Your Ultimate Trading Checklist

Trading doesn’t have to be complicated. If you have a great system in place, you can simply wait for only the best opportunities on the market thanks to your disciplined methodology.

But you need a process to limit emotions for all transactions – whether you’re long or short, or if you’re holding for minutes or months at a time.

Lather, rinse, repeat. Here’s how the process begins:

Identify Trading Candidates
Execute Entry with Risk Control
Manage Your Position (by moving protective stops when profitable)
Maximize Market Moves (using sound money management techniques)

You need to evaluate all opportunities objectively to decide if they are worthy of capital considerations. Any trade is worth placing if a plan is securely in place…

With that in mind, check out my five-part trading checklist that breaks down the key components of a potential trade:

  1. Cost – The cost of the trade needs to include the amount of money that will be allocated and also market liquidity for entry and exit.
  2. Risk – The level a loss will trigger closing out a position. Dollar and percentage loss need to be calculated.
  3. Reward – The trading objective is to exit with profit. Risk-to-reward ratio is an important metric for long-term success.
  4. Probability – Stock trades have a 50/50 chance of moving up or down, whereas option probability can be derived from a pricing model.
  5. Breakeven – A position can be more quickly profitable with lower break-even levels.

Having a trading plan is critical for financial and mental wellbeing. Regardless of the trade trigger criteria, your number one focus needs to be on controlling risk.

Success today, tomorrow, next week, next month, next quarter, and next year depends on a systematic, disciplined approach you can repeat with consistency.

Keep it In the Money,

Alan Knuckman

Alan Knuckman
Editor, In-The-Money

Chart of the Day: Small-caps shine

Greg Guenthner

Have we seen this movie before?

This week is starting to feel a lot like the last. On Monday, we saw a broad rally led by the Dow and some of the more “value oriented” names and re-open stocks. The Nasdaq finished higher, but it lagged the Dow and S&P

Then on Tuesday, the Dow, S&P lagged, while the Nasdaq outperformed.

Ultimately, it’s good to see small-caps, industrials, materials, and some of these other beaten-down sectors start to wake up start to run like the tech stocks. And despite some of the recent volatility, there’s plenty of opportunity in this market…

Just look at small-cap stocks:


The small-cap Russell 2000 (red) is starting to widen its 6-month lead over the large-cap S&P 500 (blue). As of yesterday afternoon, the Russell is up more than 15% in November, compared to a gain of about 10% in the S&P.

That’s nothing to scoff at –especially since the Russell is just now beginning to break out above its 2018 highs. Small-cap stocks never fully recovered from the Q4 2018 correction, unlike their larger counterparts. Now that the Russell is finally hitting those all-time highs, it has some room to run into 2021…

— Greg Guenthner

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Alan Knuckman

Alan hails from the home of options trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT). Beginning with his days on the floor, Alan’s worked with all aspects of the options markets for the past 25+ years.

Transitioning from a clerk to a floor...

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