Before you begin trading, it’s essential that you’re in the right frame of mind. This means feeling calm, disciplined and rational. Impatience, greed or panic can lead to losses - so it’s crucial that your mindset is just right.
There are three key mindsets you need to check before you trade: psychological, confidence and loss management, ensuring that your mindset is right for each element.
So - here’s a key list of things to check before you begin trading:
The Ultimate Trading Mindset Checklist
A key part of trading is monitoring your emotions successfully. The most skilled traders are calm and disciplined, sticking to their trading plans.
Before you sit down to begin trading, it’s important to assess how you’re feeling. If you do find yourself experiencing negative emotions, it’s a good idea to take a step back for the day to cultivate a better mindset - your capital will thank you for it!
- Do you feel calm - or are you feeling particularly anxious?
- Do you feel patient?
- Do you feel confident in your trading plan?
- Do you feel equipped to deal psychologically with trading loss?
A key part of the right mindset in trading is knowing that you have assessed the trade entry correctly - that you have identified support and resistance lines and that you have conducted technical analysis of the market. Here’s a key checklist:
- Have you created a detailed trading plan that works when tested?
- Does your plan include how to handle trading loss?
- Have you drawn support and resistance lines correctly?
- Have you detailed when to exit and enter a trade, and which buying or selling signals to look out for?
- Do you feel confident that your technical and fundamental analysis has been thorough?
- Do you have a plan for waiting for price action confirmation before making a trade?
Loss monitoring mindset
Just as it’s important to monitor your psychological mindset and your confidence mindset, make sure to also check that you can manage any losses effectively - both psychologically and practically.
Psychologically, you should make sure that you can handle dealing with loss - to respond calmly, to take a step back, or to reassess your plan - while practically, you should make sure that your plan details what to do after loss.
- Is your stop loss in the right place?
- Are your profit targets at the right level?
- Is your risk:reward ratio in your trading plan correct?
- Do you have it clear in your mind how much of your portfolio you are willing to risk on one trade?
Looking for more tips on trading psychology? Read our guide to trading psychology.