Checklist Prior to a Trade

NOTE: This checklist is mainly for “In to the level” type of trades, which is my most frequent type of trade. Hands down, this is the trade style to take to learn consistency and work on skills with the strategy I use. See Types of Trades to see the other types of trades I look out for.

The key to being consistent in the market is following rules. While the rule set followed has a lot more detail than what is listed below, these are the basics elements of the rules I hold myself accountable to.

Before entering an “In to the level trade”, I consider the following:

Speed

I look for a move out of the gate at 9:30 (market open). Ideal is several minutes either straight up or straight down into a predetermined level of support or resistance.

There is a major difference between price action that slowly grinds it's way to a level, and price action that screams towards a level like a freight train. The strategy I use (paired with the volatility of options) rewards those who can buy at the scariest times, which is often presented as SPEED in to a level. This is a major part of this strategy and trading in general where one is faced with fear.

Considering entry area of trade box is 50 cents, I like AT LEAST a 1 point distance from opening price to the actual trade level. The more distance, the better. If the market opens right at levels with not enough distance, I either don’t take the trade, use smaller size, or wait for another type of trade.

Sticking to levels was difficult in the beginning. Getting over FOMO (fear of missing out) and sticking to levels only is actually a big hurdle.

I have clear trade boxes on the trades I intend to take, IF they trigger. Many factors come in to play on deciding which level to trade, it comes with repetition and experience. There is a difference between closer levels and farther levels. Again, this is a part of trading that takes time to comprehend the psychology of decision making.

The strategy is heavily focused on capitalizing on the first test of a level. The strategy is not about taking setup formations such as double tops, double bottoms, etc. If consistency is the goal, first test of a level is where it’s at. Paying out on the first reaction of the level ties into this as well. I use trade boxes to visualize my risk and first target.

See the trade plans to see the consistency of the first test of a level.

The strategy used, while focused heavily on support and resistance, also favors the morning session. I focus on trades prior to 10:00 am. This is for a few reasons, most important is the combination of speed, distance, and direction need to happen fairly quickly. BE AWARE of when scheduled economic numbers are released. Note that 10:00 is typically when the first set of numbers are released after market open and can often cause even quicker movement of price action. This strategy works best when getting out before any type of news/numbers influence.

Arguably the most important on the list, risk is simply not talked about enough. One has to understand their risk tolerance.

Doing simple math and understanding how much one is risking is a must.

Having multiple support or resistance levels within the trade box is a great sign. This is called protection. The more protection in a trade, the higher the probability of a first reaction to capitalize on. With time, it becomes easier to spot the trades more likely to be in your favor.

Understanding the potential outcomes makes it easier to accept the outcome!