In another article, we have already said that you should never spend time searching for suitable trades. It was also said that a checklist might help you make sure that a trading setup is reliable and worth opening. So let’s talk about such a checklist today.
Forex Is Like Business
For many people, trading in the foreign exchange market is associated with gambling, although in reality Forex is a real job or even a business. And a lot of things in this area work according to the laws of business.
Imagine that you come to the bank for a loan to open your own business. No one will give you money just because you ask for it. You will require a clear business plan for several years in advance, a well-planned budget, and much more. It is quite understandable that without clearly defined goals and a plan you cannot survive in the industry. You can say the same about Forex.
If you want to stay in this business, you need to write everything down to the smallest detail and follow the compiled list. Obviously, at first, it will be difficult for you to keep everything in mind. But you do not need it. It is best to write it down and keep it in front of your eyes. Check your plan on every step of your trading. This way, you can develop the self-discipline that is crucial for success in Forex.
How to Use a Checklist
So, let’s begin with the basic definition. A checklist is a detailed plan of action or a list of conditions. You can make such a list for everything related to trading:
- Requirements for opening and closure of a trade
- List of actions you should do every morning before entering the market
- Week-ahead planning of trading activities during weekends, etc.
If you use the checklist as an action plan, then you should simply complete the terms one by one. For example, a checklist for your morning routine might look like this:
- Check the economic calendar for important news releases for today
- Indicate when it is better to refrain from trading
- Mark highs and lows on the daily chart
- Draw a trend line
- Draw support and resistance levels
- Repeat the same actions on a chart with a lower timeframe
- Check indicators for possible signals of a price reversal, etc.
Obviously, the list is individual for each trader. Only the way you use it remains the same. Follow the steps one by one and do not proceed to the next until the previous one is marked as completed.
If your checklist contains a list of conditions, then you need to work with it a little differently. You need to describe all the necessary factors for your actions and mark them on your list. If at least one of the items on your list remains unchecked, then the market situation or a trading setup is not suitable. Take a look at an example of a checklist for opening a trade:
- It’s an American trading session
- There is a suitable signal on the chart
- My indicator also gives an appropriate signal
- The second indicator confirmed previous signals
- The signal on the chart is confirmed and the price has moved in the direction I need
- The risk-to-reward ratio is 1:3
- There are no important news releases in the near future, etc.
Your list will depend on your trading style and strategy. Its size and content will vary. However, no matter what your list is, the main thing is to follow the basic rule - do not enter into a trade if at least one point on your checklist is not marked.
How to Create a Checklist
I think that everything is clear with a list of actions for every day or week in advance. Just make a list of tasks that are important to complete one after another. Write it by hand or type it on a computer and print it. Then put the list in a prominent place so you can use it all the time.
The same principle applies to the list of conditions. Just turn the rules of your trading strategy into a list. Make sure you do not miss a single factor. Only this way, the checklist will be beneficial.
If you do not want to spend a lot of paper and print a checklist every time, you can laminate it and use an erasable marker. Just find the option that suits you best and use it.
Obviously, the checklist will not provide you with a win-win trade and will not make your trading routine more productive than it actually is. The purpose of this method is different. A checklist will help you not to remember everything. You can always be sure that you are strictly following the plan and that, for example, you are not opening trades on emotions.
After some time, your actions will reach automatism. Completing the checklist will become a habit. Eventually, you will increase the level of your self-discipline and that will increase your chances of success. Most likely, later you will not need to use the checklist at all, however, in the beginning, this tool will help to increase your trading performance.