Does this trade fit your skill set?
- Does this trade fit your “plan”?
- Is it the right time for this trade?
Before you call yourself a serious trader, you should learn what your strengths are. Matt Choi, a long-time trainer of would-be traders with his educational company Certus Trading, has walked a lot of people through making these discoveries.
“I encourage new traders to experiment so they can find out what types of trades they’re successful with. Start small and see what suits you the best,” says Choi. “Then, focus on honing those skills and strengths, and you’ll start to see more consistent results.”
The next step is to know your plan. When you were making those small experimental trades, hopefully you were devising an ideal strategy for yourself, an approach – anything to keep your heart or your gut out of the equation.
“You have to learn not to let your emotions get too involved in your trigger decision, because more often than not, it leads to a loss,” warns Choi.
That’s where you need your plan to lean on.
The last step is to determine whether it makes sense to activate this trade right now. What are your criteria for determining risks and volatility? Which trades or trends have given you success in the past?
It can help to watch seasoned pros make these kinds of determination. Ross Cameron of Warrior Pro works with his students on “momentum trading”, determining the exact right time to activate a trade. His live streams could assist you with learning to make these kinds of time-sensitive decisions.
But to stay in the trading league, you’ve got to form good habits and keep soaking up knowledge on trends and tactics. You won’t make it very long by just imitating other people. You need your own approach to be successful.
So before you make your next trade, approach it like you’re conducting an appendicitis – check off all the boxes.
