4/23/2024 0 Comments My stock market checklist![]() ![]() ![]() So, we need to keep a close watch on the economic data that are going to be released soon. Economic releases like GDP, CPI, PMI, Autos sales numbers can drastically affect the prices of the stock or index. One needs to check if there are any economic releases that can affect the price movement of the particular stock in which they are going trading. Are there any significant economic releases that can impact the trade? Also, one can set stops on all trades for ensuring that the total amount risked is no more than 5% of the account balance. This can be avoided by limiting the part of capital used on a single trade. There are times when traders use all their capital in a single trade and also start leveraging the account to the maximum when they are overconfident in one trade. How much capital am I risking?īefore placing an order, one should ask themselves how much of their capital are they willing to risk for a single trade. So, traders must consider their risk to reward ratio before executing any trading order. Traders should have a positive risk-reward such as a 1:2 ratio that means that a trader risks half of what he stands to gain if the trade works out. The risk to reward ratio refers to the ratio of the number of pips that the traders are willing to risk to reach their target. One should check whether these technical indicators confirm the trading signal before executing any trader order. For example, it is always better to use volatility indicators like Bollinger bands with momentum indicators such as the Relative Strength Indicator. They should keep their analysis clean and simple and easy to view at a glance.Īlso, one should not use 2-3 indicators of the same group. One should not make their analysis complicated by adding multiple indicators to a single chart. Depending on their trading plan as well as their strategy, traders should have 2-3 indicators that complement their trading strategy. Traders should note that the indicators help the traders in confirming high probability trades. Is the price action confirmed by indicators? However, Range traders will look for prices to bounce between support and resistance for prolonged periods. Trend traders should look for breakouts of these levels as it indicates that the market may start to trend. The same applies when the price reaches a key level of support and typically bounces after. Traders do not want to enter a long position in which there is a key level of resistance nearby only to bounce back lower. Usually, the price action tends to respect particular price levels for many reasons and one must be able to identify these levels. One also needs to check whether there is any support or resistance level nearby before executing any trading order for that particular stock. Is there support or resistance levels nearby? ![]() So, making any trading checks whether the stock’s prices are in a trading or ranging phase and whether the trading in a range or a trending market is a part of your trading plan. One can use oscillating indicators such as RSI, CCI and Stochastics for trading in the ranging markets. Whereas a stock is in a range bound when the prices of that stock bounce between support and resistance and trade within a channel as shown below:Ĭertain stocks tend to trade in ranges. Traders need to ask themselves if the prices of the stock are in a strong trend and whether they want to trade along with the trend as a part of their trading plan. As we can see from the below chart, when we trade along the ongoing trend we can earn profits: There is a well-known saying that the trend is your best friend. If the market is in a trading range or trending?Įxperienced traders should know that when a stock is in a strong trend and trading in the direction of the trend can lead to a higher probability of right trades. ![]()
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