How do you analyse a trade before entering?

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How do you analyse a trade before entering?


1. Define the strategy:

    - Determine the type of trade (day trade, swing trade, long-term investment)

    - Set clear goals and objectives

    - Choose the markets and assets to trade

2. Market analysis:

    - Evaluate overall market sentiment and trend

    - Analyse market structure and key levels (support, resistance, pivot points)

    - Consider market news and events that may impact the trade

3. Technical analysis:

    - Study charts and patterns (candlesticks, trends, chart patterns)

    - Apply technical indicators (moving averages, RSI, Bollinger Bands)

    - Identify potential entry and exit points

4. Fundamental analysis:

    - Research the underlying asset's financials (earnings, revenue, dividends)

    - Analyze news and events that may impact the asset's value

    - Consider the asset's valuation and potential for growth

5. Risk assessment:

    - Determine the potential risk and reward ratio

    - Set a stop-loss to limit potential losses

    - Consider the trade's potential impact on overall portfolio risk

6. Entry criteria:

    - Set specific conditions for entering the trade (price, indicator signals, news events)

    - Determine the trade size and position sizing

7. Stop-loss and take-profit:

    - Set stop-loss levels to limit potential losses

    - Set take-profit levels to lock in profits

8. Position sizing:

    - Determine the appropriate trade size based on risk tolerance and account size

    - Consider the trade's potential impact on overall portfolio risk

9. Market timing:

    - Consider the timing of entry in relation to market events and news

    - Avoid entering trades during times of high volatility or uncertainty

10. Trade management:

    - Plan how to manage the trade as it develops

    - Set criteria for adjusting or closing the trade


By following this process, traders can make informed decisions and increase their chances of success in the markets.


Articles by Anas K  


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