The Decision Making Process

The Decision Making Process

It’s the point in which we make our final trading decision which can be crucial to trading success. We can either choose to take a trade or choose not to take a trade, but the decision that we choose can have some resounding effects on our trading results. Lets run through how we can simplify the decision making process to ensure you make the right decision, to trade or not to trade.

To make a trading decision in the first place, you must have a well defined trading strategy. Without a well defined trading strategy you won’t know whether you should take a trade or not. At Trade with Precision we use checklists to define our trading strategies, so we use these to make a case for taking the trade or not. If the trade meets all the criteria in our checklists then we would go ahead and place the trade. If any essential criterion was not present on that trade, then we would simply not take the trade. In other words, we let our trading strategy criteria make the decision for us.

What can hinder your ability to make sound, well thought out trading decisions is what’s going on in your head. Trading psychology is an area of trading that all successful traders work extremely hard on. The moment in which we are making the trading decision will be impacted by our emotions. Have you ever been afraid to put on a trade because you don’t want it to be a loser? And have you ever second guessed your analysis when you are trying to make a trading decision?  Or even um'd and arh'd over a trade for so long that it triggers before you have made a decision? These types of thoughts are common amongst traders who haven’t yet mastered the art of the decision making process. They are driven by doubt and fear and these types of emotions must be eliminated if we are to become consistently profitable traders.

What we need to focus on the most at the crucial point of the decision making process is whether the trade meets our trading criteria or not. Once you gain more and more experience in the markets this will become easier as you will have a better idea at whether the trade presented, meets your criteria for taking a trade. Then we need to act without fear and emotion to either place the trade or not. If our criterion has been met then wipe the emotion out of your mind and place the trade orders into the market. If our criterion isn’t met then simply leave the trade alone and be comfortable with the decision you have made. Once we have made our trading decision we need to hand over the outcome of the trade to the market.

Happy Trading! 

The TWP Team