The value
added by using a trading coach is to make you aware, simultaneously,
of market dynamics, those things off the charts that affect price action while appreciating what the charts are showing.
Is this trade worth doing based on the risk/reward ratio? Is the stop
a reasonable distance away from the entry? Are you willing to
lose that amount if the trade
goes against you?
You need a minimum 2:1
Risk to Reward Ratio.
Do this first before going too
far, you may not even have a potentially profitable trade.
For the ideal trade, we look for stocks in up or down
trends because the price action tells us the stock is in or out of favor.
You have a higher probability trade if the stock, the sector and the broad
markets are all trending in the same direction.
What's is the news?
Check news headlines going back 30-45 days. Any unresolved issues that
could or would be resolved while you may own the stock, i.e., court or
regulatory rulings yet to be announced?
Is the news generally positive or negative?
Is there a headline mentioning some sort of pending action, i.e. court
decision, regulatory decision, analyst upgrade or downgrade..etc.
Is there a split announcement?
This is
part of the stock's environment, just like the trend. You don't trade the
news, you trade the reaction to the news.
News will trump any chart pattern.
When will earnings be announced?
When will earnings be announced?
Is their a "powerhouse" in the stock's sector that is about to announce?
You don't
want to own the stock on the announcement date and you may not want to own
it if a "powerhouse" in its sector is due to announce soon either.
What government
economic announcements
are due this week and next? When you use Yahoo link and click on the
Statistic of the day it will rate it from A to F in terms of significance.
Are any of the coming economic announcements rated as an "A" or "B" ?
The
government's weekly announcements every week can and do affect the
markets, sometimes in a very big way. "A" or "B" ratings on the
announcement can be very powerful in consequences.
Are company earnings going up or down from quarter to quarter?
Verified the relative strength of the company compared to its
sector? Does it lead the pack?
Checked the last quarterly
earnings announcement in the news for comments regarding the company's
expectation for the next quarter?
These
items, when verified, have more to do with giving you added confidence in
your trade and position. Positive chart with positive fundamentals with
positive trends lend themselves to profitable trades.
Decide on a strategy?
Go Long the stock?
Go Short the stock?
Buy the call option?
Short the call option?
Use an option spread, straddle, collar, etc.?
Buy the put option?
Short the put option?
Hedge with an option or a futures contract?
Go long a futures contract?
Go short a futures contract?
You have to have an entry and exit strategy. What will you
do if the trade goes against you? Is the trade going against you based on
company specific news? Sector news? Broad market's news?
Are you keeping notes, a
journal, on your trade? What are you learning from your
trade journal?
What specifically did you
see in the chart's indicators?
How is the sector doing?
What are the broad market conditions?
Any other research you did that pushed you to act?
What off-chart events were you reacting to, if any?
Note, if there is a negative sign or two that you observed, you
need to make note of that as well.
<<< IF YOU DON'T KEEP NOTES,
HOW CAN YOU IMPROVE IF YOU DON'T KNOW WHAT WENT RIGHT OR WRONG?
