It is a fact that every trader trades differently. Even if two traders are trading very similar systems they will each have slightly different entry and exit rules because everyone’s personality is slightly different.
What most people fail to take into consideration is that every stock is slightly different too. Some stocks may work well with your trading strategy and others may not. In fact some stocks might continuously stop you out too early, or pull back too soon.
Other stocks might move too slow (or too fast) for your comfort zone. If you are the aggressive swing trader looking to make a quick 10% on a trade don’t buy the 10 year bond that goes up 4% a year. Similarly if you are looking for a stock that is consistently heading up over a longer term time period don’t trade the fast moving stocks that double when the markets are good and get cut in half when they are down.
It is extremely important to trade stocks that will allow you to trade how you want to trade. So, every time you place a trade it can be beneficial to go back to the past.
Look at the recent past and see how you would have done if you entered the stock then. Try to be realistic. If the stock is trading at $100 don’t say you would have bought it two years ago when it was at $30 if that is not what you would have done.
Look for signals where you would have said, that’s a great buy. And see how it would have performed considering your stop, target, and anything else you use. If a stock went up 200% last year with great fundamentals and just gave you a buy signal, but the stock is volatile and would have ended up stopping you out with a loss every time in the past, maybe you should look for another candidate.
Taking a quick scan of how the stock performed in the past can put you ahead of 99% of the traders out there.
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