Do you know if you want to be a successful trader then you must follow a checklist before entering into any trade?
Yes, in this article I am going to share the checklist with you. I am going to tell you 5 things which you must check before the market open. You must follow these rules if you are trading regularly. Let’s start.
You know that trend is your friend. You must know that technical analysis is based on historical price movements.
It is a probability that you will favor you if you have this knowledge. So the basic foundation of technical analysis is to look back the history and observe the price behavior in certain circumstances and situations.
So in this step, you should review the price actions of the stocks and markets historically. The time period will depend on your trading style.
If you are a day trader then you should check the price movement of markets for a week.
If you are a swing trader then you should review 2-3 months chart. If you are a long term trader then you must review the price behavior of 6-12 months.
Please remember that this applies only to traders who regularly trade.
News and Events –
The second thing you must do is check the news. You should be well aware of the upcoming events which have a significant impact on markets.
Events like economic reforms, FED announcements, unemployment data are extremely important as they set the market’s breath.
So each morning when you are going to trade you must check all news and announcement for the week and its timing. If possible you should write them on a notepad.
Create a watch list –
The next thing is a common thing but many traders underestimate it. Creating a watch list is a must-do thing in trading.
You must create a watch list that is favorable to you. Why I am saying favorable because each of us is different.
Some prefer to trade high beta stocks while some prefer low beta stocks, some prefer to trade on news while some follow some set of principles. Some love to trade high price stocks while some prefer penny stocks.
You must create a watch list according to your preference. After creating a watch list you should strictly follow this watch list. You should not check other stocks.
Set Alerts –
When you are going to trade, you must set an alert. Now, what is this alert? It is the entering point and exiting point.
It also includes your stoploss or trailing stoploss if any. This is important because this is discipline.
Many times we forget our targets and stoploss while watching the charts. If you set an alert on stocks then you will immediately spot when the price hit alert point.
This will not only help you to enter stocks at the right time but also help you to exit at the right time.
In the stock market, entry and exit are extremely crucial. It is even crucial for long term investors/ they should also create an alert on stocks which they hold.
Review (End Of the Day)–
This review includes all your trades in the day and your position and profits. Each day you should strictly review your trades.
You should know why you booked loss, why your trade went wrong, what was your fault, what was the market’s decision, and what you learn from the trade.
All these things are small things but they will help you to become a good trader. We all know everyone makes losses in the stock market but it is important to learn from those losses.
If you are not learning anything then you are simply wasting your time.
So friends these were the 5 things in my checklist which you must follow before entering into a trade. I hope you have benefited from this checklist. Comment your views on this topic.
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