The Trading Well Checklist

(Expanded with what each of these does for you)

I focus on the process of good trading, good execution, and consistency

By consciously being aware of what you are focusing on at the moment, this will help
you in three ways:

• First, this will help you identify any triggers and associations that may be
triggering the emotions that come up so that you can take steps to address the
specific issue.

• Second, this will help you keep your logical mind engaged and fend off the
wandering of your mind to thoughts and memories that trigger that emotional
uprising.

• Third, this reinforces your habit and mental behavior pattern of staying focused
on the process of trading and good execution.

When you are not aware of your conscious focus, you leave yourself open to getting
caught up in your imagination and whatever hopes, fears and anxiety may come from
the images and scenes that come with it. Remember though, that you must always
distinguish between your imagination and what your senses tell you is objective reality
at this moment in time.

Make your intention to remain in the here and now.

I work with a proven methodology – and I’ve proven it to myself

The more your system is proven to you, the more you can have confidence in it. This
comes from experience with your system either through extensive back-testing in the
markets you trade or through live trading experience.

If you are using a methodology whose “proof” comes from another person or from
speculation, then you are relying on hope and trust, which can be easily betrayed when
met with reality.

By having first-hand experience of your system, you can “see” where the results come
from and what truly is to be expected. Any weaknesses of the system have been
experienced by you along with the strengths. When a string of losses occurs, you can
keep faith in your system knowing when to expect the winners to come along. When
the winners do occur, you’ll know that they’re due and it’s okay to hang on. You’ll also
know better the differences in the quality of the winners that your system produces and
how to spot them – is this a single or a possible double or triple? The answer – and
your appropriate actions - will be clearer.
I am comfortable with and fully understand my system

The more intimately you understand your system and the mechanics of it, the better
you’ll be prepared to deal with any unusual circumstances that come about. By
understanding your system thoroughly, you’ll also be able to have a higher level of
confidence and trust in it – and stick to it.

It is when our understanding of something has weaknesses that we are open to loss of
confidence and trust – because when our expectations of it don’t mesh with the results
we’re getting, we don’t know what to look for to resolved the discrepancy. Without
knowing where to look to take corrective action, we then naturally lose faith in the
system as a whole and tend to rely more and more on other sources for guidance: such
as our “gut feel”, “hunches”, the opinions of others, the news, etc.

I have back-tested my system and know what it should produce when properly executed
under normal conditions

Percentage of winning trades versus losing trades

Average winner-value and average loser-value

By understanding the metrics of your system, this provides a framework for you to
operate within. Again, this goes back to proving the system to yourself. By having hard
numbers in hand as to what your systems true capabilities are - what it produces in the
real world – this greatly helps to keep expectations in line with reality. Doubts, fears
and frustration come from the discrepancy between what really happens and what we
expect.

One of the key benefits to knowing the metrics of your system is knowing what the
average loss is. When you know an actual number this provides a clear limit to stay
within when a market turn goes against you. Remember, the need to keep losses small
is crucial to overall long term profitability. Without a very specific loss limit for every
trade, this can often push your tolerance up beyond a healthy point because now you’re
“hoping” for that winner so bad that the desire over-rides your caution. When you have
a specific limit to work within, this makes it much easier to keep the losers within
reason.

One of the emotional challenges for traders is the “unlimited” aspect of trading. When a
market starts a run, who knows when it will stop or turn? Nobody. Of course there are
indicators to give us clues, such as support and resistance levels, but the market does
break through them. Having the value for an average winner gives you a reference
point to work with when the market goes in your favor. This helps you stay in if you’ve
been getting out too early too often and leaving money on the table.

The back-testing also helps give you a more realistic expectation of what doubles,
triples and home runs look like with your system in your market. Instead of every trade
having unlimited potential that fuels your hopes, you’ll know what is more realistic to
expect as far as the potential.
Trades I place are within my true personal risk tolerance

By keeping your trades within reasonable range of your true comfort zones, you will
more easily keep a clear head. This is a key step in working with your emotions. You
can go outside your comfort zones a little, but only do so with great caution. When you
operate too far outside your comfort zones, you are immediately putting yourself into a
fearful and anxious state.

My trading life is in balance with family, personal, social and business times

A life out of balance brings stress, fatigue and guilt that only work against you. By
keeping your life in balance, you put the odds in your favor of being able to be at your
best when it is time to trade.

I have and follow sound risk management rules for both my individual trades and
overall account protection

Sound risk management is at the core of emotionally congruent trading. This starts with
having rules that make sense to you, match well with your comfort zones, and that you
truly believe in.

When your risk management rules meet the criteria of ensuring that your doors will be
open for the next six months, this eases much stress and fear in each trade. By
knowing that your capital protection will have your account balance reasonably in tact
even if everything goes wrong, this takes considerable pressure off every trade to be a
winner.

