02/25/2016 05:04 pm ET Updated Dec 06, 2017

Three Things to Keep in Mind When Making Trades


Trading can be an exciting and rewarding way to reach financial freedom. It can also be a very difficult and very challenging experience. There is no end to the different tips and suggestions out there on trade systems and philosophies. They all have some sort of benefit. However, no matter what approach you choose to take, there are a few very key things that you need to keep in mind whenever you make a trade. Remember these three rules whenever you make a trade and they can save you from making a mistake with your trade and ensure that you are on the right path towards a smart trade decision.

Never Chase Trade -- Get a System and Stick to It

When you are in the heat of the moment making trades, it can be easy to get caught up in the excitement of it all. This is why it is so important to remember that you need to make sure that you are sticking to your system. No matter what system you have decided on, you need to stay with it. Never chase a trade. If you miss a trade, let it go. If you try to trade chase, you are essentially grasping at straws and you essentially put yourself under a great deal of pressure to force the transaction and hopefully still make the trade work. If you abandon your system because you waited too long to make a trade, I guarantee you that the probability of success is much lower. Cut your losses, realize the mistake you made so you don't make it again and simply stick with your system.

Make Sure You Aren't Acting Emotionally

You need to leave the emotion at the door from the moment you start trading in the morning. When you are about to make a trade, pause, take a deep breath and think about the decision clearly. Are you thinking rationally? Or are you thinking with emotion? If you let emotion get in the way, it can cloud your judgement. If emotion is part of your decision making process, you will never make clear, strong trading decisions. If you can take a moment before every trade to "check" yourself and make certain emotion isn't involved, then you are on the right path to making good trading decisions.

Make Sure You Have an Exit Plan in Place

Before you make any trade, you need to make sure that you have an exit plan in place first. Your exit plan needs to be clear cut, so I recommend writing it down first. Make sure that you know what your specific exit cue is, this is your indicator that it is time to stop and walk away. Maybe your exit cue is being down $1,000. Whatever it is, you need to know when you should be walking away and you need to have a system that can help keep you accountable.

Successful trading is not about making bold, brass decisions, it is about being smart. You need to have a system, you need to have control and you need to have the discipline to know when you should walk away. If you have these things in place, you are setting yourself up for success, no matter what trade opportunities come your way.