You’ve Done all the Hard work, You’re just about to Enter a Trade so ask Yourself what do I need to check before Entering?
Would a Pilot Fly a Plane before doing Their Pre-Flight checks? Most Definitely Not.
Would you Drive a car on a Long Journey before doing Pre-Driving checks? Most Definitely Not.
Entering a Trade on the Forex market should be no different, You need to make sure you and Your Analysis are in the Best Condition before entering the Market.
Below I have Discussed 5 Easy Steps to Check before you Enter your next Trade.
1 – Are you Approaching any Key Levels?
Have you started your Analysis on the Monthly or Weekly time frame and identified Key Monthly levels?
Sometimes on the Lower Time Frames Key Levels are not so Clear so Always make sure You start on the Higher time Frames and mark any Support or Resistance Zones.
2 – Have you got Confluence of Factors?
You’ve spotted a potential Trade on the Charts and it seems pretty Obvious and Straight Forward, Right? Wrong.
You need more than ONE Indication that the Trade is going to go the way you Predict.
Have you had Rejection from a Key Fib level? Have your Moving Average’s crossed? Have you had a False Breakout? Is RSI Overbought or Undersold?
The more Confluence’s you have for One Trade the better chance you stand of making Pips.
3 – Are you in the Correct Mindset to Trade?
Probably the Single most Important Factor to being a Successful Trader is YOU.
Are you Stress Free? Does the Trade have your Full Focus? Have you Forgotten about Your Last Trade? Then you may be in the Correct Mindset to Enter your next Trade. Only You will know the Correct answer, you need to be Honest with yourself.
Why You shouldn’t enter a Trade, Are you stressed? Are you under the Influence? Are you Over Confident from your last Trade? If you are any of these then Do Not Enter any Trades, being over Confident from your Last Trade can increase Risk. Being Clouded by stress or Worry can cloud your judegment.
4-Have I got the Correct Risk to Reward scenario?
Is Your Risk to Reward Ratio a minimum of 1:1? Ideally you want to find Trades with a Risk to Reward Ratio of 2:1 or more. You need to make sure both your Stop Loss and Take Profit are set at the Correct Levels i.e Stop Loss is at the end of a Wick on a Pin Bar and Take Profit is at a Key Resistance Level.
5 – Are You using the Correct Lot size?
Have you worked out what 1% of your balance is before Placing the Trade? Or are you looking for a Longer Term Trade with a 3% Risk?
You then need to know what Lot size You should be Trading with each Trade. Once you known a safe Lot size for your Account balance you need to work out if it fits with your Risk:Reward, how many Pips can you afford to Lose in One Trade?
Below is an example:
Account size - £1000
1% = £10
Trading at 0.01 Lot size this will give you a Large 100 Pips Stop Loss.
Trading 0.1 this will give you 10 Pips Stop Loss.