Pre-Trade Checklist Basics: Entries, Risk, and Review

A pre-trade checklist turns a vague idea into an executable plan. It reduces hesitation, forces clarity on risk, and creates a repeatable routine for both intraday and swing trades. Below is a simple, practical framework you can adapt to your style.

Why a Pre-Trade Checklist Matters

A checklist is a short set of questions you answer before clicking buy or sell. It ensures the setup, risk, and logistics are in place and consistent from trade to trade.

• Consistency: Trade the same way under pressure.
• Clarity: Know exactly what triggers the entry and what cancels it.
• Risk control: Define risk before you expose capital.
• Reviewability: Make post-trade analysis objective.

Entries: Define the Setup and the Trigger

Start with a brief thesis: the specific reason price might move. Then define the entry trigger, which is the exact condition that must happen to enter (for example, a break and close above a clear range).

• Thesis in one sentence: Why now? Trend continuation or reversal?
• Context: Key level identified (support/resistance). Support is where price previously stopped falling; resistance is where it stopped rising.
• Entry trigger: The precise event that gets you in (e.g., breakout and close above resistance; pullback tag and rejection at prior support).
• Invalidation level: The price that proves the idea wrong; used to place your stop.
• Cancel conditions: What would make you skip the trade (e.g., weak momentum candle, news risk, low liquidity)?

Keep the trigger binary. If you can’t tell in one second whether the condition occurred, it’s too fuzzy.

Risk: Stops, Size, and Targets

Risk per trade is the maximum you are willing to lose on a single idea (commonly a small, fixed percent or dollar amount). A stop-loss is the exit order at your invalidation level. Position size is calculated so that if your stop is hit, you only lose your defined risk.

• Risk per trade: Fixed amount you’re comfortable losing.
• Stop placement: Put it beyond the invalidation level, not at round numbers alone.
• Position size: Size the trade so loss at the stop equals your risk per trade.
• Reward and R: Plan target(s). 1R is the amount you risk; a 2R target seeks twice that.
• Skip rule: If you can’t place a sensible stop or size safely, do not trade.

Example: If you risk $100 and your stop is $0.50 away, 200 shares keeps loss near $100. If price reaches $1.00 above entry (2R), consider partial or full take-profit per your plan.

Review: Pre-Check, Post-Check, Improve

Pre-check is done before entry; post-check happens after exit. Keep it short, factual, and tied to your checklist so your notes are comparable across trades.

One-Page Checklist Template

• Market bias noted (trend, range, or choppy).
• Key level marked and reason for interest stated.
• Entry trigger defined (binary condition).
• Invalidation level and stop set.
• Risk per trade confirmed and position size calculated.
• Target(s) and management rules (partial, move to breakeven) defined.
• Cancel conditions listed.
• Order type and time-in-force chosen.
• Post-trade: Did the setup appear? Was execution aligned?
• One improvement for next time.

Practice your checklist in a safe environment before going live. See also How to Practice Trading Without Risk for a step-by-step approach.

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