Last Updated on 19 October, 2023 by Håkan Samuelsson
While you can’t know where prices will go, what the next breaking news will be, or how much profit you will make iny our next winning trade, there are a few things you can know:
- You can know how big of a position you will take on your next entry.
- You have to know where price will go to prove you wrong, and cause you to exit a trade. You have to know where you are getting out before you get into a trade.
- You should know how much you will lose if your trade goes against you and you are stopped out.
- You should know the highest probability entries that you would take.
- You should know the watch list that you will be trading from, and not take any wild card trades before understanding chart patterns and historical price performance.
- You should know what your total portfolio risk is at any one time, if all your positions turn into losers at the same time.
- You should understand how the leverage works before you trade futures or option contracts.
- You should understand the potential maximum drawdown of a string of losers, based on your position sizing and winning percentage.
- You should know whether the market you are trading is in an uptrend or a downtrend in your time frame.
- You should always have a trading plan that tells you what to do based on what the market is doing. You should know how to react to each days price action based on your current positions.