Many day traders are bombarded with trading strategy after trading strategy, regardless of how experienced they are in the market. By having a checklist, many have found that they are more focused and can readily carry out their daily tasks with ease. Even as traders, it is common to have a day trading checklist available to kick off your trading day.
A checklist is simply a written list of tasks or items to perform to review to meet a goal or objective. Additionally, a day trading checklist includes activities or things essential to be performed for your day trades.
The list can be written on a simple sheet of paper, in a spreadsheet, or in an electronic document as long as it is available to review every day. A day trader’s checklist should complement and align with their trading strategy to serve as a simplified summary of your strategy.
So, why is it essential to have a day trading checklist?
Day Trading Checklist Benefits
A checklist offers many benefits that can assist traders with ensuring that they are following their proven plan without any deviations. Here are some advantages to having a day trading checklist:
1. Highlights Key Points From Your Strategy
A checklist can highlight critical areas of your overall trading strategy to complete for your daily routine. Creating this in a checklist format allows the trader to focus their attention on ensuring that each item gets completed.
2. Allows Steps to Be Ordered
Have you ever attempted to do several things simultaneously and then realized that you could not complete one task before another? Ordering a checklist ensures that some activities are completed before other activities to transition between tasks seamlessly.
For example, you could include a checklist activity to select the stocks that you will trade for the day before beginning to draw support and resistance lines. Then, you can order these activities chronologically to ensure completion in the proper order.
3. Remove Clutter and Ambiguity
Like a trading plan, a trading checklist helps remove the noise surrounding us. Perhaps, you have to take your children to school when you wake up in the morning. When you finally get to your computer to trade, your mind is still focused on whether your son or daughter packed their lunch and not on what you need to do to begin your trading day.
It can be a challenge to context switch and multi-task. So, a checklist can be critical to switching off mind clutter and getting you focused on preparing for the market.
Additionally, as you write your checklist, you can be as unambiguous as possible to ensure that your tasks are clear, specific, and small enough to be achieved in a few minutes before progressing to the next thing on the list.
4. Allows You to Approach Each Trading Day the Same
Being a consistent day trader requires that a trader complete the same tasks and use the same strategy each day without deviating from the approach. Why? Because a trader wants to be a master of their trading strategy.
Having a checklist ensures that you approach each trading day the same to help develop that consistent approach to the market. This approach will build discipline and provide more confidence that you are in control over your day trading approach and assurance that you are completing your plan.
5. Ensures Each Step Is Taken
Have you ever cooked a dish and realized that you missed a vital ingredient? Perhaps you prepared a cake and realized that you forgot to add sugar. What would have helped you bake that perfect cake? You guessed it – following a written recipe.
In the same way, a day trading checklist can act like a recipe that we follow to ensure that each step is tracked and not overlooked, as each step can affect the outcome (winning or losing that day).
6. Visualize the Start & End
A written day trading checklist allows the trader to visually map out the start and end list of activities to complete. So, a trader does not have to wonder if they missed a step as long as they followed their checklist. The day trader can see the end goal as they progress through the list.
7. Do Not Rely on Memory
A written day trading checklist is vital to keep us from relying entirely on memory to day trade and prepare for the day. The human mind is very complicated, and we all can easily forget a thing or two. To make a career out of day trading, we want more automated, streamlined, and precise systems and a trading process to ensure stability and reliability.
Now that we have determined why a day trading checklist is needed. Let’s look at the key items to include.
Trading Checklist Components
#1 – Morning Routine (Pre-Trading Routine)
Before trading, each day trader may have specific tasks to prepare for the day. Provided are examples of activities that may be helpful to include as a part of your morning routine or your pre-trading routine:
If you are a day trader who uses pre-market news to determine what you will trade or not trade that day, then maybe this needs to be included in your checklist. Perhaps, you need to check on CNBC to learn of stocks that climbed or dropped significantly overnight or if there were stocks affected by earnings reports or company news (i.e., new product launches, mergers, FDA approvals, significant economic releases, etc.).
This step may need to be a part of your checklist, especially if your strategy requires you to find gappers or trade based upon market news or sentiment.
