What should you decide before looking at a stock?
Write down why you became interested and what facts would need to change for you to reconsider.
Table of contents
Remember this first
First, 3 things to remember
- 1Write down the facts and your expectations separately.
- 2Think first about the loss you can afford if you are wrong.
- 3Choosing to buy nothing and watch is also an option.
Write down “why you are watching it” in one sentence.
Write down facts you have verified, such as "trading volume increased" or "news of a new contract was released." "It will rise significantly soon" is a prediction that has not yet been verified.
Next, write down conditions that would change your mind, such as "I will reconsider if the contract is canceled." It is easier to review your judgment than to make up reasons after the results are in.
Focus on how much you can afford to lose rather than how much you will earn.
When the price of a stock moves by 1 dollar, 10 shares result in a 10 dollar difference, while 100 shares result in a 100 dollar difference. Even for the same stock, the size of profit or loss varies depending on the quantity.
Even if you plan to sell at a set price, it may not be executed as intended due to rapid price changes or trading halts. The figures below are for calculation practice and do not guarantee a cap on actual losses.
| Quantity | Assumed difference | Hypothetical loss |
|---|---|---|
| 20 shares | $0.50 | $10 |
| 100 shares | $0.50 | $50 |
You can also record the reasons for waiting.
If you could not find the original news source or waited because the price was changing too rapidly, record that as well. You do not need to place an order in every situation.
If the price rises after you sell, it does not necessarily mean your original judgment was wrong, nor does it mean your process was entirely correct just because you bought and it rose. Think based on the information that was available at the time.
You should not make such assumptions
“Now that you have written down your loss budget, you won't lose more than that amount, right?”
Your planned strategy and the actual results may differ. If the market changes rapidly or trading halts, you may not be able to sell at your target price.
Check what you have read.
- Have you separated confirmed facts from expectations?
- Have you considered the possibility of not being able to sell at your target price?
- Did you also write down the reason for deciding to watch?
Apply what you read to the actual screen
Try it on WAPE
Source and scope of verification
Reviewed · Version 2
- Types of OrdersNew window
SEC Investor.gov · Verify 2026-10-20
Difference between market price and last traded price · Price conditions for limit orders - WAPE mock trading user guideNew window
WAPE · Verify 2026-10-20
Differences between paper trading and live trading; personal record login · MA and session VWAP in lib/toss-chart.ts and lib/paper-chart-indicators.ts.
This is educational material for observation and information comprehension. Hypothetical examples do not represent actual stocks or performance and do not provide buy or sell recommendations.