Take an Overall View of the Market
- If you’re trading in a bullish market, then the majority of your trades should be long.
- If the market bearish then most trades you take should be short.
- If the market is not trending, then make sure that any
strategy taken is appropriate, such as buying at support and selling at
resistance.
Above all, realize that you do not have to be in the market most of the time, and if the market is not the right type for your trading strategy, then you should stay away or develop an alternate strategy for the market conditions.
Know Your Maximum Loss- Never take a trade without figuring out in advance an acceptable level of loss.
- You must know exactly when you are wrong, if the trade goes against you. You can only be objective before you enter the trade, so you must write this down and stick to it. You also have to realize that a number of trades will go against you even though they were good trades, and should have been taken.
- Based on technical analysis you should be able to determine the minimum expected move, and hence a profit potential of a trade.
