Smart traders always keep their trades well documented. If you are a novice trader you can do what most traders do – have a checklist and a trading journal. If you want to go for the market then you need an ultimate plan or a solid trading plan. Your plan should include the strategy or strategies you’ll use. It must also have some money management tactics as well as position size, and trading rules and guidelines. However in the trading industry, no two days are similar to each other. No matter how you prepare for your trading day there are always changes that you have to face and these changes surely affects your plans.
Most traders do not blindly follow their own strategies while fitting it to varied market conditions. If you are a trend trader you may only want to execute your strategies in markets that are trending. Thereby, you need to have a checklist that can help you focus in a trending market. With a checklist you can have a clear view of the trend’s direction and what you can expect from it in a day. What will you put in your checklist and what are the things that you need to consider? Here are checklist items that you can use for your trading opportunities:
1. KNOW LONG AND SHORT TERM TRADES
Long term trends are trends that go over a one day session. This means that you need to be more patient towards observing the trend. Short terms trends are at least thirty minutes to one hour. Most of the time, traders like trades wherein momentum shifts happen in shorter period and then align in long term. When doing so you might want to ask yourself the question – what is the general expectation and what are your instant expectations? You may take have trades based on quick expectations. However, if it is more than your immediate expectation then you can quickly bail once you see that there is a hint of trouble. When you trade with a general expectation then you are more geared towards giving more space for your trade.
2. KNOW THE PATTERN
It is ideal to put some notes about the market pattern on your checklist. You might be deceived about market patterns because they may be just a bigger range or wedge pattern. When you see any patterns you may draw lines along lows and highs on your chart so that you can isolate them. You have to pay close attention to these details.
3. SUPPORT AND RESISTANCE
Every trader must know more about support and resistance. There are parts that have influenced strong price shifts on both directions. What you need to be careful about are strong bounces off levels.
4. WEAK AND STRONG MOVES
You have to “Moves” on your checklist. When you see that very sharp moves are going upward and al weaker moves are going down the best thing for you to do is to trade on the longer side until there are changes.
This is one reminder that you need to include in your checklist. When the days is slow then your profit expectations may also be slow especially when the day is volatile. With regards to your targets on price action you may trade on what the market wants to give you.
6. HAS THE STRATEGY WORKED BEFORE
You can also put questions in your checklist. Would it have already worked? If there are already signals occurring prior to your trading you have to ask if it would probably have worked before? When the market is in a disrespectful state to your strategy you have to wait until it calms down. This most likely means that you are lacking one trade and that it is better than imposing a strategy on a non-compliant market.
7. REPEATING TENDENCIES
Repeating tendencies need to be understood in real time. However, sometimes price movements may be repeating. For example, prices move higher and then stalls and then make some attempts to move higher prior to breaking out. On the next time, process may move higher and then a similar thing may happen again. By looking for such tendencies you have a few more confidence to trading but do not have expectations that this will last longer. This can be repeated for two to 4 times and then disappears.