Oh, how I love checklists! My trading rules are continuously evolving as I learn from my mistakes, but here’s my trading checklist as of late.
SPX is in an uptrend
Three out of four stocks follow the market so I always trade with the market just to be on the safe side. I’ve been burned several times where I didn’t pay attention to what the general market was doing and I immediately got stopped out the following day.
Since my trades are short term, I look at the short term uptrends in the market. I like to use SPX or ES as my gauge.
Here’s an example of the SPX 6 month daily chart below. The market is in a long term uptrend in area A, and it’s in a range in area B. In both cases, I enter into long positions during the short term uptrends.
I time my entries so that I’m entering a long trade at the beginning of the short term uptrend of the SPX.
The stock is making higher highs and higher lows
This is a big requirement. The chart has to be making higher highs and higher lows. No exceptions. Here’s an example chart below.