What are the Right Questions to Ask Before Trading?

In a recent TV interview conducted by the show host Edric Mendoza, & Salve Duplito, Resident Financial Adviser (not in photo) at ABS-CBN News Channel - On The Money, an ANC Finance talk show that features all aspects of finance, including insurance, business economy, and a lot more from investing to trading in the financial markets .

The recent segment featured several important issues which were broadly discussed are the essential elements of trading these markets for the benefit of traders and investors alike.

ANC On The Money

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We deemed it more fitting to support this interview with a more in-depth discussion of the questions asked. And due to other finer points that are relatively important, the supporting article and information shared is made available to effectively drive other pertinent points of interest and issues which we may have fell short of delivering during the show.

These discussions would have taken quite a lengthy time frame to really be able to understand the intricacies of trading the global financial markets today. Likewise, the information shared herein may or may not be in the forefront of a regular seminar presentation which can be very useful. A separate checklist can also be found in our website under "Guidelines for Investors and Traders". For inquiries send us an email to: This email address is being protected from spambots. You need JavaScript enabled to view it.

Talking Points Summary:

1. In the world of trading , how essential is preparation?

 "Due Diligence" has always been the two most important words that every trader / investor needs to consider. The knowledge of having the access to the right information from reliable resource will always be in the forefront in any financial trading / investing decision. The level of preparedness would depend on the degree of the investors or trader's level of sophistication of the financial markets. Short of this would entail a high degree of difficulty in trading that may turn up to be an expensive trading expereince where risk managment will always be a part for wealth preservation and capital growth.

2. Why is it important to ask the right questions before trading?

To be able to ask the right questions, one needs to know the right information. This can be attributed to trading experience and by surrounding market conditions that affects trading decisions. A prudent approach should be exercised by defining relative questions into three basic categories and the coresponding elements  pertaining to actual trading actvity even right at the opening of an account.  

   a. How will this help you make successful transactions?

Whenever all pertinent and relevant issues of a trading account are properly addressed then the probability for a successful transaction or trade for that matter can have a greater probaility of success more often than not. As traders would only have to fully concentrate on the aspects of trading strategies pertaining to their accounts. Its not how much money you win in a series of trades, but its how much one keeps at the end result.

3. What are the “right questions” to ask before trading? And why? 

Let's address this by dividng the corresponding issues into three main categories and their respective degree of relevance in trading the financial markets.

 A. Define Investors / Traders financial objectives and goals.

 1. What would be your objectives & goals over a period of time; as to how much of the investors net-worth would  be willing to commit to invest / trade in their chosen market? Do you have the right Risk / Reward Management skills and knowledge to be able to properly trade a volatile market?...while preserving capital and growth potential in the portfolio investment. Let's define what needs to be done! .

 1a. Self Assessment - passive, pro-active investor (Self-directed), or to have an assigned account officer, but never sign a waiver or a full blanket authority to trade without the investors knowledge and approval.
 2a. % of Networth committed over a period of time.
 3a. Time Management or How much time are you willing to commit to trading, if self-directed.
 4a. Knowledge and skills to learn the tools of the trade. Either through an independent adviser or course program.

 2.  Which financial markets would best suit your goals as an investor? Do you have the necessary information or experience to be a successful investor? And where do you go in search for the right information from? And how much time does an investor have to prepare for this?

A checklist would really be a good process to have and consider the right instruments to trade that traders and investors can consider. Being familiar with these instrments is a must know. Getting prepared is a matter of having to be able to filter the information based on the investors specific requirements. And again, on the level of sophistication they have in the financial markets that they intend to get involve with. Therefore, serious due diligence in preparing a trade plan consisting of all pertinent angles shold be readily be made before, during and even after trading the market. Keeping track of a trading journal would likewise be important to keep for future reference. Commitment on time management is a must.

Reference: Investors Transition Not a Transformation

  Is Trading a Medium for Investing in Today's Market Conditions? 

  RAISING the BAR of TRADING CONFIDENCE Part 1 of 7 Series

2a. Where and What instruments best fits investors / traders critiria to trade (Contract Specifications of Financial Instruments)
Examples are Stocks / Equities & Indices, Foreign Currency Trading, Financial or Commodity Futures, Derivatives, CFDs, Mutual funds and Exhcange Traded Funds that are duly authorized by the global exchanges. There are other instruments available for conservative, passive investors who simply want fixed-income, dividends on investments and avoid high risk alternative investments.