Pre-Trade Checklist

A pre-trade checklist is a short list of questions you answer before every order. Pilots use checklists not because they forget how to fly but because skipping one small step under pressure can be costly. Trading is the same. Most bad trades are not caused by a lack of knowledge but by skipping a check you already knew you should make.

Why a checklist works#

Markets create urgency. A price is moving, a candle is forming, and it feels like the opportunity will vanish. A checklist forces a pause of thirty seconds to two minutes and turns the decision back into a calm one. It also links each trade directly to your trading plan, so your journal records trades taken by the plan, not by impulse.

The checklist#

Answer every question with a clear yes before placing the order. One no means no trade.

The setup#

1. Is this one of my defined setups? Name it. If you cannot, it is not a plan trade.
2. Does the higher timeframe agree? For example, a long setup on the hourly chart while the daily trend is up. See Multi-Timeframe Analysis.
3. Is the market liquid enough right now? Check the Bid-Ask Spread and recent Volume.

The risk#

1. Do I know exactly where I am wrong? The stop price is written down before the entry.
2. Is my position size calculated from that stop? Risk per trade within your rule, such as 1% of the account. See Position Sizing.
3. Is the reward worth the risk? The distance to a realistic target compared with the distance to the stop meets your minimum Risk/Reward Ratio.
4. Am I within my limits? Daily loss limit not reached, open risk across all positions within your Portfolio Heat limit, and not adding a position highly correlated with one already open.

The calendar and costs#

1. Is there scheduled news before my planned exit? Earnings, central bank decisions or major data can cause gaps through your stop. See Trading Economic Releases.
2. Have I accounted for costs? Spread, commission and, for overnight holds, financing.

Me#

1. Am I calm? Not trading to recover a loss, out of boredom or because of excitement after a win. See Emotional Control.
2. Would I take this trade if I had no position and no recent results? This catches revenge and overconfidence.
3. Do I know my exit plan for a profit? Target, trailing stop or time limit, decided now.

A filled in example#

Adapting the checklist#

Your checklist should match your style. A day trader might add "am I outside the first five minutes of the session?" An options trader might add "is implied volatility rank low enough to buy premium?" A prediction market trader might add "have I read the market's resolution rules and data source?" Keep it short enough that you actually use it; twelve items is near the upper limit.

Common mistakes#

• Running the checklist after the trade. It only works before the order.
• Accepting "mostly yes." One clear no is a reason to wait.
• Letting it grow to thirty items. Long checklists get skipped. Trim anything that never changes your decision.

Frequently asked questions#

What should be on a trading checklist?#

Your setup, the higher timeframe trend, liquidity, stop placement, position size, reward to risk, limits, upcoming news, costs and your emotional state.

Does a checklist make me miss trades?#

Occasionally, and that is usually fine. The trades it filters out are mostly impulsive ones with poor risk. If valid trades are often missed, shorten the checklist or prepare orders in advance.

Do I need a checklist for small trades?#

Yes. Habits are built on small trades, and skipping steps on small ones makes it easier to skip them on large ones.

Next, learn how to review each trade after it closes in Post-Trade Analysis.