Using a trading checklist is an important part of the trading process because it helps traders stay disciplined, stick to their trading plan, and gain confidence.
Keeping a trading checklist provides traders with a list of questions to answer before executing trades.
It is critical to distinguish between a trading plan and a trading checklist. The trading plan addresses the big picture, such as the market you are trading and the analytical approach you intend to use.
The trading checklist focuses on each individual trade and the conditions that must be met before making the trade.
A trading plan is incomplete without a checklist. That's fantastic if you already have a trading strategy. Now it's time to take things a step further and make a to-do list.
You will refer to it before each trade, and you will not enter unless everything on the list is present.
Trading plans come in a variety of lengths, ranging from 5 to 50 pages. It will explain your overall strategy, regardless of how long it is.
When you're trying to use your market advantage, it's all too easy to break your rules "just a little bit." Before you know it, you're making trades that have nothing to do with your original trading strategy.
Most traders lose money not because their strategy is flawed, but because they begin to take random trades that are outside of their trading edge. It usually only takes a few hours of trading based on how you feel.
As a result, it's critical to have a short and clear checklist, usually no more than ten sentences long, that describes your trade entry step by step.
You can even scrutinize every detail before making a deal (I do it). You'll eventually remember that checklist by heart, but it's also critical to follow it honestly without double-checking every time. The ability to follow rules is a separate topic.
How many traders are constantly on the lookout for "something else" or a new trading strategy? Instead of mastering one concept, pattern, or trading system, they will move on to the next as soon as they begin to lose money.
For years, they have been operating on the surface rather than getting to the heart of trading, which, in my opinion, is the perfecting of one strategy.
Sometimes they find something they like and it starts to work for them. But after a while, he may begin to break his rules if he experiences any kind of emotional stress, such as happiness after a win or fear and anger after a loss.
A novice can be so emotional that, over the course of a few hours, he may make a slew of random trades that wipe out a significant portion of his account.
There are numerous other causes of this type of inefficiency, but creating a checklist is one of the first steps you can take to address it.
Because if you don't know what you're looking for on the market, you'll settle for the first trade you come across. Make a checklist and stay away from gambling.
You can only be correct if you follow your rules, and you can only be incorrect if you pick setups randomly.
Again, if you have a loser but follow your setup, you are correct; if you have a huge win but a random trade, you are incorrect because this is not a long-term stable way to trade.
Yes, traders can predict how prices will move if they follow their rules and use their system. A trader will not be fixated on his predictions or expect the market to follow his coloured drawings simply because he drew a box or a line.
A trader's job is to take a setup based on his experience and testing and then let go of his expectations and trade, of course, while managing along the way. I believe this is a very deep question that deserves its post later.