By keeping at-risk numbers low, such as trade size, number of trades open, and percent
of account at risk each month limited, many of your fears will not be triggered.

One very good rule to live by is to look at risk first, then to seek profit only if the risk
associated with it is within sound guidelines.

I always use protective measures, such as stops, to manage risk exposure and
only take calculated risks

Regardless of the measures employed, having a way to limit your risk on every trade –
before you enter the market – keeps your anxiety down and takes much of the
uncertainty out of the picture. You may not know what the market will do, but at least
you know what your maximum exposure is on every trade.

I only use risk capital that is within my true comfort zones

Many times, a person will enter trading with the idea that it is unlikely that all of their
money will be truly at risk. Most other investments that people are familiar with do not
carry the same level of real risk. Real estate and traditional buy-and-hold investments
may hold some risk, but the investor inherently knows that it is very unlikely that their
entire investment will be lost. Worst case scenario usually represents only a
percentage being lost. With trading, the entire account is at risk and by having that
entire amount within your comfort zones to lose is a key step to keeping fears at bay.
 Not only should your risk capital be a sum that if lost will not put you in the poor house,
but it should be an amount that if the entire amount were lost, that you could be okay
with it, that it truly is within your comfort zones.

I fully understand the core concepts in trading

Many traders get active with a limited understanding of the core concepts in trading.
Confidence will be proportional to the level of understanding of a matter, and in trading
there is a considerable amount of information to absorb. Like most bodies of
knowledge, there are core concepts and each of these serves as the foundation for
more detailed information. If the core concepts are only understood on a contextual
basis and not on a full comprehension, this creates confusion on the more detailed
levels. Confusion leads to anxiety, mistrust, fear and a host of other detrimental
emotions. By having a thorough understanding of the core concepts, this makes the
detailed concepts much more rational and natural to understand.

I grasp all the terminology used in my trading

Words are powerful and represent concepts. If you are working with words that are not
fully understood, this creates a barrier to full comprehension and confidence.

Rather than a rote memorization of a word, a full comprehension of the concept it

represents gives you the ability to expand on the idea in a useful and beneficial way.
This also makes the further learning much more natural and healthy, and raises the
comfort level associated with decision making.

I keep a trading journal and review it regularly

Within the notion of continuous improvement of a process such as trading, recording the
inputs to the system, including environmental variables, and the specific results of those
inputs gives you the information necessary to reinforce what it working to your
advantage and to take appropriate steps to address what is detrimental to your goals.

I generate reports for my trading business

Besides being a general good business practice, generating reports helps to organize
information and keep one’s execution of good trading practices in focus.

This also provides a method of feedback for you that is somewhat detached from
individual trades. This is powerful in maintaining your overall objectivity.

I regularly review my trading execution, with a focus on continuous improvement

By focusing on the process of executing well, this allows you to keep your awareness
high to what matters most – trading well. If you are focused on the trade execution
specifically, keeping your mind in the present and on what you’re doing, this helps to
keep your mind from wandering to the past or future where your emotions and
imagination can work on you.
I remain aware of my beliefs to identify counter-productive beliefs and views of myself,
money and trading.

Beliefs come from all different sources and identifying defeating beliefs is critical to
avoiding self-sabotage. By identifying and replacing false and detrimental beliefs, this
empowers you to grow and make progress toward your goals.

I follow my business plan, including: a budget, financial controls and general

money management rules

By first having a business plan that is sufficiently complete and one that feels right when
reviewing it, this gives you improved likelihood of having a profitable trading business. It
is when you begin an endeavor without a workable business plan that you are likely to
encounter emotional challenges simply from the overall uncertainty in the future of the
endeavor.

By having a plan and then following it, that you continue down the anticipated course. If
necessary, you can make directional and situation-specific changes that keep you on
track to achieving your goals.

I keep my math and trading skills finely honed

If your math or trading skills are weak or begin to deteriorate, your overall system is
becoming weak. These two skills will serve you very well when finely honed, as they
are core to good trade execution and subsequent results. These also serve as keys to
maintaining your confidence and discipline.

I keep my trading area organized and conducive to good trading

Your operating environment contains many cues and associations, as well as

influencing your habits and patterns. By keeping your trading area organized and
conducive to good trading, this only reinforces the consistent process of trading and the
avoidance of error.

I adhere to healthy, sound routines and practices in my trading activity

By consciously identifying, recording in detail and evaluating your routines and

practices, you will ensure consistency in your trading. Consistent trading is the most
likely to produce consistent results. Also by focusing on your habits, your awareness
will remain high when something is amiss and possibly working against you. You will
then have the opportunity and information to take appropriate action.

I only trade when I am rested, well (not ill), and clear-headed.

Your trading depends very heavily on you as a person, so keeping yourself at an

optimum state and only trading when at your best gives you the best chance of
successful execution of every trade.