7 Questions To Ask Before Every Trade

Think you’re ready to make a trade? Not so fast. All too often, we act without planning and thinking things out. While you never want to drag your feet, acting without forethought can be even worse.

So as you’re on the precipice of your next trade (and every trade), pause to ask yourself these seven things and yes, watching this free stock trading guide and using this free tool before EVERY trade will help your odds of success dramatically.

It might sound like a lot, but after a while, pre-trade planning will become an automatic part of your process. Over time, this practice can improve your performance and make you a better penny stock trader.

1. Am I prepared? Before any trade, ask yourself if you are truly prepared, on every level from potential risk to potential reward.

First, consider your readiness on a very literal level. Have you gotten enough sleep? Did you wake up early enough to have some quiet time before you got to trading? Really take a moment to evaluate if you are mentally prepared to trade right now, or if you have a million things going through your mind that might be distracting you from making the best decisions. You need a clear head to be a good trader.

Second, consider your preparedness on a deeper level. Are you prepared as a trader? Have you received the proper training and education? Do you understand the stock, sector and overall market enough to confidently make this trade, or are you just taking a stab in the dark? While most penny stocks don’t trade on the major market exchanges, there are still some basics that you need to understand if you want to be successful. The Timothy Sykes Millionaire Challenge was created to provide an educational resource for traders who want to succeed.

2. Have I done my research? One of the key things I teach my trading challenge students is that you have to do your research BEFORE YOU RISK YOUR HARD EARNED MONEY IN THE MARKETS. Don’t go into a single trade without having some basis of knowledge and ideally the more the better. After all, you probably wouldn’t even go to a restaurant without giving it a cursory look-up online to see reviews. Why would you invest your money in a stock that you haven’t checked out?

Download a PDF version of this post.

It may be annoying to research a stock that is trading for pennies, but often just a little bit of digging can reveal information that can let you know if it’s worth it or not.

Cut through the BS; don’t believe just what a self serving stock promoter tells you. Think for yourself and do your own research before committing to an investment.

3. How much will it hurt if I lose it all? Take a step back and ask yourself this question: how would it feel if this stock went south and you lost most or all of the money you invested?

No, this exercise isn’t meant to scare you off or to discourage you from making a trade. Rather, this can be a method of making sure you are properly mitigating risk. If you haven’t even thought about the risk or are pushing it to the back of your mind, you may not be taking all of the proper precautions. With the potential of loss looming, you might be inspired to do that extra bit of legwork to make sure that this trade is a good idea.

4. Am I forcing this trade? In your desire to make a profit, are you putting on blinders to some serious red flags? To really find success as a trader, you have to keep a level head and be able to think rationally and logically, think of yourself as a retired trader and ONLY come back into the market when a setup is so good you’d feel guilty missing it. You don’t want to lose your patience as patience is what truly pays. You also don’t want to get cocky or else the market will humble you VERY quickly.

Approach every trade as a unique transaction. Sure, you can use the past to educate current and future decisions. But don’t think that if you force it this time it will end up like it did the last time you made a profit.

5. Is there a pattern here? The fact is, every trade is unique and should be traded that way. But at the same time, history often repeats itself. When it comes to penny stocks, there are certain patterns which, if you memorize them, can inform your trades and earn you consistent profits.

In my free guide entitled Penny Stocking 101, I go over some common patterns and potential ways that you can react as a trader; I also cover this in more detail with students of the Tim Sykes Million Challenge. Once you get the hang of it, seeking out patterns is a great way to really look at a potential investment and evaluate whether or not it’s a good fit for you at this time.

6. What would my mentor do? If you’re experiencing a moment of doubt or you don’t know what to do, try to channel your mentor. What would he or she do in this situation? The coolest thing about my trading chatroom is that there are SEVERAL Millionaire Traders there during market hours and it’s been great to watch newbies bounce ideas off more experienced traders. More often than not, this can take you out of your head enough to get some distance from the situation and make the right choices in your trade.

