Before You Enter a Trade

I make my trading decisions based on technical analysis. I believe in developing a trading system and following it to a tee. But I don’t take just any old trade that gives me a technical set ups of course. Before I enter a stock I like to check a few things.nn1. I back test the stock, just a little. I want to know what would have happened if I had entered the trade before. I like to go back and spot every time I would have gotten a trading signal in the stock in the past year and see what would have happened. nnIf I would have lost money I skip the stock, if I would have made money it passes this test. Remember all stocks have different personalities. If the stock doesn’t agree with your trading approach, skip it and find one that does.nn2. I also like to check how strong the actual company is. Do they have growing earnings, if I’m bullish or lowering earnings if I’m bearish. nn3. Finally I want to make sure that the stock is not going to have an earnings announcement anytime soon. I hate trading through earnings because they can be very unpredictable. No one can predict how a stock is going to react to an earnings announcement so it is best to not even try. nnI would rather be out of a stock then to watch it gap against me 20% or more in 1 day. And although it rarely happens, it does happen. nnThose are just 3 little things I like to look at before I decide to trade a stock. A stock that is giving be a great buy signal but does not pass 1 or more of these rules is probably better to pass from my perspective.