Trading Checklist (Step-by-Step) For ThinkOrSwim

[antwerks]

Trading Checklist (Step-by-Step)

1. Stock Selection (WHAT to Trade)

• ☐ Average daily volume > 2M shares
• ☐ Options chain liquid (tight bid/ask < $0.20)
• ☐ ATR% > 2% (stock actually moves)
• ☐ IV Rank between 30–80 (not dead, not extreme)
• ☐ Catalyst present (earnings, breakout, news, macro event)
• ☐ Institutional activity (large OI near ATM strikes, unusual options flow)

2. Instrument Selection (HOW to Trade)

• ☐ Stock (simple exposure)
• ☐ Options (leverage with limited risk)
• ☐ ETF (broad exposure, sector play)
• ☐ Futures (hedging, overnight exposure)

3. Directional Bias (WHICH WAY)

• ☐ Trend: Higher highs/higher lows = bullish; lower highs/lower lows = bearish
• ☐ RSI > 50 rising (bullish) / RSI < 50 falling (bearish)
• ☐ DMI/ADX: +DI > –DI (uptrend) / –DI > +DI (downtrend), ADX > 20 confirms strength
• ☐ Volume supports breakout or breakdown
• ☐ Macro backdrop checked (earnings, Fed, CPI, jobs report)

4. Timing (WHEN to Enter & Exit)

• ☐ Entry near support (long) or resistance (short)
• ☐ Confirmation: breakout + volume or retest holds
• ☐ Holding period plan:
  • Options: 2–14 days swing / intraday for scalps
  • Stock: days to weeks
• ☐ Exit triggers:
  • Take profit target (20–30% options gain, 2x ATR move)
  • Stop loss (technical break or –30% option premium)

5. Risk Management (PROTECT Capital)

• ☐ Position size = < 2–5% of account
• ☐ Max risk per trade defined
• ☐ Stop loss placed or mental stop set
• ☐ Hedge plan:
  • Long stock → buy puts
  • Long calls → sell higher strike (spread)
• ☐ Adjustments: roll forward or scale out profits if move slows

6. Post-Trade Review (LEARN)

• ☐ Record reason for entry
• ☐ Record reason for exit
• ☐ Outcome: win/loss %
• ☐ Lessons learned → refine playbook

Flow in Order

1. Screen stocks → liquidity, volatility, catalyst.
2. Choose instrument (stock, option, ETF, futures).
3. Set directional bias (trend, RSI, DMI, volume).
4. Plan entry and exit BEFORE trade.
5. Define risk → position size, stop, hedge.
6. Enter trade.
7. Manage trade: trail stop, scale profits, adjust.
8. Exit at target or stop.
9. Review and log.

 

[antwerks]

We can always expand the sections if you guys want... for instance Section 2 Instrument Selection might include the following expanded definitions for clarity:

Instrument Selection: How to Trade
Instrument selection is a foundational step in trading strategy, balancing risk, leverage, exposure, and liquidity to align with your goals (e.g., swing trading with ATR/OBV signals). Each type offers unique characteristics, such as sector leadership (dominance in growth areas like tech or energy), upward slope (consistent bullish trend), constant gainer (steady appreciation over time), gamma/OI strength (option-specific: high gamma for acceleration, open interest for liquidity), and year-after-year returns (historical performance). Below, I expand on each option with key characteristics, pros/cons, and usage tips tailored to folk’s focus on breakouts, consolidation, and momentum.

☐ Stock (Simple Exposure)

• Characteristics:
  • Sector Leadership: Direct play on industry leaders (e.g., TSLA in EVs, MP in rare earths), with high beta for amplified moves.
  • Good Slope Upward: Ideal for constant gainers like AAPL (up 15% YTD 2025), showing steady EMA trends.
  • Constant Gainer: Reliable for blue-chips with 10-15% annual returns (e.g., XOM in energy, ~12% CAGR 2020-2025).
  • Gamma and OI Strength: Mid-range deltas and high stock volume ensures liquidity.
  • Good Returns Year After Year: Low volatility for compounding (e.g., MSFT ~20% average annual return).
• Pros: Simple owning the stock and being a seller of options, no time decay on the stock, dividend income; easy to hold for swings.
• Cons: No leverage without options, unlimited downside risk without stops.
• Usage Tip: Buy on ATR stretch pullbacks (e.g., TSLA at $440.40 near lower band), exit at upper band or 2x ATR target. Use for 1-5 day holds.