7. What can I learn from this? Most people think about what they learned after a trade is complete. But actually, there’s a lot of value in considering what you could learn from this experience before you actually buy.

For instance, if you’re trying a new method of investing, write down the questions and concerns that you’re having as you go through the process. You can revisit these questions and concerns after the trade is complete, and you may realize that you’re better informed now. It can be hard to think in the heat of the moment, so next time if you find yourself wondering the same things, you can think back to your previous experience and apply what you have learned.

Additionally, these questions can give you direction as you continue with your studies. You may realize that you need to learn more about selling short, for example.

Taking a few short moments to pause before making a trade can be a good thing. What you lose in your quick reaction time can save you from losing because of acting too rashly. Over time, these questions and considerations will become ingrained, and your overall performance will improve as your instincts become honed.

Have you ever asked yourself any of these questions before a trade and have you ever not asked these questions…then tell me which of these trades worked out better for you?

Posted in Basics

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Timothy Sykes

Hey Everyone,

As many of you already know I grew up in a middle class family and didn't have many luxuries. But through trading I was able to change my circumstances --not just for me -- but for my parents as well. I now want to help you and thousands of other people from all around the world achieve similar results!

Which is why I've launched my millionaire challenge. I’m extremely determined to create a millionaire trader out of one my students and hopefully it will be you.

So when you get a chance make sure you check it out.

PS: Don't forget to check out my free Penny Stock Guide, it will teach you everything you need to know about trading. :)

  1. OceanRider

    This information is really good and really timely.

    I am going to print this out and read it every day. Read it before every trade.
    When I am at work, I am going to have a copy with me and read it between meetings.

    I’ve taken trades this past week that I shouldn’t have taken to begin with (lack of patience on entry).

    I entered and cut a major runner (XTNT) short before it makes it’s move. (Entry .57, exited loss at .51). I didn’t set a good stop loss. I was looking at the % loss and not the pattern. I need to get better at this and will. It was not easy to have XTNT locked in, ready to go at .57 and exited at .51 when it runs to $1.175. It helped knowing I picked this one in advance though (and still took a loss with it).

    I need to slow down.

    Part of my difficulty is being at work and making rushed decisions while at work. I will work from home tomorrow and will focus on taking things slow. My new motto is going to be, slower is better. Slower’s best friend is calm and cool. Any time I rush something I am going to have to halt everything. I am not rushing anymore.

    I like the idea of learning and joining the Trading Challenge. I know that when the right ideas combine with the right people is where the magic happens.

    I will be considering this further over the next week.

    Thanks again TIM!

  2. OceanRider

    One more thing that is not helping, our company is getting ready to lay people off.

    I am hearing from someone who knows someone with the details, the layoffs are around March 22.

    I need to make this work.

    I have been focusing on the things I can control.

    On that note, I went back and found an error in my previous price target for XTNT few minutes ago. I don’t know for sure why certain measure points work over others but it can vary as many sub patterns exist within the major pattern. I am very glad to see that when I went back to my research this weekend on price targets for this week’s stocks that my discovery this weekend when applied to XTNT was spot on so I know I am on the right path.

    I was telling and explaining my findings with my wife and telling her I am in kind of disbelief that I might have something special. I am not wishing something, or wanting something. I am in disbelief and will look to see if the stocks follow expected targets.

  3. Matthew Morea

    I played RNVA last week without thinking about my risk level as much. Ended up profiting only $20 but had I thought about how much I was willing to lose it coulda proved more in profits. Lesson learned! Gotta remember to ask the right questions!

  4. Nick

    All of these are great points to consider before making a trade. Number 6 (What would my mentor do?) has really helped me. When I first started trading I tried to trade everything I saw, and when I finally settled down I started asking myself that very question. I noticed that the gurus weren’t making these trades given the odds were not in their favor. Yes sometimes you might be on the right side, but everyone can get lucky a time or two. Having the mentors in the chat has really helped and it is great seeing so many perspectives from their different strategies.

