Trader Self-Audit Checklist: Before You Take Your Next Trade, Ask Yourself These Questions

Before You Take Your Next Trade, Ask Yourself These Questions A disciplined trader doesn't just react to the market — they follow a system. Run through this self-audit checklist before your next trade. 1. ENTRY RULES - What are your Entry Rules? - Do you have a clearly defined setup for entering a trade? - Do you know exactly when to enter and when NOT to enter? - Is your entry based on a predefined system or on emotions, tips, news or assumptions? - Is your entry rule written and repeatable? - Can another trader understand and execute your entry rule without asking you what you meant? 2. EXIT RULES - What is your Exit Rule? - Where is your Stop Loss? - Where is your Target? - What will make you exit the trade before the target? - Do you have a clearly defined Trailing Stop Loss Rule? - Do you move your Stop Loss according to a predefined rule, or only after the trade starts moving against you? - Do you exit profitable trades randomly because of fear? - Do you hold losing trades because you hope that the price will recover? 3. RISK-REWARD RATIO - What is your Risk-Reward Ratio? - How much can you lose if your Stop Loss is hit? - How much are you expecting to make if your Target is achieved? - Is your potential Reward reasonably aligned with the Risk you are taking? - Do you calculate Risk-Reward before entering the trade? - Does your actual trading data support the Risk-Reward assumptions used in your system? 4. POSITION SIZING - What is your Position Sizing Rule? - How much capital are you allocating to this trade? - How much of your total capital can you lose if the Stop Loss is hit? - Is your position size determined by your risk limit, or simply by how much money you have available? - Do you increase your position size after a loss just to recover the previous loss? - Do you have a maximum risk limit per trade? - Do you have a maximum daily loss limit? - Is your position size appropriate for the volatility of the instrument? 5. TRADE STRUCTURE - What is your Trade Structure? - Are your Entry, Stop Loss, Target and Position Size logically aligned? - Does your Trade Structure support your intended Risk-Reward Ratio? - Is your Stop Loss based on a predefined structure rather than an arbitrary number? - Is your Target based on your system rather than wishful thinking? - Does your position size change when the distance between Entry and Stop Loss changes? - Is the entire trade planned before you enter? 6. POSITIVE EXPECTANCY / CASH FLOW - Have you tested your Trading System? - What is your historical Win Rate? - What is your Average Winning Trade? - What is your Average Losing Trade? - What is your system's Expectancy? - Does your Win Rate and Average Win/Loss combination produce positive expectancy? - Have you considered brokerage, taxes, slippage and other transaction costs? - Have you tested the system over a sufficiently large number of trades? - Are you measuring the system using actual data rather than a few successful trades? - Does your Trade Structure align with your Risk-Reward Ratio and your overall objective of achieving positive expectancy over a series of trades? 7. SYSTEM DISCIPLINE - Do you have written Trading Rules? - Do you follow the same rules consistently? - Do you change your strategy after a few losing trades? - Do you take trades because of FOMO? - Do you revenge trade after a loss? - Do you overtrade? - Do you abandon your system after seeing someone else's trade? - Do you maintain a proper Trade Journal? - Do you periodically review your actual performance against your system's expected performance? FINAL 10-QUESTION PRE-TRADE CHECK Before entering any trade, ask yourself: 1. What is my Entry Rule? 2. What is my Exit Rule? 3. Where is my Stop Loss? 4. Where is my Target? 5. What is my Risk-Reward Ratio? 6. What is my Position Size? 7. How much can I lose on this trade? 8. What is my Trade Structure? 9. Does this trade follow my tested Trading System? 10. Does the complete setup support positive expectancy over a series of trades? THE MOST IMPORTANT QUESTION Are you trading according to a defined system, or are you simply guessing where the market will go? If you cannot clearly answer these questions, first learn, understand, test and practice your system before risking substantial capital. EDUCATIONAL DISCLAIMER This content is provided solely for educational and informational purposes. It is intended to help traders understand concepts such as entry rules, exit rules, position sizing, trade structure, risk-reward ratio and trading-system expectancy. It does not constitute investment advice, personalized investment advice, a recommendation, solicitation, or a guarantee of returns. Trading and investing in securities, particularly derivatives, involve substantial market risk. Readers should conduct their own research, understand the risks involved and make decisions based on their own circumstances and risk capacity. Past performance does not guarantee future results. By Varun Bhargav SEBI Registered Research Analyst — SEBI Reg. No. INH000014508 Profit X Research Research Analyst Disclosure/Disclaimer: Varun Bhargav, Founder and Proprietor of Profit X Research, SEBI Registered Research Analyst, SEBI Registration No.: INH000014508, BSE Enlistment No.: 5998. Official Website: profitxresearch.com | Compliance & Disclosures: profitxresearch.com/legal Standard Warning: Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, enlistment with RAASB/BSE and NISM certification do not guarantee the performance of the Research Analyst or provide any assurance of returns to investors.