The Importance Of A Forex Trading Checklist & How To Create Your Own
About 1 and 1/2 year ago, I created my first trading checklist.
That was a big step forward. In fact, I went from having no plan and being confused to being clear on what I had to trade. I saw benefits immediately.
“But, why a checklist?”, you may ask.
Answering that question will be the purpose of this article.
Guest post by Etienne Crete of DesireToTrade.com
Then, I’ll help you in creating either your “first” or “improved” Forex trading checklist.
But before we go on, I want to make something clear…
Using A Checklist Stinks
My goal isn’t to make you adore trading checklists. Most people don’t.
When you think of a professional Forex trader, my bet is that you don’t see someone reading his plan or checklist and acting on it.
Instead, you see someone acting out of intitution and improvising to make the most out of every situation in the market.
Sounds about right?
That’s how I used to see great traders too, and that’s how most people see achievers.
That idea needs to be updated.
It is a fact, however, that people don’t like to use checklists, not just because of laziness, but because we feel interrupted in our natural instinctive actions with a checklist.
Why Checklists Exist?
There’s something powerful about writing things down. What’s more, having a physical object to tell you what to focus on really helps to stay focused.
The following quote comes from The Checklist Manifesto by Atul Gawande:
“We are not omniscient or all-powerful. Even enhanced by technology, our physical and mental powers are limited.”
Checklists In Forex Trading
As much as I like to tell Forex trading is simple, it requires a series of steps to be executed in a precise order. Skipping over a step frequently could move you from making millions to blowing up your trading account.
Take the words of Atul Gawande once again:
“Under conditions of complexity, not only are checklists a help, they are required for success.”
According to Brian Tracy, everything in life is a checklist, and not thinking of specific tasks in that way, makes you more likely to forget something.
How many times have I forgotten to check upcoming news releases before entering a trade?
How many times have I skipped over criteria that would have made my trade invalid?
That happens way too often if you do not have a tool like a checklist to guide you through your trading process.
How To Create Your Forex Trading Checklist
Your Forex trading checklist should contain all the elements you’ll look at before entering a trade and what actions you’ll take once the trade is open.
Talk to any successful Forex trader, and you’ll see that a very precise step-by-step process is followed by the trader on a daily basis.
Your goal with your checklist is to eliminate confusion in what you’re doing. That means you must be precise in your different steps.
Usually, a trading strategy counts three parts:
- Signal: what you need to see before considering entering a trade.
- Entry: how you enter the trade, what you risk, etc.
- Exit: what rules you have to exit your trade (stop loss, take profits, etc.) and where you place those orders.
You’ll want to have a section for each. The Signal is usually the biggest part because it contains several steps (looking at the trend, spotting zones, looking at indicators, etc.).
If you want to get a better idea of what a Forex trading checklist looks like, you can get a pdf version of mine for free. — My Free Checklist
The way I created my checklist is by writing down every single step as I was taking a trade. Then, I went ahead and tested my checklist.
Ask yourself: “Is everything clear and simple to understand?”
If you ever have doubts while you trade, you’ll want to pause and tweak your checklist.
Using Your Checklist
See it as an experiment at first, and once all the steps are covered, then you can print it and place it on your desk.
Make it a habit to review your checklist before every trading day (i.e. in the morning) and go through it while entering every trade.
It might be tough at first (and you may even forget to review it), but soon enough, what you repeat becomes a habit. You won’t even have to think about it, and you’ll go through your checklist every day.
I bet you’ll be surprised by how easier it will become to trade.
Originally published at www.forexcrunch.com on December 6, 2016.