  5. Javier

    When I first began to trade I wasn’t asking myself any questions just because I was new and didn’t know anything.. But the more I read the more videos I watched the questions started to uprise now that I’m in this challenge and I’m learning more n more the questions are Always there.. What Can I learn from this..

  6. Johnny kowal

    These rules eliminate the guessing game and ease the knot in my stomach. Atleast I have some solid guidelines to increase my odds. Being a challenge student also helps.

  7. HimmenyDiggaley

    i usually ask myself most of these questions, only one i havent asked is “What can i learn from this trade?” before taking the trade.. now i will 🙂 glad i read this post thanks Tim for being a great mentor and always providing your students with more information that can help them refine their strategy and aim for success.. PUMPED

  8. Tim Vaughn

    Thanks Tim, I have a problem with dragging my feet too long and end up not making the trade because I don’t want to chase. These questions now give me a framework to better help me plan and have the confidence I think I’m lacking in time to make the trade. Thank you, this is going to be very helpful every day.

  9. Kenny Bailey

    I don’t ask them as I should, and my account has suffered. Thanks for the refresher Tim. There’s no such thing as being too prepared before a trade. I WILL SUCCEED !!!

  10. OceanRider

    Up at 4 am doing research from my tablet in bed.

    Doing everything I can to confirm and research that this company I have my eye on is ready. I am seeing big things in this chart and I have exact references of other symbols that I am using as a reference.

    I found out that my dermatologist, a guy I have been going to for 15 years, has co developed this patented product the company is about to launch.

    Before this article (7 questions to ask before every trade), I would not have done as much research as I have. From my research this morning (at 4am), I can directly follow up now with my doctor and ask him for more information of this company’s product that was co developed by my doctor.

    BTW, I was up at 3am every night last week. I could not figure out why. I believe it is my mind preparing for the kind of success that is coming. I do not know if my success will be today, this week, month, year, or whenever. I think it is soon (like now in the short term) but cannot see beyond the present moment.

    Thank you again for this post !!!

  11. Timothy Davidson

    Number 4 applies to me. Been there done that! It pays in more ways than one to be cautious & not force anything. I haven’t traded in a few years but when I did I made some rash decisions that cost me. A more rational approach would have saved my hide. At the time I didn’t realize that I was being pumped & dumped, which thanks to you Mr. Sykes i am aware now which was a valuable lesson in & of itself. I am more aware now & I thank you for that.
    Timothy Davidson

  12. Anthony Renne

    Tim, these posts help me by reminding me of the basics, its easy to loose focus with everyday life and with so many trading opportunities its far too easy to jump in to a trade and not think about the risks especially when most of the time as traders we only think about the rewards!!! I have been a challenge student for 9 months and it has started to “click” but its not a perfect science and mistakes will be made so I come to respect and understand that your Millionaire Challenge is truly a life long commitment because we will always have reason to reflect back on our education! Thank you for all of you and your teams hard work over the all the years, without it and I believe I speak for all of us students that our possibilities of trading success would not be anything but a dream! Keep the Knowledge coming!!!
    Thanks Again,

  13. krs1

    #4 is super important!!! They all are…but #4 is definitely in my head before I place any trade. This is a great post btw…. really helpful to us up and comers. Thank you for posting!

  14. RBI

    My problem is with number 4. I’m excited and am looking way too hard for something to happen rather than being patient and letting things unfold. Getting into trades too early hoping they’ll breakout rather than waiting for the breakout, etc.

  15. Lando/Zaleucus

    Getting better everyday – no worries today, staying well disciplined and patient. Let it come to you, no forcing or chasing. Cut losses first. thanks to YOU.

