trade-execution-checklist

Trade Execution Checklist

When to use this skill

Use when the user:

• Is about to execute a trade and wants a sanity check
• Needs help with position sizing and risk management
• Wants a structured framework for trade planning
• Asks about stop-loss placement or take-profit levels
• Needs to evaluate their risk-reward ratio before entering

Pre-Trade Checklist

1. Trade Thesis Validation

Before any execution, confirm:

• Clear thesis: Can you state in one sentence why this trade should work?
• Catalyst: What will drive the price in your direction? (news, technical level, on-chain event)
• Timeframe: Is this a scalp (hours), swing (days-weeks), or position (weeks-months)?
• Edge identification: What do you know or see that the market might not be pricing in?
• Invalidation: At what specific price or condition is your thesis wrong?

2. Position Sizing

Calculate appropriate size using these rules:

• Risk per trade: Never risk more than 1-2% of total portfolio on a single trade
• Position size formula: Position Size = (Portfolio * Risk %) / (Entry - Stop Loss)
• Maximum position: Even with tight stops, cap single positions at 5-10% of portfolio
• Correlation check: Are you already exposed to this sector? Avoid stacking correlated positions

Example calculation:

• Portfolio: $50,000
• Risk per trade: 2% = $1,000
• Entry: $100, Stop loss: $90 (10% away)
• Position size: $1,000 / $10 = 100 units = $10,000 (20% of portfolio)

3. Entry Strategy

Plan the entry method:

• Limit vs market: Use limit orders for better fills unless momentum is urgent
• Scaling in: Consider entering in 2-3 tranches (e.g., 40/30/30) to average entry
• Slippage awareness: For low-liquidity tokens, check order book depth first
• Gas timing: For on-chain trades, check gas prices and consider low-activity periods
• DEX vs CEX: Compare execution costs including gas, fees, and slippage

4. Risk Management Setup

Configure protective measures before entering:

• Stop loss: Place immediately after entry — never trade without one
  • Below recent swing low for longs
  • Above recent swing high for shorts
  • Account for typical volatility — avoid stops within normal noise range
• Take profit targets: Set at least 2 levels
  • TP1: 1:1.5 risk-reward — take 50% off
  • TP2: 1:3 risk-reward — take remaining or trail stop
• Risk-reward ratio: Minimum 1:1.5, ideally 1:2 or better
• Maximum loss scenario: If everything goes wrong, what do you lose?