Pilots don't trust memory. Before every flight, they work through a checklist. Step by step. No shortcuts.
Trading is the same. Every time you click buy or sell, there are critical items that must be verified. Miss one, and the trade that looked perfect becomes a preventable loss.
Here's how to build a checklist that actually helps.
Why Checklists Work
Your brain under pressure is unreliable. When you see a setup forming, adrenaline kicks in. You want to act. In that state, it's easy to forget basics.
A checklist externalizes critical thinking. It forces you through each requirement before action. It catches mistakes that excitement would overlook.
Studies show checklists dramatically reduce errors in complex tasks - surgery, aviation, construction. Trading is no different. The best traders use them religiously.
Essential Checklist Categories
Your checklist should cover these areas:
1. Setup Validity
- Does this setup meet my criteria? (All of them, not just some)
- Is this my trading timeframe or am I reaching?
- Would I take this trade if I'd already won/lost today?
2. Context
- What is the higher timeframe trend?
- Am I trading with or against it?
- Any upcoming news/events that could impact?
3. Risk Management
- Where is my stop? (Specific price, not "around there")
- What is my position size? (Calculated, not guessed)
- Is this within my per-trade risk limit?
4. Execution
- What is my entry trigger? (Specific condition)
- What is my target? (At least one defined level)
- What would invalidate this trade before entry?
Sample Checklist Template
Here's a template you can customize:
PRE-TRADE CHECKLIST
- □ Setup matches my defined criteria
- □ Higher timeframe direction supports this trade
- □ No major news within my hold time
- □ Stop loss level identified (price: ____)
- □ Position size calculated (shares/contracts: ____)
- □ Risk is ≤ 1% of account
- □ Entry trigger defined
- □ Target level identified (price: ____)
- □ I am emotionally neutral (not revenge trading, not overconfident)
- □ This trade fits within my daily trade limit
If any box remains unchecked, do not take the trade.
Making It Actually Work
A checklist you don't use is worthless. Here's how to make it stick:
Keep it visible. Print it. Put it next to your monitor. You should see it without looking for it.
Keep it short. 10-15 items maximum. Longer checklists get skipped. Cover the essentials, not every possible consideration.
Make it physical. Actually check boxes. The physical act of checking engages your brain differently than mental review.
No exceptions. Use it every single trade. The moment you skip it "just this once," you've lost its power.
Review and refine. After losses, ask: "Would my checklist have caught this?" If no, add an item. If yes but you skipped it, that's a discipline problem, not a checklist problem.
The Emotional Check
Include at least one emotional check on your list:
- "Am I taking this trade because I want to, or because I need to?" (Need = danger)
- "How would I feel if this trade loses?" (If the answer is "devastated," size down)
- "Am I rushing?" (Rushing = missing things)
These checks catch the emotional states that lead to bad trades. They're easy to skip - which is exactly why they need to be on the list.
Post-Trade Checklist
Consider a checklist for after the trade too:
- □ Did I follow my entry rules?
- □ Did I respect my stop?
- □ What did I learn?
- □ Is there anything to add to my pre-trade checklist?
This closes the feedback loop. Good decisions should be reinforced. Bad decisions should be identified and prevented.
Adapting to Your Style
The exact items on your checklist depend on your strategy:
Day traders might add:
- Is it within my trading hours?
- Is volume adequate?
- Am I at my daily loss limit?
Swing traders might add:
- Any earnings during my expected hold?
- Is the sector supporting or opposing?
- Weekly structure aligned?
Options traders might add:
- Is IV appropriate for this strategy?
- What's my max loss scenario?
- Time to expiration adequate?
Build the checklist for YOUR trading, not generic trading.
The Bottom Line
A pre-trade checklist isn't bureaucracy - it's protection. It catches the mistakes that cost money. It forces rational engagement when emotion wants to take over.
Build one. Use it every trade. Refine it based on experience. The few seconds it takes will save you from the trades you should never have taken.
Some traders integrate objective data points directly into their checklists: What cycle phase are we in? What's the confluence score? Does volume confirm the move? Does higher timeframe regime align? When these become automatic checkboxes rather than subjective assessments, the checklist gains teeth.
Pentarch's clear cycle signals integrate naturally into your checklist - one objective confirmation that the market context supports your trade.
Add cycle context →