Since I opened up a discussion with my readers, my inbox has been flooded with questions on how to succeed in trading. And while I can’t get to all of your responses… I do try my best to answer the most commonly asked questions.
More specifically, I try to find the ones that have propelled me from a $15K account into more than $7M in just a few short years.
There was one question I saw today that really resonated with me because it was one of the driving forces behind my trading success…
What’s your step by step trading process?
Today, I want to draw back the curtains and give you a taste of the questions I ask myself before I get into any trade.
If you ask any successful trader out there, they’ll tell you they have a mental process they go through whenever they throw down bets on a trade. They don’t just randomly push their chips into a stock or option… they actually have an edge and plan accordingly.
I actually struggled with this when I first started out trading because I was so focused on making money. Let me tell you, being a broke college graduate who earned just $32K annually living in LA was not easy. I wanted to change my life and the stock market was my ticket out.
So I scraped up whatever I could and saved up $15,000. However, I didn’t have a process whatsoever. I just placed random trades thinking I would magically make money… and I ended up losing nearly half of my account.
I went back to the drawing board and tried to figure out what my bread-and-butter setups were. Thereafter, I structured a plan around them. I quickly realized how easy trading is, just as long as I stuck within my guidelines.
Now, I have a mental process before I get into any trade. I ask myself:
- What’s the reason behind this trade? If I don’t have a good one, I just sit on my hands and wait until the right setup pops up.
- What’s my trading plan? Before I get into any trade, I conduct what-if scenarios… and I know exactly where I want to buy the stock, take profits, and stop out in case things go sour.
- Am I taking on too much risk in relation to my account size? I can’t tell you how many times (it’s a lot) I’ve seen traders blow up their accounts by putting all their eggs into one basket. One trade should not make or break your trading account.
For the most part, the reason behind entering a trade should fit your personality. If you’re into chart patterns, news events, fundamentals, or any other form of analysis… stick to that. For me, I focus on catalysts and chart patterns.
For example, here’s a look at one trade idea.
The reason behind this trade was based on a catalyst (the coronavirus) and a bullish chart pattern. Thereafter, I identified clear zones to buy, take profits, and stop out. The last thing to do was just size the position properly.
Pretty simple, right?
Once you get the mental process down, all you have to do is execute and let the stock do its thing. Win, lose, or draw… as long as you stuck to your plan, you should be proud of yourself.
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