4. Checklists

Having a routine makes it so much easier to follow your plan. What the routine should do is compile most of the daily tasks of your Trading Plan in order to ensure that every detail is processed methodically and efficiently. Each of the components of the Trading Plan has its own set of rules related to the object of their operation. The set of rules for each component is then converted into simple-to-follow instructions we call “checklists”.

These checklists supplement the Trading Plan in different areas of the trading activity. What your business routine will look like will very much depend on how other components of the plan are shaped, but here we are going to lay out some of the key areas.

Before The Open

It is always good to prepare your trading in advance. On the weekend, when the markets are closed, study weekly and daily charts to look for patterns, potential set-ups, key price levels or economical data coming the following days.

If your timeframe is very short-term, then checking the big picture should be done each day before the session starts. It cannot be stressed enough how important it is to prepare yourself strategically and tactically for the business. This routine will also mentally put you in the right frame of mind, focused on the market action. Don Dawson reminds us how important pre-market routines are:

Before trading starts, remind yourself that you have a trading plan that will not allow you to be ruined by a small number of losses, nor will you become rich from just a few trades. Remind yourself that one trade does not make a trader. It takes a series of trades to determine that. So each trade is simply just a small piece of the big picture.Winning or losing is not as important as following your plan and being able to stay in the game long enough to enjoy the profits of your trading.

The Watchlist

A watchlist is the term that many traders use to describe a list of pairs that have met the selection criteria and are waiting for final approval for execution. It is a list containing potential set-ups and trading opportunities. A watchlist is useful because it filters out those pairs where nothing interesting is happening accordingly to your system. It makes it easier to keep focused on a few charts only which will be monitored until you revise the watchlist again.

Include in your plan how you will manage the watchlist and how will you set it up. Will it be in an excel spreadsheet or in what format? How often will you review the watchlist to ensure it remains accurate?

Because trading is inherently exciting , it is easy to feel like you are missing the party if you do not trade a lot. As a result, you start taking trade set-ups of lesser and lesser quality and higher risk. Wayne McDonell explains why preparing the trades is so important:

Planning your trades has an immediate effect on your trading: Most of the stupid trades vanish. They fade out of your trading. You may miss a lot of trades in the beginning, as your trade planning skills are not yet fully developed. However, missing a trade is a lot better that taking losses.

Trade plans are like setting traps a few candles in front of price. Forex is all about setting traps.

As a trade strategist, you should focus on setting a trap for price. To take full control of your trading:
Make price come to you.
Take the high ground.
Build your fortifications.
Wait for the enemy to approach you.
Retreat as soon as you lose your advantage, regardless if it's for victory or defeat.
Do not start the day by opening your charts and looking for a trade.
Do your technical analysis and start planning profit opportunities.

Source: “FX Bootcamp's Guide To Strategic And Tactical Forex Trading”, Wayne McDonell, Wiley trading, pags. 141-142

Starting the Session

Now the trader sits down at the computer and turns it on. How to begin? Write down what you need to do first according to your system. You may need to check for market news and research, opinions on macroeconomic conditions affecting the pairs you plan to trade for the day, or look at what other markets are doing which will affect those pairs.

Depending on your style, there is a specific time at which to start trading. Since the Forex market has several sessions broken into smaller sessions where the volume, price and volatility are complete different from one another, you have to know exactly what is your session to trade. Take note of what the London, New York or Asian session have been doing since you have been away from the market.

Check for holidays in any of the major financial centers, or for seasonalities: are we in December with thinner markets, or is Japan closing its fiscal year? Is it Friday and day traders are closing positions? Is there increased volatility because of corporate earning seasons as released in January, April, July and October? Or are we currently experiencing the quite summer months?

The type of questions to include in your checklist will be defined by your particular trading method. A swing trader, for example, will probably not pay attention to the particularities of the London open, but will be concerned if there is a major economical event during the weekend which may lead certain pairs to gap on Monday's open.

Frame of Mind

A checklist may also be used to assess the emotional state of the trader by addressing key questions about the trader's behavior and routines.

Check if you are in the right frame of mind to trade. Our behavior patterns provide early clues on our mental state and the trader should be able to detect them in advance. If you know, for example, that after four consecutive losses you are more prone to revenge feelings, take note of it.

Keep a constant review of your mind and examine your behavior constantly. By keeping a detailed record in a trade journal for example, you may find signs for recognizing that an old behavior pattern is about to repeat itself or what triggers a certain behavior. Add new findings to the checklist as you find new behavior patterns and their probable consequences. Without this part, trading will become an uncontrollable experience where loss of capital will be a more likely outcome.

Open Platforms

Go over the price charts and check for current trends, deviations from Pivot Points, support and resistance levels, or any other indicator's values, and mark key possible turning points. You may also set price alerts on preselected pairs. These are just examples of tasks to perform once you open the platform, as your checklist will be designed accordingly to your trading system.

Fill the checklist with every single action needed- it can be very frustrating to lose an opportunity (or lose money) just because of a small negligence.

Check Open Positions

For swing and position traders, holding positions overnight is the norm. For those types of traders, checking the overnight price action and managing stop orders is probably one of the routines to follow.

Check if the stop loss or profit target orders are still active on the broker platform and make sure the trade set-up is still valid accordingly to the plan. You may also check if there are orders pending on the platform which shall be deleted or modified.

Decision Matrix

During the trading session, you need a trading system's checklist containing the exact description of the conditions for the execution and management of the trades.

It is very useful to set up a so called “decision matrix” and have all the conditions scored. A minimum score that a potential trade needs to reach before becoming a genuine trading opportunity is then established.

Ideally, this checklist should leave no room for second-guessing the signals generated by the system. This way, the matrix will allow you to make decisions based on the system's rules avoiding external variables or emotional disturbances. To make the decision matrix more effective, try to formulate the conditions through questions which are most easily processed by your mind.

The decision matrix results especially useful with discretionary trading methods where a certain level of ambiguity and the possibility of second-guessing the signals is possible. It helps to identify entries and exits ahead of time and ascertain the probability of success for the trade depending on the outcome of the score. Besides controlling aspects of the executions like timing or technical conditions, the decision matrix may also be used to calibrate the position size. This means that is not only related to the strategies but also to money management.

Reviewing Past Trades

Another checklist is used to record resultant trade details in a trading log to be  studied later on how to improve in each of the trading areas.

Make it a habit to analyze trades from the previous session, for example.

These are trades you have already taken note of and thoughts you have recorded right after the trade. But reviewing them the day after brings more objectivity when the emotional stress of trading no longer lingers.

This additional perspective is only possible by writing a trade log or a trade journal. More about these two areas in the next chapter.


Checklists pertaining to different areas of your plan should be reviewed frequently so you can keep what works and change what does not. Most importantly, it will help you find out why certain things do not work and why others do. You have to know whether the origin of a declining equity curve is in the pre-market analysis; if it is due to the fact that your mental state was not favorable to trading at that moment; or if the money management technique was not adequate.

The benefits of laying out a Trading Plan can be read in this article by Don Dawson:

For those of you already using a trading plan, I applaud you; for the others, I strongly urge you to create one for yourself. Ask anybody who uses a trading plan about their stress levels and confidence in their trading plan and you will see a successful trader. Once you take the thinking and emotion out of your daily trading, you will see remarkable results. If you have problems pulling the trigger to enter a trade, this could be from not having a good trading plan. Create a trading plan and you will be amazed at how easy it is to place a trade. All the anxiety goes away because you know what each move will be after you enter the trade. No guessing, just hard and fast rules to follow. The trades are actually run in the subconscious mind where things happen automatically.