Last updated on April 28th, 2020
Over time, day traders are prone to falling into autopilot when it comes to each trading day.
Trading every day becomes a reflex and while being in the flow may be a good thing, there are times that something can be missed.
In trading, when something is missed too often that can aid you in your trading day, you may find yourself not having the success you once had. The trading world is full of traders who slowly bled their trading account to zero.
There is a simple way to ensure that even the most mundane yet important factors are not being missed that can affect your day trading strategy, and that is through the use of a basic checklist.
Trading Checklist To Improve Your Performance
Some of the best things you can do to improve your trading (and life in general) are often the simplest. Yet because they’re the simplest, they’re often disregarded and not valued.
People are quick to look for complex solutions when they really do not need to. Ensuring that the basics are done well is the foundation which everything else should be built upon.
There was a time when I believed that people who use checklists were boring, dull and incapable of remembering a simple set of tasks or items on a list. I used to look at people shopping from groceries and wondered why they couldn’t remember what they needed to buy!
In hindsight, this was not an especially useful way of thinking. If they are buying items to complete a recipe, missing one of the ingredients could result in a sub par outcome when they start making the item.
Today, the market checklist is at the center of everything I do as a trader.
Airline Pilots Understand The Value Of Checklists
In trading, one of the most obvious but most important ideas is to know what is going on at any given point in the trading day and not either being taken by surprise or ‘forgetting’ a particular aspect of the market which may have bearing on a trading decision.
A simple, well written and thorough checklist can help you to remain on top of all that’s around you.
Imagine if an airline pilot decided to do the run through of all their instruments by memory alone. Even after decades of flight experience, the checklist is gone through to ensure, beyond any doubt, that everything important to the flight has been checked.
When day trading, knowing which economic releases are due out, the current market mode and important technical references are all potentially pivotal to your efficacy each time you trade.
Trading too close to NFPs (non-farm payroll) or buying in an aging uptrend close to an important technical resistance level for example, are not things which are going to help you in your never-ending quest to making it as a professional trader.
However, they are not especially difficult obstacles to avoid.
Can A Trading Checklist Improve Your Results?
Consistency in trading is vital to success and a checklist is a step by step approach to ensuring you are consistent
- A checklist is a means to ensure you do not forget anything.
- A checklist is a point of reference for important observations.
- A checklist can reveal patterns where you may have missed them.
- A checklist can make you much more organized and allow you to complete tasks more quickly.
- A checklist allows you to easily incorporate new variables into your trading.
- A checklist forces you to consciously address items which you might ‘skip’ over normally.
It is impossible to argue that there are not huge benefits to using a checklist if you want to become a successful trader.
Sample Trading Checklist
You might think that it’s easy enough to remember to do this or check that each day without a list, but for me it’s when the market is going crazy that you really need the information. This is usually when the information hasn’t been checked properly.
You can use this checklist as a running start to build your own as each trader will have look at things differently. The type of trading system you use and the style of trading, day trading, swing trading, and even the markets you trade, may have their own needs.
Don’t shrug this off. It may seem simple to put together but it needs to be well planned out and constructed in such a way that it flows. So think carefully and create a valuable checklist for your every day trading routine.
Market Technicals – This can include clusters of previous price action, highs and lows, longer term swing levels
Market State – A market this is ranging can destroy a trend following system especially for short term traders. There can be trends inside of larger time frame ranges and this is why each trader may have a different opinion and take different action.
Events – There is no excuse to be blindsided by a scheduled economic data release and with the many economic calendars available, you’d be foolish not to check them. Sudden events do happen and that is why risk management is vital to trading.
Possible Trading Scenarios – It is not about being wrong or right but thinking through how the market may evolve keeps you on your toes. Remember, the “market” will do whatever it decides without a concern for you so having a few scenarios in mind will able you to plan a reaction in advance.
Personal Condition – When a trading session is a tough haul, we can be affected and this is especially true for day traders. Check in with yourself and ensure you are not prone to revenge trading, ignoring your stop loss but cutting profits, or have exceeded your POQ time.
In Session Progress – You started the trading session with an idea of how the instrument could move and this is where you see if your expectations are being met. If not, have you covered other possible trading scenarios that are enabling you to still capitalize on the moves that are happening?
End Of Day Tasks – Don’t just shut down your trading computer and call it a day. Ensure you do an evaluation of your trading performance and note things such as
- Did you follow your trading plan?
- Did you follow risk management protocols?
- Were your trading results a result of you not being consistent or because of the market moves?
As mentioned earlier, each trader may want to put their trading checklist together only using variables that are essential to their trading day. These are the checks that are performed every trading session without fail.
Take the time to make yours.