๐ STEP 5 to MASTER TRADING: Create a Checklist ๐
If you already have a trading plan - thatโs really great. Now itโs time to take one step further and create a checklist. You will refer to it before each and every trade, and youโll enter only if 100% of the checklist is present.
You can have different kinds of trading plan, it can have 5 or 50 pages - and it will describe your overall approach. Unfortunately, when it comes to executing your edge in the market, itโs very easy to bend your rules โjust a little bitโ, and all of a sudden you find yourself taking trade that is only a distant reminder of your actual trading setup.
Most traders will damage their account not because their strategy is bad but because they start to take random set up outside of their trading edge. Blowing the account usually doesnโt take more than several hours of emotional trading.
So thatโs why itโs essential to have a short and clear checklist, usually up to 10 sentences usually that describes, point by point, what your trade entry looks like. You can even check every point before entering a trade (I do it). Of course, with time youโll perfectly remember that checklist, but itโs also important to honestly follow it without checking every time, and the rule-following skill itself is a separate topic.
Think about it. How many traders are constantly looking for โsomething elseโ, one more strategy. Instead of grinding deep into some specific concept, pattern or trading system, they will run to the next one with the first normal losses. They are running on the surfice for years instead of going deep to the core of trading - which, in my opinion, is the perfection of one strategy.
Sometimes they even find what they like and what starts to show some kind of results. But then some time passes, and after any kind of emotional stress (would it be euphoria after a winner or fear and anger after a loser), he can start to deviate from his rules. A beginner can be so emotional that he can enter random trades, one after another, in the course of a few hours, destroying a big part of his account.
There are a lot of other issues behind such inefficient behavior, however, a checklist is one of the first steps to handling it. Because if you donโt truly know what youโre looking for at the market, youโll take the first trade youโll find.
๐ฉ"Right or wrong" mentality is a fundamental flaw ๐ฉ
Youโre only right when youโre following your rules, and youโre only wrong when you take random setups. Again: even if you have a loser but you followed your setup - you're right, and even if you have crazy profit but it was a random trade - you're wrong, because this approach is not stable long-term.
Yes, traders do predict the price movements in a way, but only as a side effect of following their rules and executing their system. A trader will not be fixed on his predictions, and because he drew a box or a line, he will not expect the market to obey his colored drawings. A traderโs job is to take a setup based on his experience and testing, and he should let go of the expectations and his trade, managing on the way of course. This is a very deep question, in my opinion, and deserves a separate post later.
Thatโs why next time when youโll see someone asking: โShould I buy or sell sir?โ, you can surely tell the person is in the very beginning of his journey.
๐ฉHow to create a checklist? ๐ฉ
Take a moment and describe in the short form how does your entry look like. What are your rules for Structure, Zones of interest, what is your entry confirmation, and what is your risk and management? I like to actually checkmark every point before each of my trades, so Iโm sure Iโm following my plan. Hereโs an example of what my checklist looks like:
๐Bonus for everyone still reading :) If youโre struggling with any discipline issues, ask yourself a question: โIf I would receive a fully funded 100k account, for free, would I start to follow my rules and would I be more disciplined than I am now, and would I start โtrading the right wayโ at last?โ Try to be honest with yourself.
It may seem strange, but many novice traders think that something should happen before they will โreally stick to their planโ. It could be โjust one more good winnerโ, or โif only I had bigger capitalโ, or โwhen I finish this yet one more educational courseโโ - and AFTER that Iโll do what I know I should be doing.
So, if your answer to that question is yes, then this is a clear indication youโre still in a very beginner mindset. Try to realize that ANY external change will not change the way you are. You need to change yourself FIRST, the way you behave in the markets and your mindset, and then everything external will follow.
