Essential trading elements

Below are 10 factors that every trader should consider.Skill assessmentBefore a trader starts trading, he needs to assess whether he is ready for the market. A simple way to test his system against the market is by virtual trading/paper trading it till he feels comfortable with it. He should only start trading real money once he is totally at ease with the system and can make money consistantly.Mental assessmentAnother important aspect of trading is mental. Many traders make fortunes virtual trading, but when it comes to real money, 2 factors come into play - fear and greed. Fear of losing money and greed of earning more money will ultimately and inevitably be a traders downfall. He should learn to keep his emotions in check, and also be prepared for the ups and downs of the market.Set risk levelsEverybody has different risk levels. A retiree in his 60s will not risk much of his account size per trade; whereas young aggressive traders in their 20s will not hesitate to plough a large portion of their account size in each trade. One must come to term with his psychology - whether he is a conservative or aggressive towards the market. Higher risks comes with higher rewards - and the vice versa may also apply. To know oneself is a step towards becoming a better trader.Set goalsThere is a saying - "Reach for the moon. Even if u fail, you'll still land amongst the stars" While it sounds corny and cheesy, I believe one should constantly aim for greater heights. He should aim for the next level, instead of giving in to mediocrity. While aiming high is encouraged, the goals shouldnt be the I-intend-to-earn-US$1m-using-my-$1k -account-in-a-year type. Set high goals, but also set realistic goals.Do your homeworkBy this, it means doing your pre-market scans, watching for impending economic/earning data (which might cause unwanted volatility) etc. Do not go into the market unprepared, for it robs complacent players mercilessly.Set exit rulesI believe exit rules are equally, if not as important, as entry rules. Knowing when to exit a trade is paramount to building equity. Set a profit target, and stick to it.Set entry rulesEntry rules should be precise and leave no room for guesswork. It should be a well thought out and written down in black and white, and followed to a T. (of course, it should be tested profitable too) Discipline and consistancy will be rewarded to those whom abides by it.Keep excellent recordsBy writing down each trade, you have an indicator of how well you're doing. Keep a P/L sheet, plot a monthly equity graph, whatever works for you - but KEEP RECORDS!Perform a post-mortemIt has and always will be a good practise to perform an after-action-review of each trade. Hindsight is 20/20, and usually the trade will become clearer to you once you have been detached emotionally from it. Write down the reasons you entered the trade, reasons you exited the trade, stuff like what you did well, what you should have done, and what you can do better next time. This 'diary of trades' is vital over the long run, as you can read about past trades and improve upon them.

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