A corollary to this is that you must know what kind of stories you like, which means you have to develop your taste. I don't mean "taste" in the sense that you have the same opinions as New York Times critics. I mean that when you watch a movie or read a book that you enjoy, try to understand what parts of it you enjoyed, what parts of it you didn't enjoy, and how you would change it to make it better. This doesn't just apply to literature. In developing your artistic taste, you could try to understand exactly what part of an awesome painting evokes feeling in you.
After I started thinking this way, I came up with a story that might not appeal to most people but sure as hell felt moving to me. I realized that the story could be told better in a visual format instead of in prose, so I started practicing art again. I'm a perfectionist who hated drawing when I studied art in school, but now that I have this idea in my head I feel very little inhibition in practicing. Instead of wondering how to make my story sell better or second guessing every mark I make, I move forward because if I hesitate I feel like I'm letting down the characters in the story I want to be told.