  16. Glenn

    I have a problem with recognizing patterns, not the ones from your dvd’s but new patterns. I fail to recognize new trends and patterns, however I am learning thanks to the chatroom and your guidance. I am improving on a day to day basis. Thank you Tim

  17. Dess24

    great information as always… mainly sometimes I have a problem with number one … so either some good tea or cup of Joe put me into focus a little more… working evenings can strain me sometimes … But I will apply

  18. Kerry57

    Questions 4 & 5 probably pertain to me the most. Obviously #5 requires more education, study and experience. The question “what would my mentor do” is an interesting one because it could play both ways. But I do love the fact that we have mentors in the chat room willing to help. I just with there were more of them and we could spend some 1-in1 time with them. Still, great insights Tim–thanks. (Wish these blog posts had a printable format option!)

  19. Turbulentsurfer

    My issue is being afraid of missing out on a trade and also not holding my position long enough.

  20. Kenny Bailey

    #4 is the one I deal with a lot. My account has suffered BECAUSE I’ve made trades for the sake of making a trade. The longer I’m a challenge student, the more things I realize and have to change to become successful. it’s a wakeup call. Thanks Tim.

  21. Bschroede

    Awesome information I’ll try to apply as i make my first trades as a challenge student.

  22. Rob

    Great perspective on things that actually matter. I need to do a better job at not forcing a trade and also asking myself “what would my mentor do?”. It really helps to go back to these basics questions and not get distracted. Great post!

  23. Viengsavanh

    For me it’s # 4,and #5 that I would like to ask myself more often. This is very helpful thank you Timothy

  24. Evan Balfantz

    I struggle with #4 the most. Forcing trades due to past success and thinking I can make a trade happen is what gets me the most. I have been working on it and one thing that has helped me is to just close the computer down mid day and not worry about trading until power hour. Using the Sykes Sliding Scale has helped slow my trading down to make better decisions. Since I joined the challenge I have been trading less which has helped me learn more and wait for the best set ups. I have only been in the challenge for just over a month and have been mainly focused on learning new strategies and testing them by paper trading.

  25. OceanRider

    “#4, Am I forcing this trade” This is what I am working on.

    When I look at my losses, I am working on not doing this. I am trying to make my trades more mechanical. I think I need equal work on the exit, if not more work on the exit.

    How do you clear your mind from a recent loss and not have it affect your exit while in the next trade?

    I think I can work on not entering a trade, or entering only good trades (avoid trading when things are not just right).

    However, if a trade goes against me, the NEXT trade is harder to hold for the fear of another loss.

    Any advice?

  26. Vandel Chinen

    Mahalo Tim,
    Yup need to be fully prepared, plays must meet a good score on the SSS or don’t play at all.

  27. Cory Watson

    Keep up with the great articles. Using your methods and principles I have become self sufficient in my trading. I have brought my account up from $18K to $30K since October. It is all because of your lessons and these great articles. Thanks again for your diligence in trying to teach us how to be safe and do this. The thing that won me over was the transparency of your trades and guidance for us to do the same. The accountability makes us all better traders.

  28. Greg Halliwill

    Sometimes have trouble with 4&5. As each week goes by I am trading more and more like a sniper. Just watching and waiting for the right kill. I am learning enough to trade less and trade smarter at the right times. May be watching great trades pass me by but using them as education trades. Jumped into STT today on some paper trading and made some awesome trades!

  29. Radioman

    Thanks for sharing, Tim. I’m just like a sponge right now. I am learning as much as I can and I do not trade as much as I want (avoiding impulse trading)–this is my way of “paying forward”. There are a lot of good trades but I am solidly building a habit of being mentally prepared for a setup. Focus on the fundamentals first. I personally need to go back to square one on all the basic stuff because lot of things made sense the second time I went through Pennystocking Part Deux, and Timfundamentals Part Deux. Recently, a friend shared with me Trading Tickers DVDs by Tim Grittani–awesome material. Although I haven’t gotten much sleep and very little play time with my kids lately because learning to trade is so addictive. The goal to all of this is not just to have money but a healthy and balanced life. It is my ultimate goal to join the Millionaire Challenge as soon as my finances permits. It must be an awesome feeling to have a mentor coach you side by side, LOL.

