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Your Lesson 09
Task: Read the article
Goal: To learn how a Pre-Trade-Routine-Checklist helps reduce errors, boost performance, and keep you out of danger of trading.
A 12 Point Pre-Trade-Routine-Checklist helps reduce errors, boost performance, and keep you out of danger of trading.
A trading checklist assists us in adhering to the methods mentioned in our Trading Plan.
Don't trade unless you have it.
For some traders, going through a checklist may only take a second, while for others, it may take a minute or two.
A trading checklist is a written document that covers the elements that must be present or absent to execute a trade.
When followed, checklists reduce errors, boost performance, and keep you out of danger.
Checklists differ based on the approach and timeframe of trading strategy.
A day trader's checklist could only have a few points in a fast-paced market and take a second or two.
A swing trader or investor may have time for a more detailed checklist, even manually checking each requirement their trade idea meets.
Here are some points to include in your checklist.
Are the market conditions (volatility and trend) favorable for this trade?
Are there any important news events that could happen during the trade? (Economic or monetary)
What is the best entry point depending on your strategy?
Is the stop loss reasonable concerning the potential reward? (risk/reward)
How am I going to get out of this situation? (This is not a checkmark question; instead, describe) Is my position size correct?
Are any of my Trading Plan rules being broken?
Is this order being placed during the correct hours/during my established trading time?
Is it one of the positions I can occupy at the same time?
Is it within my tolerance for leverage?
Is it okay for me to trade? (Not on a forced to take an entry due to recent losses)
Did I spot this trade correctly?
Am I in the correct frame of mind for this trade? (Not revenge trading, angry, overconfident)
It's a long list, but before considering a trade, this pre-trade routine of checking each of the above will ensure your success.