As I was discussing with a new trader, the conversation moved to a talk concerning trading strategy. At some point, I asked, “…so when do you know you should enter a trade?”
From that question, I got a long “Well…hmm” followed by an unclear answer.
Not Knowing Our Trading Strategy By Hearth
The response of the trader I was talking to suggested me that he didn't know his trading strategy by heart, something which can strongly affect the profitability of a trader.Not knowing our trading strategy by heart as traders is like not knowing how to fly a plane for a pilot @desiretotrade Click To Tweet
When a trader is in the action, the last thing he can do is to think about his trading strategy. In fact, thinking will often cause the trader to accept bad setups as good trades or to reject good setups.
I knew a trader who was changing his trading strategy almost every week. When trading, he had to constantly look at his sheets to not get confused by the setups of his old strategy. That is a very poor way to trade.
However, by knowing his strategy by heart, the trader will be able to focus on execution. This is important because execution is negatively affected by uncertainty.
A Partial Solution
In case you are a trader and do not fully master your trading strategy by heart, there is a very simple thing you can do. Create a checklist.
A checklist is a tool that you'll be able to look at and take action on in an instant. It should take less than 15 seconds to review so that you can take action on what you see on the chart.
Make sure to keep that checklist near you!
Have you ever made a checklist for trading? How has that helped? Let me know!