If you want to build confidence in your trading with MetaTrader 5 (MT5), you need a regularly updated trading checklist combined with a well-thought Forex trading plan. Maintaining a checklist is very important in trading but just like trading plans, it won’t be successful unless you really know what to do on it. A trading checklist should involve several questions and the traders need to provide a realistic answer to it right before you execute the trades.
However, some traders confuse trading plans and trading checklists. This shouldn’t happen to you. Trading plans mainly tackle the bigger picture such as the market and the analytical approach that you need to follow. As for the trading checklist, it focuses on individual trades as well as the conditions that should be met before trades are made.
Possible Questions For Your Trading Checklist
- Before you enter a trade, ask these questions to yourself.
- Is the market ranging or trending?
- Do I have a good level of resistance and support near me?
- Are the trades confirmed using an indicator?
- What is my trade’s risk to reward ratio?
- How much is the amount of capital I am willing to risk?
- Is there a significant economic release that could harm my trades?
- Is my trading plan strictly followed?
Trending or Ranging Market
Traders who already have vast experience in trading know the fact that strong trends or trading according to the trend’s direction can lead you to the path of higher profitability. Trending markets tend to have the ability to keep traders from acquiring bad entries. As for the ranging markets, it allows traders to see the bounce of prices for support and resistance. Oscillating Indicators, including Stochastic, CCI, and RSI are highly recommended for range trading.
Support or Resistance Nearby
For a couple of reasons, price action respects a particular price level. As a trader, you won’t want to hold into a short position right after the price drop only to bounce back, now a lot higher. This thing also applies to the level of resistance.
Through the help of indicators, a high probability of trades is confirmed. There will be one or two indicators, depending on the trader’s strategy and plan.
The risk to Reward Ratio
The risk to reward ratio is known as the ratio of pips that traders willingly risk being able to reach their targets. According to research, traders who have a positive risk to reward ratio have a higher chance of becoming profitable.
The Capital At Risk
Asking this question is very important. Most of the time, traders blow up their funds in trading when they leverage their accounts without considering the amount that they are willing to risk. To avoid this, you must limit the leverage and set up stop losses in all of your trades.
Significant Economic Releases Affecting The Trades
As much as possible, check for possible economic releases that could invalidate your ‘perfect trade’. You must anticipate things like natural disasters, terror acts, or systematic failures.
Trading Plans Need To Be Followed
If you want to keep your emotions at bay, away from interfering with your trades in MT5, then make sure you are following your Forex trading plan.