You have probably read about how a trading system and trading plan are indispensable components of your trading. Indeed, if you do not have some kind of system or method which tells you when to enter and exit trades — get one. A checklist for trades can be a part of your trading plan. Your trading plan will help you organize when you watch the charts, when you trade, what timeframes you look at, how you manage your money, how you work with alerts, and more. While your system probably has your entry and exit rules and target profit and stop-loss rules, it probably does not have a full list of things to keep in mind as you trade. Nonetheless, this needs to be part of your trading plan.
Why make a trading checklist to help you keep track of what you are doing? Trading real money (or even demo testing for some people) can be very stressful. When you are dealing with your emotions and working on making trading decisions, the last thing you want to do is forget something simple just because it is not written down. A trading checklist helps you to make sure you consider all contingencies.
For example, you might have a checklist for entering a trade. This is a checklist you look at after you find a setup identified by your entry criteria and before you actually hit "buy" or "sell." You might ask yourself whether the context around the trade looks good (unless this is already part of your entry criteria). You could also make sure you are investing the correct percentage of your account (obvious, yes, but remember, if you are frantically trying to place a trade to catch a move, you may not look carefully at what you are doing — especially if your trading platform is confusing, and many are).
Some questions to ask yourself while in a Forex trade might include:
This is just an example — what you put in your checklist could vary quite a bit. Your checklist could include not only considerations about the trade itself but considerations about yourself. If you have a tendency to hang onto losing trades when you should let them go, you could even ask yourself in your checklist if you are doing so, and include a reminder about the ways in which your emotions tend to impact your trading. Your checklist not only checks your trading, but also checks you. It is a form of accountability, and it makes trading much easier to manage when emotions run high.
Of course, the check list should be a part of a larger trading plan. One thing more about this — when emotions start rule your mind and situation on the charts is very extreme, then just keep following the trading plan, so you can avoid many mistakes and loses. That is the primary homework that all traders must do. Without any planning, you will probably unable to see what and why you are trading.