Before you ever hit the button to execute a trade, answer this checklist of questions to make sure you really want to take the trade:
- What is the setup?
- Are the parameters of the setup are met?
- Are you getting at least 2:1 on your reward-to-risk?
- Is your stop price in a logical spot?
- Did your target take into account the stock’s volatility?
- Is there resistance on the way to your target?
- Are you trading off emotion like FOMO or revenge?
- What is the stock’s sector and industry doing?
- Did you check the market trend?
- Do you have a plan for the worst case scenario?
- Is my portfolio over leveraged in this type of stock?
- Am I over leveraged in this particular setup?
- What is the stock’s short interest?
- What is the stock’s float size?
- Are insiders buying or selling the stock?
- Are institutions buying or selling the stock?
- Is the stock overbought, oversold or neutral?
- Would you recommend this trade to a family member?
- Does the stock have a catalyst?
- Are there any upcoming news events for you stock
There could be more things to consider, but if you ask yourself these questions, you know you’ve done your homework. On the flip side, if you haven’t thought about these things, you are not doing enough.
This is post #4 of writing everyday until the end of the year. It may be a little or a lot. Some of it good and some of it bad. I might miss a day or three, but I will try to write something everyday.
For more on swing trading check out my swing service at bullsonwallstreet.com