If you are just randomly trading what you like with no real underlying system, method or planning then unfortunately your odds of success in the long term are slim. Trading a winning methodology is what creates an edge in trading.

Consistently trading a robust system or methodology enables you to trade in a way that historically wins, controls risk, and does not bring your ego and your emotions into your trading in a destructive way.


Ten questions to ask yourself before every trade:

  1. Does this trade fit my chosen trading style? Whether it is:  swing trading, momentum, break out, trend following, reversion to the mean, or day trading?
  2. How big of a position do I want to trade? How much capital am I going to risk? Am I limiting my risk to 1% or 2% of my trading capital?
  3. What is my risk of ruin based on my capital at risk?
  4. Why am I entering the trade here? What is the trigger to trade?
  5. How will I exit with a profit? A price target or trailing stop?
  6. At what price will I know that I was wrong? Where is my stop loss based on the position size?
  7. Will I be able to admit I was wrong and exit the trade if my stop is hit, or will my ego make me hold and hope?
  8. Is the risk small enough that I can emotionally handle the loss without blaming the market?
  9. Can I really risk this money or do I need it for upcoming bills? Trade with risk capital not living expenses.
  10. Am I committed to staying disciplined and following my trading plan on the trade?

I believe the answers to these questions will determine your success in any trade more than anything else.