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What is a Trader Checklist? Here are Five Things.
Financial Markets

What is a Trader Checklist? Here are Five Things. 

Trading is one lucrative skillset that has the ability to generate short term returns that can be effectively deployed elsewhere or built upon to generate even more long term capital. It is a skill that can easily elate and disappoint novices, sometimes, it does the same to experienced traders. Undeniably, it is a zero sum game and only requires your best-self lest it will be an endeavor in futility. As such, here are five things that every trader ought to have in their checklist before executing a trade;

Assess Where You are in the Market

It is important to know where you are in the market in terms of prevalent market conditions. Could you be in the middle of an economic meltdown, political instability or persistent rate hikes? All these have significant effects to how a stock or currency performs. Ignoring them might find get you off-guard and work against your trading system. Make sure you understand economic news, their release times and how they affect a stock, currency or even a nation.

Know if a market is Oversold, Overbought, Ranging or About to Reverse

Knowing the current posture or state of the market is not to be ignored. A market could be overbought, you would not want to rush to buy an overbought instrument. This does not mean an overbought trading asset cannot be bought, instead, one has to exercise caution as such an instrument could easily be moving into consolidation or reversal. The same criterion inversely applies to oversold markets.

Ranging and about to reverse markets also need to be smartly engaged. Know what to do when in such markets and ensure alignment with your system. For instance, do not execute a trade in a ranging market when your system is solely trend based.

Take on Calculated Risk

In the pursuit of success, it is important to strive for sustained profitability. There is no better way in doing that than in knowing your risk. Your risk should further be calculated and assessed against your reward. Always ensure that your risk to reward ratio is at a minimum of 1:1. The bigger the ratio, the better.

Mental Clarity

Successful people will tell you that success is a state of mind. It all starts in the mind. You have to be in the right form mental state and form. Have solid goals that are realistic that do not put unnecessary pressure on you to perform in the markets. As you might know by now, there is nothing that you can do as a retail trader to influence the market. This calls for sobriety and objectivity when executing a trade. Always ensure that your mind is clear and if possible strive to be in a good mood to help you make the best trading decisions devoid of emotions.

Ability to Effectively Manage Trades Patiently and Proactively

As noted in the preceding section, there is little that one can do to influence the market. It is almost practically impossible to point a market towards a certain direction. Fortunately, time when utilized in the best manner, tends to reward traders and their counterparts that are investors. Patience is a construct of time and so is being proactive. Ensure that any trade that you take is in line with your trading system. Be willing to be patient to let your system play out. You do not want to be closing winning trades early. On being proactive, once your trade is invalidated, make sure you cut your losses early, a calculated stop loss can help you manage this without emotions. Avoid the tendency to widen your stop loss as this is a recipe to denting your trading capital. There will always a better opportunity in the market if you wait patiently.

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