Another item that most traders will also need to include in their checklist is to review the most recent economic calendar and schedule. This calendar lists major market events and significant economic releases that could potentially affect the overall market and have an effect on stock price moves and price action. Examples of these events include: Consumer Index Reports, FOMC Meetings, Inflation News, Federal Reserve Meetings
If you are a trend trader who trades with the market’s overall trend, you may want to include a market review to determine the direction of the major indexes for the day (DOW, S&P 500, NASDAQ, or the VIX). Most day traders would not argue that the best advice is to trade with the trend.
Trend traders trade on the right side of the market and do not go against the herd. Therefore, a market review should be a part of every trader’s checklist in most cases.
#2 -Day Trade Setup
No matter the strategy used to day trade, every trader has a standard setup that they prefer before beginning their day. This trade setup is unique to each trader based upon their preference and how they approach the market. However, it involves many components to consider. Here are some examples:
Are you the type of trader that loves trading in a particular area of your home, or do you have a dedicated workspace that you trade from each day?
Activities for your physical setup may include: Clearing off your desk or kitchen table to trade or sitting out on your patio with a cup of coffee before you begin your trading day.
It is always important to be in a space where you are comfortable and familiar, as it helps to relieve frustration and anxiety.
Depending on your space, you may require additional setup each day from a digital perspective. This setup includes booting up your computer, adjusting your monitors, and getting logged into your trading platform.
One of the keys to being a profitable day trader is staying mentally in the right mindset. On days when you wake up on the wrong side of the bed or you have a tough morning, it is essential to ensure you have the proper trading psychology before you begin trading.
This particular setup may include reviewing your trading plan and trading strategy to prepare you mentally for the market ahead. It may also involve meditating or watching trading psychology videos to get your head in a suitable mental space.
Last but not least, before entering your first trade, you must also prepare your charts. As day traders, we read candlestick charts to take advantage of a slight movement in price.
This step may include opening your chart(s), loading your technical indicators, and drawing support and resistance or supply and demand levels. Chart setup may also include a brief analysis of market direction and sentiment based on the chart.
#3 – Trade Entry Point
Now that you have identified all pre-trading items on your checklist, the next step is to document the entry criteria and price target that you will look for on your charts to include as activities in your list. Perhaps, you may look for an engulfing candle or when there is a crossover of two moving averages for your high probability trades. The high-level criteria identified in your strategy would be included in your checklist.
#4 – Trade Exit Point
Your exit criteria also need to be included as an activity in your trading checklist. As a day trader, you would need a task to set your take profit and your stop loss. Your existing trading plan may already include your sell signal criteria. However, you just want to ensure that you do have exit points covered as an activity in your checklist. Many often forget to include their stop loss in their trading checklist as we always want to concentrate on winners and not losers. However, risk management is also an essential part of the day trading puzzle.
#5 – Post-Trading Review
Most checklists will miss the following activity that does need to be a part of your overall checklist. Even if you win or lose a trade, it is crucial to have a task devoted to post-trading review.
This review allows time to reflect on the trade(s) taken that day to uncover new opportunities and fine-tune your checklist with any new tasks that may be beneficial. You may also be interested in including a step to document your trades in your trading journal or a step to write a journal entry describing your trading psychology for that day.
Sample Day Trading Checklist
Now that we have discussed the overall components of a day trade checklist. Let’s end by providing a sample of one that you can incorporate into your trading approach. Please reference the sample below. Feel free to download it HERE. Remember that you repurpose the trading checklist to meet your specific needs.
A day trading checklist can be an essential tool that can make or break you as a day trader. It is an excellent resource that can work alongside your trading strategy and overall trading plan. It is a quick way to keep you focused and encourage you to consistently take the same steps each day as you approach day trading.
These checklists are unique to you, and you have the option to include the elements that will fit your trading approach, trading style, and needs. The above article summarizes the areas that may be important in creating your own unique checklist.
Maurice Kenny is a profitable day trader and coach that is available to assist you in creating your own day trading checklist to complement the profitable strategy that he has taught hundreds of students. It’s okay if you do not know where to begin. Maurice is here to help you become a profitable day trader and realize the profit potential you desire.
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