Before you enter a trade, you should have a checklist of what to take note of. While a trading plan addresses the bigger picture, such as the market you’re trading and the analytical strategy you’ve chosen, a trading checklist focuses on each individual trade and the requirements that must be completed before the trade can be entered.
Using a trading checklist is an important part of the trading process because it will help you stay disciplined, stick to your trading plan, and gain confidence. Keeping a trading checklist will give you a list of questions to answer before executing trades.
Many exchanges may not allow you to set your Take-Profit and Stop-Loss orders simultaneously when spot trading. CoinPanel offers a Full Trade feature that allows you to plan your entry, Take-Profit and Stop-Loss orders at the same time which is vital when it comes to understanding how much risks you are taking per trade.
Here is our easy-to-follow, 3-step crypto trading checklist:
Step 1: Determine the Trade Setup
It’s important to skim through different crypto markets to find an asset with a proper set up. The set up is the set of requirements that must be met before a trade can be considered. If you’re a “trend-following trader,” for example, a trend must be present.
A tradable trend should be defined in your trading plan (for your strategy). This will prevent you from trading when there isn’t a trend. Consider the “setup” to be your rationale for trading.
For example, an investor who trades based on chart patterns spots a descending triangle pattern on the LTC-USDT chart. Since the chart pattern projects a bearish trend, the trader may then decide to enter a short position – selling high first, then buying back low in the crypto spot market. If the trader spots another pattern on the AVAX-USDT chart , for example, an ascending triangle – the trader may choose to enter a long position – to buy low then sell back higher.
If you don’t have a reason to trade, don’t trade – it’s as simple as that. If the set up—your purpose for trading — is there, then you can move on to the next step.
Step 2: Decide Your Entry
So, now that the reasons for trading are there, you will need to identify the triggers.
The precise nature of your trade trigger is determined by the trading method you choose. The first is a support consolidation: the trigger event occurs when the price climbs above the consolidation’s high.
A bullish pattern near support is another probable trade trigger: when a bullish candle forms, a long is initiated. The third buy signal is a rise to a new high price after a pullback or range.
If you want to learn more about support and resistance levels, you can take a look at this very comprehensive article.
Step 3: Set Your Take Profit (TP) and Stop Loss (SL) Orders
Knowing your trade trigger and having the correct entry conditions aren’t enough to make a good trade. A stop loss (SL) and Take-Profit (TP) order must also be used to manage the risk of the deal.
A SL can be placed in a variety of ways. A stop loss is frequently put just slightly below a recent swing low for long trades and just slightly above a recent swing high for short bets.
Another exit order is the Take Profit (TP): An order selling at a price point higher than the entry order. That will maximize your profits, and it would work even better on a trading automation platform like CoinPanel.
Another thing to be aware of is the reward-to-risk ratio. Make sure to only enter trades where the reward potential exceeds 1.5 times the risk. If the price reaches your stop loss, in which you would have lost $100 for example, you should make $150 or more if the target price is met.
If you are spot trading on a centralized exchange, you can set up just one (TP or SL) but never both.
With CoinPanel, you can use our Full Trade feature, a function where you will be able to set full cycle trade, including – entry, Take-Profit and Stop-Loss orders – at the same time. Once the prices hit the trigger levels you’ve set for either buy low and sell high, OR sell high, then buy back lower.
Essentially, in a spot market, traders can still make money in a downtrend if they sell high, then buy back the crypto asset at a lower price.
Conclusion
Here is a summary:
Step 1: Determine the Trade Set Up
It’s critical to sift through many crypto markets in order to select an asset with the right set up.
Step 2: Access the Trade Triggers.
So, now that you know why you’re trading, you’ll need to figure out what triggers you’re going to use.
Step 3: Set Up Take Profit (TP) and Stop Loss (SL)
The reward-to-risk ratio is another thing to consider. You can use the CoinPanel’s Full Trade feature, where you can set up TP and SL to maximize your profits and minimize your losses. In
Read more about our Full Trade feature here.