3 Questions Before Every Trade
43sOffers a clear, actionable framework that traders can immediately apply, sparking curiosity and saving.
▶ Play ClipAI Summary
This video presents a systematic three-question framework that a professional trader uses before entering any position. The framework grades trades based on catalyst, setup, and confirming variables, and links the resulting grade to position sizing.
[00:03]
Question 1: The Catalyst
Before trading, ask if something real happened to create the opportunity today, such as an earnings beat, analyst initiation, FDA approval, or index inclusion. A moving stock price alone is not a catalyst. Without a catalyst, the trade gets a D grade and is usually skipped unless the setup is exceptional.
[00:31]
Question 2: The Setup
Evaluate whether a clean, recognizable pattern exists on the chart, such as a failed breakout, range break, or 90 EMA continuation. If the setup requires 'squinting' to see, it is at best a B grade.
[00:56]
Question 3: Confirming Variables
Check if confirming variables favor the trade: direction of a hot sector, expanding volume, institutional presence on the tape, and a trending market regime. More 'yeses' result in a higher grade.
[01:11]
Grading and Position Sizing
Higher grades justify larger position sizes. The entire system is summarized as: ask the three questions, grade the trade, and size accordingly. The video references a full breakdown of a real trade in the link below.
The core takeaway is that disciplined trading relies on a repeatable three-question framework that grades opportunity quality and directly ties that grade to position sizing, preventing overexposure on weak setups.
Mentioned in this Video
Tutorial Checklist
1
00:03
Ask: Is there a real catalyst (earnings beat, analyst initiation, FDA approval, index inclusion)? If no, grade D and usually skip.
2
00:31
Ask: Is there a clean, recognizable setup (failed breakout, range break, 90 EMA continuation)? If it requires squinting, grade B at best.
3
00:56
Ask: Are confirming variables in favor (hot sector direction, expanding volume, institutional presence, trending market regime)? Count the yeses.
4
01:11
Assign a grade based on the answers and size the position accordingly: higher grade = bigger size.
Study Flashcards (7)
What is the first question a trader asks before putting on a share?
easy
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What is the first question a trader asks before putting on a share?
easy
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What's the catalyst? Did something real happen to create this opportunity today?
00:03
Name three examples of a real catalyst mentioned in the video.
easy
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Name three examples of a real catalyst mentioned in the video.
easy
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Earnings beat, analyst initiation, FDA approval, index inclusion.
00:17
What grade is assigned to a trade with no catalyst?
medium
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What grade is assigned to a trade with no catalyst?
medium
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D grade.
00:17
What are three examples of a clean setup mentioned in the video?
medium
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What are three examples of a clean setup mentioned in the video?
medium
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Failed breakout, range break, 90 EMA continuation.
00:44
What grade is assigned to a setup that requires squinting?
medium
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What grade is assigned to a setup that requires squinting?
medium
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B grade at best.
00:44
List the four confirming variables mentioned in the video.
hard
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List the four confirming variables mentioned in the video.
hard
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Direction of a hot sector, expanding volume, institutional presence on the tape, market regime trending.
00:56
How does the grade affect position sizing?
easy
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How does the grade affect position sizing?
easy
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Higher grades justify bigger position sizes.
01:11
💡 Key Takeaways
⚖️
Catalyst as a prerequisite
Establishes a clear, objective filter that prevents trading on mere price movement.
00:03
🔧
Clean setups only
Emphasizes pattern quality over subjective interpretation, reducing false signals.
00:31
💡
Confirming variables stack
Shows how multiple confirmations increase confidence and justify larger size.
00:56
⚖️
Grade-to-size link
Directly ties risk management to a scoring system, making position sizing systematic.
01:11Full Transcript
[00:03] Before I put on a single share, I ask three questions in order always. Question one, what's the catalyst? Did something real happen to create this opportunity today? Not the stock is moving, that's not a catalyst. An
[00:17] earnings beat, an analyst initiation, FDA approval, index inclusion, something that explains why institutional money might show up that wasn't here yesterday. No catalyst, you're at a D grade. You usually don't trade it unless
[00:31] the setup's really good. Question two, what's the setup? Is there a pattern? Is it Is it actually clean? Not it's it's kind of there if you squint, but does it jump off the chart? Failed breakout, range break, 90 EMA continuation,
[00:44] your playbook says. If the setup requires squinting, it's maybe B at And question three, are the confirming variables in your favor for the trade?
[00:56] direction of a hot sector, expanding volume, institutional presence on the tape, market regime trending? None of these or or all of these stacked. More yeses is a higher grade. Higher grades are bigger size. That's
[01:11] it. That's the whole system. I applied all three questions to a real trade from the other day. We walked through the grade, the position size, the entry, the exit, full breakdown in the link below.
