Before every trade, run a 10-point checklist: Is this setup on your watch list? Does it meet your setup definition? Is the reward at least 2:1 or 1.5:1 risk? Is position size correct for 1R? Do you see the setup with your eyes? Are you in the right emotional state? Have you traded this morning already? Is your account in drawdown? Are you forcing trades? And finally, are you following your rules? This takes 30 seconds and prevents most of the rule breaks that lose money.
- Most losses come from rule breaks, not bad setups
- A checklist prevents 70%+ of the emotion-driven trades
- Keep it short (10 points max) or it gets skipped
- Run it before entry, not after
Most traders know what they should do. They break rules anyway. A checklist stops that.
The 10-point checklist
Run this before every entry. Thirty seconds max.
| # | Question | Red flags | Action |
|---|---|---|---|
| 1 | Is this setup on my watch list? | You discovered it at market open. | Stop. Setups should be prepared yesterday. |
| 2 | Does it meet my setup definition precisely? | "It looks like a breakout" or "I think it will go up." | Define it. If you can't describe it in one sentence, it's not a setup. |
| 3 | Is the reward at least my minimum ratio? | Target is 1.5R, stop is 1R. No. | Skip this trade. Risk/reward matters. |
| 4 | Is position size exactly correct for 1R? | 100 shares at $100 = $10,000 risk, account is $50K. | Recalculate. Position size discipline is critical. |
| 5 | Do I see the setup with my eyes on the chart? | You're looking at alerts or a screener, not the chart. | Look at the chart. Visual confirmation beats everything. |
| 6 | Am I in a good emotional state? | Revenge trading, just took a big loss, angry. | Step away. Emotion costs more than setups. |
| 7 | Have I already taken my maximum trades today? | Your rule is 3 trades max, you've done 3. | Stop. Rules limit is rules limit. |
| 8 | Is my account in drawdown today? | Daily loss limit is $500, you're down $450. | Sit out. One more loss and you hit your limit. |
| 9 | Am I forcing this trade, or taking it? | You're hoping it will work. You're on your 4th coffee. | Wait. Good trades come to you if you wait. |
| 10 | Would I be able to explain this trade to a mentor and defend it? | No, honestly. | Don't take it. Your gut knows. |
If you hit a red flag on any of these, the answer is no and you skip the trade.
Building it into muscle memory
Week 1: Print the checklist. Read it aloud before every trade.
Week 2–3: Say the 10 points to yourself silently before entry.
Week 4+: It becomes automatic. You sense when a checklist item is violated before your hand moves to click.
Most traders skip this because it feels mechanical. It's supposed to. The point is to bypass the emotional decision-making that costs money.
Your Journal Should Find the Pattern for You
TRADZY's TradLog tags every trade by setup, session and emotion, then shows where your edge actually is.
Start Your Free Journal →The setup definition (item 2 is the gatekeeper)
If you can't define your setup in one sentence, you don't have a setup. You have a feeling.
| Not a setup | Setup |
|---|---|
| Breakout | Opening range breakout: 15-min high/low broken on volume. |
| Pullback | Pullback to rising 20-day MA on 60-min chart, closes within 1% of MA. |
| Momentum | Gap + first 5-min high broken, volume 2x average. |
| Support/resistance | Three touches of a level without break, then breakout confirmed on close. |
Every time you get tempted to take a trade that doesn't fit, log it. At your weekly review, see how often you break this rule and what it costs.
The position size check (item 4)
Most traders get this wrong. They think they know their size.
Correct: Account $50K, risk limit 1% = $500 per trade = 1R. Stock at $100, stop at $99 = $1 risk per share. 500 shares = $500 risk = 1R. ✅
Wrong: "I'll take 500 shares, that feels right." You end up risking $1,200. ❌
Use the formula: Position size = (Account size × risk %) ÷ (entry - stop in dollars)
If that number isn't a round share count, move your stop by a tick. Precision matters.
Reason this works
The checklist serves two purposes:
- It stops you before you're committed. You haven't entered yet. Walking away is easy.
- It creates a record. Every time you violate item #2 or #9 and skip it, you're building the habit. Your brain learns: my rules have teeth.
Over time, your rule breaks drop by 70%+. Fewer rule breaks means fewer bad losses. The checklist pays for itself in the first week.
Adapting it to your trading style
A day trader's checklist looks like this:
- Confirmed setup on chart, 5-min or lower?
- Risk exactly 1R?
- Trading in my best market?
- Win rate on this setup >40% in my journal?
- 90%+ rule adherence today?
A swing trader's checklist:
- On my watch list?
- Daily chart setup confirmed?
- Risk 1–2% per trade?
- Not in drawdown?
- Have room for this position (margin/capital)?
Keep yours to 7–10 points max. Longer checklists get skipped.
FAQ
What if I follow the checklist and still lose?
Losses are normal. Checklist losses are acceptable losses. Rule-break losses are not. Review which losses were checklist-filtered and which broke a rule.
How do I know if I'm in a good emotional state?
Ask yourself: Would I take this trade if I were already up $5K today? If no, you're emotional. Wait.
Should I use a checklist app or paper?
Paper if you're new (forces you to read). App if you're consistent (faster, logged automatically).
What if the setup looks perfect but I feel like I shouldn't take it?
Trust that feeling. Item #10 on the checklist. Your subconscious catches things your rational mind misses.
Can I modify the checklist after I start using it?
Yes, after 30 days. Log which items you skip most, and that's the problem area. Customize around where you fail.
Put This Into Practice
- Log your next 20 trades with setup, session and emotion tags
- Let the TradLog surface your best and worst setups
- Run the weekly review and cut one leak
Start Free in TRADZY →
Educational content, not financial advice. Trading involves substantial risk of loss.