You have to know your own tolerance for risk and draw downs in capital. Not what you believe is your risk tolerance but what you can bear in reality when your real trading capital is down 5%, 10% , 20% or more and you don’t give up your trading system. What is your breaking point, do you know?
What type of trading are you comfortable with, end of day, day trading, swing trading, high win percentage or really big wins with the trend? A trading system will do you no good if you can’t trade it because you can’t handle the stress of the time frame.
What will be your robust entry signals? What signals have a great probability of making you a profitable trader based on historical back tests and chart patterns?
How will you exit a winning trade to keep your profits? When will you know it is time to take profits? A profit target, trailing stop, or time stop?
How will you exit a losing trade? At what price level will you know you are wrong? Where should the price not go if you are right about the trade?
How much trading capital can you risk per trade and not be ruined by a string of losers based on your trading winning percentage?
Is the market you are about to trade in an uptrend or downtrend?
How much do you expect to make if you are right about this trade and how much will you lose if you are wrong?
Do you have a trading plan that defines all your trades on paper before they happen?
Does the size of this trade stress you out so much that you are having trouble following your trading plan?
