Checklist in Forex Trading

Hello, fellow Forex traders! We all know that it is important to have a trading plan and a profitable strategy, and, of course, follow them.

And it is in the matter of maintaining discipline and following your own trading rules that most of the problems begin. However, there is one simple tool, literally a page of paper, that will help you significantly improve your trading discipline and, as a result, your key performance indicators and profits.

And this simple tool is a checklist. In this article we will talk about why it is important, why a trader needs it, and how to correctly compile and apply it.

Great traders and world-renowned investors plan how, when and why they invest. They understand that to achieve their end goal, they need a map that outlines the route of their trading plan that will help guide them to making the right decisions at the right time.

A trading plan will provide you with structure and encourage discipline in your trading actions. This will help you track your trading process, hold yourself accountable, and measure your success. This will provide you with a basis for a clear understanding of your current situation at any given time, and will also help you identify your goals, outline your strategy, and determine risks and rewards.

Whether you are an experienced trader or just a beginner, a well-thought-out trading plan is the vehicle that will take you to your destination. Not only is it important to have a trading plan, but it is equally important to stick to it. Some of us stick to it easily, while others find themselves in a constant struggle with their concept and the reality of carefully following the rules they have set out in their strict trading plan.

I want to ask you a question: do you really have a trading plan that you would follow, correctly executing your entries and exits from the market? I am a big believer that we should all have a clear system to support our decision making that will help us remain objective and dispassionate about when to buy and sell. However, should any good system that you are supposed to follow be so unambiguous? Should you trust it or doubt it?

Your discipline and commitment to your trading plan can be measured, reviewed and improved. You can incorporate key performance indicators (KPIs) into your trading strategy and determine how closely you are adhering to your rules and trading plan. The number of mistakes you make, based on aspects such as noise, emotion or oversight, can be counted and questioned and your trading plan can be improved as a result. Identify your mistakes by comparing when your system gave you a buy or sell signal and when and why you actually executed it. If most of your trading is not executed according to your system or rules, then you may be managing your positions intuitively rather than following the rules of your trading plan. This approach to trading lacks consistency and will negatively impact your income in the long run.

At the same time, there are cases where trading based on emotions will minimize losses and lock in profits, however only a small circle of professional traders have intuitively mastered this ability on a regular basis. In the end, for the remaining traders, trading based on emotions does not work because it cannot be replicated, and this only leads to inconsistency and frustration. What may work today will not work tomorrow or all the time. Moreover, such trading increases stress and creates bad habits for repeated indecision.

If your trading plan is solid most of the time, then it is worth sticking to. Thus, it is important to make an effort to check the reliability and sustainability of your trading plan before you start trading or increase risks.

Traders often abandon their plans when they do not have enough personal experience to follow those plans and thus naturally lack self-confidence.

So how do you follow your carefully crafted plan? How do you avoid blowing off your own rules? One of the things that gets in our way is, oddly enough, our brain. We think and guess too much.

From this we can assume that if we reduce the activity of our wandering mind and leave only logic, efficiency will increase.

A good way to do this is to create and print a checklist for entering and exiting trades.

What is a checklist? A checklist is a control list. It contains a number of necessary items for some kind of work. In our case, for trading.
A checklist serves to verify whether all conditions correspond to your market entry strategy.

You check the boxes next to each of the conditions; if at least one of them is not met, we will not enter the market.

Everything is very simple. Suppose your strategy is based on two indicators combined with support / resistance levels, you trade intraday, one of these indicators is trend-following, and the second is an oscillator. Then your checklist might look like this:

Run through this list and mark the items with a pencil. If the answer to all questions is YES, we enter the trade. If there is at least one NO, we do not enter.

Everything is so simple and there is no need to think. By thinking I mean the wandering mind mode that leads to unnecessary trades, early entries / exits, and so on. The checklist removes these mental "what ifs," "sort ofs," "it seems," and so on.

If there is compliance with all checklist points, we enter. If at least one point does not match, we do not enter.

Similarly, a checklist can be created for exiting a trade if you exit the market not by take-profit, but by some signals.

It is best to print out the checklist and fill it out anew each time (checking the boxes) for each trade. Believe me, the cost of paper is much cheaper than the possible mistakes from which the checklist will protect you.

How do you make a checklist? Very simple. Take the rules of your strategy and reduce them to a list of points so that opposite each point you can put a check mark if the conditions on the chart correspond to it, or answer with a plain Yes / No.

I also advise including an item about your current emotional state, because trading when you are tired, sick, depressed, and so on is not worth it.

A checklist, in essence, is a control list of items from your trading strategy and trading plan. Its task is to reduce the influence of the "wandering mind" on your trading. Also, a checklist helps you not forget anything. Do not spare a couple of rubles: print out your checklist and put it next to your trading workstation. It will come in handy.

Every time, before opening a trade, go through each item on your list: if even one item does not correspond to the current situation, do not enter the market. And may the profit be with you:)

Best regards, Vlasov Pavel TradeLikeaPro.ru