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For trade rationale, I focus on technical vs. fundamental approach.  You can use whichever approach you think works best for you, but be clear to yourself as to the basis of the trade (write it down in a journal) before you ever open it up. Once a trade is entered, it’s all too common for fundamental-types to start pointing at technicals to rationalize keeping a trade open, even if the fundamental picture has not played out as expected.  Even worse, perhaps, are chartists who revert to economic analysis to justify a technical trade set-up gone awry.  My own preference is to blend the two, developing a directional view based on a macro-economic outlook, but defining entry/exit based on technicals.

Trade management, or risk management more accurately, is usually determined by the economics of your trading account, which I would suggest is the starting point for everyone.  Since we’re most concerned about preventing losses, the first question is ‘what is the maximum loss I’m prepared to sustain?’  The second question is ‘where am I wrong?’  The answer to those two questions will dictate your maximum position size based on your stop loss.  Above all, vow to stick to your risk management plan as an integral part of your trading style. 

I can’t tell you what approach is best for you, but I can tell you that not having settled on a trading style is no approach at all.  

Brian Dolan

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