The Importance of a Forex Transaction Checklist
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- Always identify market conditions prior to trading
- Your strategy and entries should reflect the market
- Plan your risk and write your trades down to stay accountable
Traders should have a checklist to consult prior to making any major trading decisions. These steps are critical for Forex scalpers as they often have to make these choices on a moment’s notice. To help with the process it can be helpful to keep a checklist and determine your options prior to approaching the market. Today we will review the scalper’s checklist. Let’s get started!
Identify Market Conditions
The first task assigned to day traders and scalpers is to identify market conditions. Is the market trending or ranging? Is the volatility of an asset low or high? These are both important questions that should be answeredprior to entering into a new trade idea. Not only will this help Forex traders which currency pair to trade, but also help determine their strategy. Every scalper and day trader should check this off their list, prior to considering any market entries!
Choose a Strategy
Once market conditions are found, traders need to identify a strategy that is congruent with the market. If you are trading a trend, you will need to not only find market direction but also decide if you are going to trade a retracement, momentum or breakout strategy. In lack of a trend, traders again need to decide how to approach pricing patterns, support & resistance values, as well as potential breakouts. With so many strategies to choose from, it is worth taking your time and doing your due diligence prior to checking this off your scalping list.
Plan Your Entry
Next traders need to select how they are going to enter into the market. Typically traders need to first determine if they will trade with market orders or entry orders. Market orders allow you to trade immediately if conditions are met and you are immediately in front of your trading terminal. Entry orders can be used and will execute at a designated price even if you aren’t watching the market.
Once this is decided, traders need to evaluate which indicators if any will be used for trading. In the event an indicator is added to the graph, prior to execution, plan on its use and know its strengths as well as limitations. When you are 100% certain on your entry triggers then you can proceed to the next portion of the checklist.
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