Executing with Confidence: Why Write a Trading Checklist?

An important skill to learn is how to execute a trade with confidence with a trading checklist. One of the most common exercises of a retail day trader is to “pull the trigger” or entering a trade. You look at the days news, fundamentals and technicals and when you decide to open a position you simply call your broker or execute the trade online using your software or browser. Simple isn’t it? But have you has times when you got stuck between the decision making stage and the actual exercising your decision? Have you ever missed a trade because you hesitated, got cold feet or were simply indecisive at the time you needed to execute your planned trade?

A trading checklist will help you make those decisions and give you confidence to execute your trades. Your trading checklist should be a well defined list of criteria, which you have personally backtested and hence would give you a higher probability of spotting and executing potential winning trades.

Can you visualise yourself in front of your computer staring at the trading screen, you are trading with confidence. You have a tested trading checklist in hand and you are ticking off each criteria which matches the current market environment. You are now confident enough to execute the trade.

How to Write a Trading Checklist

Each different trader would have a different trading checklist to give them confidence to execute their trades. If wearing your rabbits paw and jumping up and down is a part of your winning trading strategy, throw them in. If the stars need to align, throw that in as well. But the majority of traders who are trading with a checklist simply have a list of technical or fundamental analysis criteria to match their trading system. Ask yourself: what is your trading system? Which technical indicators do you use when you are trading? What signals are you looking for? Crossovers? Overbought/oversold regions? What fundamental factors are you looking at? P/E ratio? The size of the company, their credit ratios... trends, support resistance....

Whatever you write in your trading checklist, your goal is to make the list as objective as possible to eliminate any human error. Prioritise your list in order of importance, so that as you tick things off, if one criteria is not met, you do not need to continue down the list wasting time. Having your trading checklist alongside your trading objectives as part of your trading arsenal will help you quickly decide if a trade is worth entering and will make it easier to execute your trade with confidence.