3 Key Points in Trading Decision Making

When it all comes down to it, the decision of whether to take a trade or not, impacts directly on your trading results. It's an area of trading which can cause allot of emotions as it decides whether you enter into a trade or not. If a trader can make consistently sound decisions on whether to enter into a trade or not without emotion then consistent results from their trading edge can flow. Inconsistent decisions on the other hand, lead to inconsistent results. Let's run through the 3 key aspects of trading decision making which you must apply to your own trading.  

1) You Must Have Well Defined Entry Criteria 

To make decisions you must have a well defined and set out criteria for what needs to occur for you to either take a trade or to leave a trade. Here at Trade with Precision, all of our trading strategies have checklists with well defined criteria. If a trade setup meets the criteria then you simply take the trade, if it doesn't then you leave the trade, it's that simple. This helps to alleviate the ambiguity of making a trading decision and it also helps to take out some of the emotions that go with trying to make up your mind.

2) Trust Your Trading Edge 

Once you find a setup which meets your strategy criteria, you must trust your trading edge, place your orders in the market and hand over the outcome of the trade to the market. You need to avoid finding trades that meet your criteria but then not placing the trade because you don't have trust in your trading edge. If you start not placing trades which meet your criteria you resign yourself to not making consistent trading decisions. Simply put, if you work through step one above and find that a trade meets your full criteria, trust the strategy and place the trade, leave your emotions out of it!

3) Make Your Own Decisions 

So often we see traders taking a trade without really assessing the trade for themselves. The only reason they take the trade is because another trader has tipped them off that they are taking the trade. This works against you as a trader because your trading results then become a collection of other people trades instead of a true reflection of your trading decision making. If you’re always taking other peoples trade calls, how then can you accurately assess your trading results if there's inconsistency with where your decisions originate from? If you do see another trader taking a trade, you must objectively assess that trade on your own and come to your own decision on whether to enter or not without being impacted by another trader’s opinion. 

If you can start to apply these 3 key points to your trading decision making process then you will start to really develop as a trader. Improving your decision making process directly affects your trading results and you'll be able to consistently analyse your progress in the markets without influence from outside forces. 

Happy trading! 

The TWP Team