Trade Organization

It's the end of the month and I've been doing some housekeeping, going over my plans, checklists, etc. It occurred to me that some things don't get mentioned a lot, such as trade organization.

I use the following everyday:

A daily checklist of what to look at and for.

A money management checklist. Even though I know it by heart, I read it everyday so I won't get cocky or stupid.

A pre-trade checklist. This is designed to keep me from making impulsive trades (always my weakness).

A trade setup checklist. I look for certain things and using the checklist keeps me from taking trades I really don't want to be in.

An Exit Ritual. This is something I've never seen on forums. It was taught to me by a professional and it is probably the most valuable thing I use. Before I close out any trade, I go over the Ritual to make sure it's the right time to close the trade. Another one of my weaknesses is closing out trades early (a pretty common one among all traders) and this ritual keeps me in lots of trades when I read it and realize I want to close for no good reason other than greed.

Finally, here's a rule that was taught to me that has proven to be very valuable to me. It might prove to be the same for you.

Don't make any changes to any of your rules on a weekday!

This keeps you from impulsive screwing around. If you find that you cannot continue with your current rules, stop trading for the rest of the week, then make your changes over the weekend.

I would be interested in hearing about your exit rule!!

Tx

Also- I never make any changes to my actual trading methods unless I make a change in my trading plan. So it is a good rule to not make any changes in trading plan except on weekends.

I use a flowchart for my Exit Ritual. It's simple, yet effective. It sits next to my keyboard when I'm in a trade. When I find myself wanting to close a trade, I use it.

Bear in mind my trades have technical targets...I'm not a trend follower, which would require a different exit strategy.

seems like you have a very well defined plan and I would like to know what the following list you mentioned is about. It would help lots of us if you can attach it also.

Dail Check List
Money Management check list
pre-trade check list
Trade set-up check list

Thanks in advance Dopey. Much appreciated.

Hi Lerner,

Most of those lists are specific to how I trade. I'll give you an idea what's on each one.

Daily Check List - these are things I look at everyday before trading. They consist of the news announcements for the day; the two things I look at for fundamental analysis, one of which is the Cot (it changes once a week, so I really don't have to look at it everyday), the other is freely available but I'll keep it to myself.

I trade with Pitchforks so I look at the dominant forks on the Daily, 4 hour and hourly. I also look at Fib confluences and this consists of daily updating them in an Excel spreadsheet I made, ala FibNodes by DiNapoli.

A daily checklist for you might be different, so you need to consider what is necessary to know before you even consider getting into a trade on any given day.

Money Management Checklist - In this one I have defined how much I'll risk on particular types of trades. For example, if I'm going with the trend I'll risk more than if I'm going counter-trend. It also defines how much loss I take per day, week and month. Again, each trader needs to define their own MM system. Once you do, write it down and keep it in front of you at all times. It's so damn easy to violate this part that you need a constant reminder of what your risk should be.

Pre-trade checklist - This is to keep me in the right frame of mind before taking a trade. Mine is this:

1. Does taking this trade violate any risk management or trading rules?

2. Is the trade described in the Trade Setup Plan?

3. Do I have a stop, profit objective and at least a 2x R:R?

4. Would you take this trade as an example of a good trade for someone
you were teaching how to trade?

5. If the trade loses will you say in retrospect that it was a bad trade?

6. Is this where the Kyudo Master would loose his arrow? (yes, they didn't hunt, but it's the frame of reference that works for me...I'm hunting for the best trade I can find).

As for what defines a "good" or "bad" trade, do a search for one of my posts in which I defined them. It's necessary to know how I define them in order for 4 & 5 to make sense.

Trading Rules - I've defined what are the things that are important to my trading. I read them everyday. It's nothing earth-shattering, just things like how much I'm allowed to risk on correlated positions, what my maximum loss per day, week, month is, always place an emergency stop when entering a trade, go over the other checklists before entering a trade, stops are not to be moved away-only closer, etc. It's the mundane things that screw you up, not the big things. I've defined all the mundane things and remind myself of them everyday.

Trade Setup checklist - Again, this is specific to how I trade. In it I describe specifically what I'm looking for to enter a trade. I have 3 setups that I'll take if I see them. They're not complicated at all, but I have to be patient and make sure it's exactly what I want. I also list the steps to be taken as the trade is setting up, such as calculating as precisely as I can my position size, on which time frame to enter the trade, and my minimum acceptable R:R and my maximum risk.

None of what I have in any of these checklists is a secret, or a huge factor by itself. But as a whole, the process keeps me focused on my goal, which is to make the best trades I know how. Screwing up is part of trading, it never goes away. The goal is to be able to do it less and less, and once you do it to minimize the damage.

Have you ever noticed that airplane pilots always use checklists? It doesn't matter if the pilot has 10,000 hours logged, he still has to use a checklist to make sure everything is done correctly. That's how I think about trading. If you get too relaxed about it, the mistakes will come, there's no doubt about that.

I hope this helps.