Utilizing a trading checklist is an important element of the trading procedure. It assists traders to remain disciplined and helps them to trade the market with strong confidence. Moreover,a trading checklist provides traders with a set of questions to answer before taking any trades. Thus, they are able to filter out the bad trade signals while analyzing the checklist.
It is critical to distinguish between a trading plan and a trading checklist. The investor’s strategy addresses the larger picture, such as the trading technique you want to use. The trading checklist focuses on each trade and the requirements that must be satisfied before making the deal.
Check the trending and ranging market
Experienced traders understand that identifying a strong trend and trading in its direction has the potential to result in higher probability deals.
A well-known proverb states that surging markets have the potential to rescue traders out of poor trades. As seen here, even if a trader started a short trade after the trend had already established itself, the trend would continue to give more pips to the downside than to the upside. Traders must consider if the market is showing symptoms of a strong trend and whether ‘trend trading’ is part of their trading strategy.
Price in ranging markets tends to trade inside the support and resistance level. Certain currency pairs like EURUSD, GBPUSD tends to trade-in ranges during the Asian trading session. So, if studying the price movement during the inactive hours is a great way to identify the ranging markets.
Degree of support or opposition
For a variety of reasons, price tends to meet particular price levels, and being able to recognize these steps is critical. Traders do not want to be maintaining a little timing position after the price has plummeted to a critical level of support just to rebound higher. The same is true when the price reaches a crucial level of resistance and then falls quickly. Typically, trend traders look for persistent breaks of these levels as an indicator that the market is about to trend.
Range traders, on the other hand, will seek for the price to bounce back and forth between support and resistance over extended periods. Visit the official site of Saxo and learn more about the support and resistance level trading technique. As you gain sound knowledge, you will become better at executing the trades at the important trading zones.
Trade confirmation by indicator
Indicators help traders confirm high-probability deals. Traders will use one or two indicators to supplement their trading technique, depending on their trading plan and method. Avoid overcomplicating the analysis by using several indicators on a single chart. Maintain a clean, straightforward, and easy-to-read analysis.
Risk to reward ratio
The risk to reward ratio is the ratio of the number of pips that traders are willing to risk to hit the objective. According to a successful Trader’s study, which examined over 30 million live transactions, successful traders tends to use 1:3 or better risk to reward ratio.
This is a critical question for traders to say. When pursuing “sure things,” traders frequently sharp up their fund’s utmost. One useful piece of advice is to shut down all transactions and limit the total amount risked to no more than 5%.
Level of impact on the trade
Market news can render the “perfect” trade setup invalid. It is nearly difficult to predict terrorist attacks, natural catastrophes or traders may plan for economic profit such as the NFP, PMI, CPI, and GDP.
Following the strategy
All of the preceding is meaningless unless it is linked to the trading strategy. Abstracts from the trading strategy will provide inconclusive results and simply exacerbate the trade process. Follow the trading strategies and prevent trades until the trading checklist is finished and the deal is concluded.
The trading checklist does not guarantee that all transactions will be profitable. However, it will assist traders in sticking to their trading plan, trading more consistently, and avoiding impulsive or risky transactions.