☐ Options (Leverage with Limited Risk)

• Characteristics:
  • Sector Leadership: Leverages leaders via spreads (e.g., TSLA calls for EV hype, gamma ~0.5 at ATM or NTM for acceleration and reduced Theta and Gamma pressures).
  • Good Slope Upward: Bull call spreads on constant gainers like NVDA (up 150% YTD), with OI >10,000 for liquidity. Condors and butterflies along with Ratio Credit spreads.
  • Constant Gainer: Selling options, PMCC, long calls pr spreads on steady performers (e.g., MSFT 20% CAGR), low delta (<0.25) for theta decay reductions.
  • Gamma and OI Strength: High gamma at strikes near resistance (e.g., TSLA $450 OI 50,000) creates dealer magnets; strong OI ensures tight spreads.
  • Good Returns Year After Year: 30-50% ROI on 45 DTE spreads in trending markets, with 60% win rate if using ATR filters.
• Pros: Defined risk with certain options (e.g., $500 max loss on $350/$360 MSTR 03OCT25 spread), high leverage (5-10x).
• Cons: Time decay, IV crush; requires precise timing.
• Usage Tip: Enter bull call spreads on consolidation breakouts (e.g., MP $75/$80 when ATR expands), exit at 50% max profit or OBV divergence. Favor 30-40 delta for balance.

☐ ETF (Broad Exposure, Sector Play)

• Characteristics:
  • Sector Leadership: Sector ETFs like XLK (tech, up 25% YTD) or XLE (energy, up 15%) for diversified plays on leaders (e.g., NVDA in XLK).
  • Good Slope Upward: Constant gainers like QQQ (Nasdaq-100, ~20% CAGR 2020-2025) with steady EMA trends.
  • Constant Gainer: Low-vol ETFs like VTI (total market, ~12% annual return) for reliable compounding.
  • Gamma and OI Strength: Options on ETFs like SPY (OI >1M at ATM) have high gamma for leveraged sector bets.
  • Good Returns Year After Year: 8-15% average returns with lower drawdowns (e.g., VOO S&P 500 ~10% CAGR).
• Pros: Diversification, liquidity; easier to trade than individual stocks.
• Cons: Lower leverage, sector-specific risks (e.g., XLK sensitive to rates).
• Usage Tip: Buy ETF shares or calls on ATR stretch pullbacks (e.g., XLK at $278.92 lower band), exit at upper band. Use for sector rotation (e.g., XLE on oil rallies).

☐ Futures (Hedging, Overnight Exposure)

• Characteristics:
  • Sector Leadership: Commodity futures like gold (/GC at $3,684/oz) or crude (/CL) for leading sectors (e.g., energy).
  • Good Slope Upward: Constant gainers like /ES (S&P 500 mini, ~15% CAGR) with persistent trends.
  • Constant Gainer: Index futures like /NQ (Nasdaq mini) for steady returns (~18% annual).
  • Gamma and OI Strength: High OI in /ES (millions of contracts) with gamma for intraday swings.
  • Good Returns Year After Year: 10-20% returns with leverage, but high risk (e.g., /CL ~25% CAGR with volatility).
• Pros: 24/5 trading, high leverage, hedging (e.g., short /ES to hedge stocks).
• Cons: High margin requirements, overnight gaps.
• Usage Tip: Enter long /NQ on consolidation breakouts (e.g., above $20,000 with ATR expansion), exit at 2x ATR or OBV peak. Use for overnight holds.

Overall Idea

Instrument selection depends on your risk tolerance and horizon: Stocks for simplicity, Options for leverage, ETFs for diversification, Futures for hedging. Prioritize sector leaders with upward slopes and strong OI/gamma for consistent gains but always confirm with an indicator like ATR/OBV. For example, TSLA at $440.40, a bull call spread (options) on a breakout above $450 resistance might fit your style. Adjust based on volatility and trends!