What are the four (4) questions every trader needs to ask before placing a trade?
Jumping into a trade on a whim is not a good idea. John Paul will explain what to look for.
You’ll also see today’s Atlas Line and Trade Scalper signals with explanations.
Here are the four questions from the video:
- Do you have a reason to enter the trade? Is your methodology sound? Is your technique based on support, resistance, price action, a signal, or something else? Can you trust the situation enough to give you a reason? Or is that reason based on, say 30% confidence?
- Do you have a reason to avoid the trade? Is the market too fast or too slow? Is there a news event occurring? Are there conflicting signals from multiple systems? Have you encountered two or more consecutive losing trades so far for the day?
- Can you confirm/validate the long or short direction using a separate, reliable method? You don’t have to take every signal that you see. We have long recommended going with signals that match one or more other methods. We often pair the Trade Scalper with the Atlas Line for this reason.
- What’s the risk/reward situation for the intended trade? In other words, ask yourself the win potential and the risk potential. Are you comfortable with the profit target and stop loss? Skip the trades that are of the highest risk. At the same time, understand that risk cannot be avoided when day trading. With practice, you will be able to gauge this one more easily.