Designing your first price action trading plan is daunting. There are so many approaches to consider and decisions to make. On top of that, there’s that nagging thought that you’ve missed out something critical in your plan. This is why you’ll find this trading checklist helpful.
Try your best to answer the questions in this checklist.
In the process, you’ll uncover gaps in your price action trading framework. From there, you can work on reinforcing your trading plan.
There are no perfect answers, but this checklist will help you to cover all the essential trading aspects.
Most questions are left open-ended deliberately and are not meant to be prescriptive. For these questions, you cannot answer with a simple yes or no.
You’ll need to define and describe your trading plan.
This approach means more work for you, but it also makes you more accountable to yourself.
Market Perspective and Context
- Why are you trading with price action?
- How do you determine which markets to trade?
- How do you determine what time frame to trade?
- How do you determine what time of the day to trade?
- Are there hours of the day that you should stay out of the market? Why?
- How do you check if there’s enough volatility to trade?
- How do you check if there’s sufficient liquidity to trade?
- How do you handle scheduled economic/company announcements?
- How do you determine the market bias?
- How do you know that the market is trending?
- How do you know that the market is trapped in a range?
- What is your plan for when you’re unsure of the market bias?
- How are you marking support and resistance?
- How do you interpret support and resistance that have been broken?
- How are you prioritizing different support and resistance zones? (e.g., swing pivots of varying degrees, trend lines, high and low of the previous session, accumulation and distribution zones, higher time frames)
- Are you drawing too many support and resistance lines on your charts? Are you confused by them?
- How do you identify price momentum?
- How are you going to make sense of volume?
- How do you identify a setup?
- Why are you using these price patterns?
- When do you need confirmation for a setup?
- What type of order are you using to enter the market? Why?
- How do you handle markets that run away from you before you can get in at your desired price? Do you chase the market?
- What is your strategy for re-entry?
- How do you take profit for a trade that goes your way?
- How do you limit your loss for a trade that goes against you?
- What is the rationale for your stop-loss placement?
- How do you respond to mid-trade movements?
- What types of orders are you using to exit from the market? Why?
- Do you know that stop-orders are not guaranteed?
- What is positive expectancy?
- How do you determine your trade’s likelihood of success?
- How do you determine your reward-to-risk ratio?
- How do you know if your trade has positive expectancy?
- How do you determine your position size?
- Can you sleep at night with the amount of risk you’re taking?
- How do you handle consecutive losses?
- How do you handle consecutive wins?
- How are you feeling? A sense of hubris? Defeated?
- Are you stressed?
- How do you judge if you’re in an ideal state of mind to trade?
- How do you distinguish between strict trading rules and less rigid trading guidelines?
- How do you assess if you’re following your trading plan?
- How do you record your trades?
- How do you measure your success? By profits or by your discipline? Both?
- How do you plan to improve your trading framework over time?
As you work through the questions above, you will find yourself repeating part of your answers to different questions. Yes, the answers overlap. In trading, every aspect is inter-dependent. Over time, you’ll learn to recognize these complex relationships within your trading framework.
Put in serious effort to answer the questions above. If you do so, you’ll be far more prepared than most price action traders out there.
For me, my attempt to address these questions led me to create my price action trading framework.