So over the last couple of weeks, we have found a couple of tools to put into our toolbox and this is going to slim down the time it takes us to research our quality trades.  We went through a spreadsheet that can help us calculate our entries, exits, and targets.  This same tool also helps us calculate our RISK/REWARD ratios which are by far and away one of the most important parts of successful trading.  We also looked into a position sizing tool that makes it ultra simple and easy to quickly calculate our perfect position size as long as we know what our pain threshold is.  The position sizing tool can help ensure that you remain a trader for a long time.  The two biggest mistakes a rookie can make is to not have a rock solid exit plan and to put too much into any one position because as we have discussed many times in this blog that no one trade is 100% guaranteed no matter how good the setup looks like.

Now that we have been able to put together the basics of a quality trade, its time to stack the deck in our favor as much as we possibly can.  Once we find a good candidate and we go through running the numbers for our stops, entries, and targets.  We then want to see if the market can help put the odds more in our favor than just the pattern we may have found.  One of the ways we do that is to look at some other metrics like the checking the sector to see if may help or hinder our trade.  We can also use the indicators we discussed to confirm what we have surmised when putting the trade together.  We can also look at the volume pattern to see if it is working for us or against us.  Is the volume signaling a reversal or is it telling us that it is ready to continue with the current trend. We can also make sure that we haven’t run out of space for our trade to move.  Putting all these things in place will help us make better trades.

This week we will focus on the sector portion of “churching” up our trades.  In the following video, you will see how we check the sectors to make sure that our trade is less likely to run into trouble.