13 Questions You Should Be Asking Before Pressing The Buy & Sell Buttons When Trading Forex

Before a pilot takes off in an aircraft, he has to go through a pre-flight check, right?  This is to make sure that everything is in order before take off. Otherwise, passengers lives will be at risk.

Similarly, every trader should be getting into the habit of doing a pre-trade check  to make sure everything is lined up proper before the “flight”.

Or do you just go ahead and press the “buy” or ” sell” buttons?

Take these questions below very seriously and pay attention to each and every one of them; one mistake could lead you down a road you never wanted or intended to take.When your money or others money is on the line, it does affect your personal well being.

Now, these 13 questions below may not be the full list of questions that you may require(and even it may be a lot less)…and a lot depends on what type of trading systems you use etc. You can also create your own checklist or use some of the ones listed below to help you out.

But whatever you situation or case is, at least these gives you an idea of the thought process and the questions that you need to be asking yourself before you hit the buy or sell button.

Lets face it, I’ve been there before and maybe you have too and it goes like this: I place a trade, not really following my trading systems rules because I was impatient. A few minutes or hours later, the trade is negative and about to hit my stop loss and I’m like ” Why did I take this freaking trade In the first place!”

Here we go…

#1: Is the trade in line with the fundamental/technical trend?

Go with the flow of the market. Follow the trend. Its hard paddling a canoe upstream…you are fighting with gravity.  If you know what the fundamentals are, then wait for the opportunity when the trend lines up with the fundamentals and take the trade.

#2: Are ALL of my conditions for entering the trade being met?

A trading strategy has its rules and conditions for entering a trade. Are all the rules and conditions for entering the trade being met to actually take the trade? If not wait.

#3: If I am fading a level, is momentum too strong/price leading up to it too steep? Should I look to buy a breakout of the level instead?

Increase momentum can keep going for a long time and can break support and resistance levels that could have held and reversed back price.

#4: Is the setup clear and definable to the majority of traders across the world?

Make sure you are trading what everybody (or majority) of others are seeing as well.  These include major support and resistance lines, trendlines etc.

#5:Am I taking this trade because its clearly a high probability trade / the best of the best?

Sometimes, this also means looking at different timeframes you trade in. Is the 4hr timeframe better than 1hr? Sometimes, its about trading in different trading sessions you have to trade in. Should you be trading the Asian Session or the London Session or the US Session?

#6:  I’m not taking this trade based on a “hunch”, am I?

Don’t make “haunch” trades. Its a big No.

#7: Am I taking this trade because I am bored, anxious, or haven’t taken any other trades all day and are “forcing” the trade?

Get out an Xbox or play packman if you get bored waiting or go and sing to your dog or learn Japanese language on youtube.

#8:  Am I taking this trade only because it looks to be simply “oversold” or “overbought”?

Follow your trading systems rules. What does it say? What it says is your “10 commandments”…follow them: “Thou salt not take this trade when the CCI crosses the MACD and STOCHASTICS is pointing down” 

#9: How is my confidence level on this trade? Am I overly worried about taking it?

If you are not confident, don’t take the trade. If you take the trade, then trade very small contracts so that if a loss happens, its bearable. If you’ve been on a losing streak and your confidence level is very low, then you either take a break for a week or so, if not, then trade very small contracts.

#10: What am I going to do if the trade goes against me? Am I going to reverse the position and buy a breakout/fade it or just take the loss?

What does your trading system say? If no, don’t stop and reverse. Take the loss and wait for another day or trading setup.

#11: Do I have a clearly defined profit target and trade management process in place?

Set your take profit target and when your trade is in profit, do you take some profits off the table when you reach 50 pips and leave the rest running? How do you trail stop your trades to lock in profits?

#12: Do I know how much I am willing to risk on the trade?

The more you risk, the more you win. But on the flip side, one bad trade and you could be crying for your mamma.

#13: Does my risk:reward ratio work out in line with my long-term money management plan?

I really see no point in having a trade like a 1:1 risk to reward ratio. With such a ratio, you really need a high success rate trading system to be in the positive territory. Its better to have risk:reward ratio 1:2 and above to be able to make a trade. Because  when your trade is profitable, you make more then you risk so what this does is during your losing periods, you don’t need to play a “catch up” game because you will be always a step or two ahead of where you were before the loss happened.

Don’t forget to click those buttons below to like and share and tweet.