3 Questions to Ask Yourself Before You Trade Stocks

Yesterday, I found an interesting article from BigFatPurse's Alvin Chow. The article titled "3 questions to ask yourself before investing in stocks" discusses about the important 3 questions that you should answer well before you decide (or allowed!) to trade in stocks market. These three questions, to some may be debatable, are very relavant!

Question #1

Do I Own a House?

Question #2

Do I Need the Money?

Question #3

Do I Have the Personal Qualities It Takes to Succeed?

My points:

Question #1
House is really the first investment you should have. The reason being is that you need a house soon or later. I bought an apartment 2 years before my wedding, after accumulating savings from the years of working part time while studying in University (also borrow money from parents). I believe you must set your priority right in terms of personal finance. Make sure you have a steady source(s) of incomes. Make a plan for you saving and spending. Once you have enough to invest in a house, do it!

Question #2
If you remember my post on position sizing, you need a rather big Capital (C), to even be able to buy minimum amount of shares. To keep your alive in trading, you need sizable amount of money. You have to be disciplined enough not to disturb your capital as it will affect your trading plan. So, make sure you do not need to use this capital. Make sure you have emergency savings to use in case of urgent matter. Leave your trading capital alone!

Question #3
This is important. Trading is not a game. It is a BUSINESS.  Make a business plan. Understand the method of stock screening, technical analysis, entry rules, cut loss. Understand the importance of position sizing as well as the psychology of trading. Allow yourself to make mistake and take all the blame yourself, and learn from the mistakes.