  30. Chris

    2 is my first offender, while I do research the stock I know I could do better. I need to watch the sec filings dvds to help with that.

    4 forcing trades. Even though I see the right patterns I hesitate and miss the opportune moment to enter a position. Then I will chase it and have bad entry’s that completely mess up the risk/reward.

  31. tomfinn92

    Tim, I think #4, forcing trades, is still my biggest problem, but I’ve cut down on that substantially in the past month as well. Only make the trade when the right setup for me is there, and all of the factors you talk about in the SSS line up.

  32. Geoff Dudman

    Great article Tim. Thank you. I have only been following you for a couple of weeks now but I already feel I’m learning so much. I am currently doing 7 all the time watching your videos and reading and learning.

  33. Bronson

    I have a problem with not letting winners play out when the level 2 fakes me out on NASDAQs. Been taking off half so I can be more diligent with the second half.

  34. juan pavlo

    I just joined the Challenge, haven’t done any trading yet, only studying so far. I have to learn from all of the 7 Q’s, but especially Nos. 2 and 5, I really have to work hard on those.

  35. Danielle

    Such great questions to ask! I need to print this out and tape it to my laptop! I’m fairly new to the trading challenge and I know I still have a ton to learn- but the two I need to work on the most are #2, research, and #5, patterns. I am still learning how to do my research and still learning patterns.
    I just wish there were more hours in the day to fit it all in! Thanks Tim for your constant education! I’ve learned so much and am so grateful!

  36. SpaceBoundT

    My biggest weakness is figuring out what I can learn from the trade about myself after the trade is complete. When you say you’re going to cut losses when the prices reaches X or your risk tolerance is Y but when you’re actually in the trade, many other factors evolve. Most recently I was in a trade where I set my risk tolerance, support, and exit strategy in place. When the pattern I dip bought in failed down to my initial risk tolerance and support I felt comfortable. However, another string of sellers came in pushing the stock down another 10-15 cents below support hitting the next level of support; all within a matter of minutes. It happened so fast but I thought going into the trade I would exit if the trade failed. However, the reason why it failed did not make me want to exit the trade asap, BUT if it fell through the next level of support I would’ve been exiting asap. I ended up escaping the trade with a $10 profit and could’ve been in the hundreds to thousands had I held and not went through that experience. I learned regardless of the situation I need to CUT LOSSES QUICKLY because what if it didn’t bounce back? Where would I have cut losses then? I don’t want to be another casualty and blowup because I didn’t react the way I was taught to. My experience is you never know what you will actually do unless you were in that same exact situation before with emotions and adrenaline rushing through you and the feelings you had if the trade didn’t go your way. This makes you more aware so you don’t make the same mistake again; however you can learn from mistakes, they just don’t have to be your own (I read that quote somewhere the other day and I liked it lol).

  37. Ali

    Thanks Tim. I love the SSS. It really makes it easier to cover all bases when planning. Can’t wait for the Shorting segment of the TCL.

  38. Fred Becker

    Hi Tim,
    I will add these to my 17 Lessons To Remember & Read Each Morning before I start my Million Dollar DVD’s. There is never to much to learn and you can never be a pain in the ass to me. Just a great teacher/instructor!

  39. De Wayne J

    Hey man I’m late n this one.. but I appreciate every single fucking post,tweet, or whatever…. Thank u…

  40. Sunny

    Nice post Sir. Bullshit They Self Not 😀 Thanks to emercing myself in your reading list early, I feel really good about where I am at with this process. Increased account like 70 percent in last two trades. Surprised that you don’t hound that lounder. That is why you teach and I don’t. You are amazing at it. I on the other hand could never have the tolerance or patience to beg people to study. I would just wind up frustrated with there stupidity. BUT I can promote the SHIT out of in on your behalf. 😀

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