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The order entry checklist

Lesson 10 · about 8 min

Between "the setup is present" and "the order is filled" there are about fifteen seconds, and more account damage happens in those fifteen seconds than in any other part of the day. Wrong size. Wrong direction. Stop not attached. Market order into a thin book. The order entry checklist is a fixed sequence, run every time, that closes those gaps.

The problem it solves

Pilots use checklists for the take-off they have done a thousand times, not because they might forget how to fly but because the failure mode of a routine action is inattention, and inattention is not fixed by experience. Order entry is the same. The trader who has placed five thousand orders is more likely to fat-finger the sixth thousand, not less, because they have stopped looking.

The checklist

Read it out loud, or at least move your lips. It takes ten seconds.

# Check Failure it prevents
1 Is every setup box ticked? All, not most. Taking a trade that is nearly the setup
2 Filter still PASS? No-trade window not active? Trading through a data release
3 Direction: long or short, said aloud Buying when you meant to sell
4 Stop price, from the plan's STOP line Placing the stop by feel
5 Size = 1R ÷ stop distance, from the calculator Sizing from conviction or from the last trade
6 Size within the plan's hard cap A tight stop producing an absurd position
7 Heat after this trade within max heat Stacking correlated positions
8 Order type matches the plan's ENTRY line Chasing with a market order
9 Stop order attached and visible in the platform Naked position
10 Invalidation and time-stop noted with a time Forgetting the rule that is not a price

Ten items is the upper limit. If yours has fifteen, some of them are pre-market items that have drifted into the moment.

Key idea: The checklist is run every time, especially when the trade is obvious. Obvious is when the fat finger happens.

Bracket orders

Most platforms let you submit entry, stop and target as one bracket. Use it. A bracket means item 9 is satisfied by construction, and it means the stop exists in the market, not in your intentions. A stop that lives in your head is not a stop; it is a plan to have a stop, which will be renegotiated the moment price approaches it.

If your platform does not support brackets, the sequence is: stop order first, then the entry. Not the other way round. Two seconds of a position without a stop is two seconds too many on the day the news hits.

The order type is on the plan

The ENTRY line says how you get in. Stop order above the trigger bar. Limit at the level. Market on the next open. Whichever it is, the checklist confirms the order you are placing is the type the plan says, and the reason is slippage accounting. A plan designed around stop-order entries has a certain cost per trade baked into its expectancy. Switching to market orders "just this once because it's moving" changes that cost, and after enough "just this once", your journal is measuring a different plan.

Confirm the fill

After the order: confirm the fill price, confirm the stop is working (not just accepted), and write the entry time and price on the journal line for this trade. The journal line is opened at entry, not at exit, so that the plan-follow score in Module 4 can be marked as you go.

When the checklist says no

If any item fails, you do not take the trade. Not "adjust and take it". A failed item 5 means resize and re-run the checklist from item 1, because the setup may have moved on while you were fixing the size. A failed item 1 means no trade, full stop, and the setup that was "almost there" gets logged as a non-trade with the reason.

The second most expensive thing in trading, after not having a stop, is fixing a checklist failure in a hurry and taking the trade anyway.

Try it: Print the ten-item checklist and tape it below your monitor. For the next twenty trades, tick each item physically before pressing the button. Count how many times an item fails. Most traders find item 5 or item 7 fails more often than they expected, which is information about where their sizing habits actually are.

Recap

  • Order entry is where routine inattention costs the most. The checklist is run every time, especially on the obvious trades.
  • Ten items: setup, filter, direction, stop, size, cap, heat, order type, stop attached, invalidation noted.
  • Use bracket orders; a stop that lives in your head is not a stop. If brackets are unavailable, stop order first, then entry.
  • Order type is on the plan because it is part of the cost structure your expectancy assumes.
  • A failed item means no trade, or re-run from the top after fixing it. Never "adjust and take it".

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Market, limit and stop ordersA price track crossing a resting limit order below the market and a stop order above it.10410210098PriceTime (the market moves left to right)priceSTOP BUY at 103.00waits above the market; becomes a market order when touchedtriggers hereMARKET ORDERfills at once at 100.60filled hereLIMIT BUY at 98.50rests below; fills only at 98.50 or better
Market, limit and stop orders. A market order buys straight away at whatever price is there. A limit order waits below until the price comes to it, and a stop order sits above and turns into a market order the moment price touches it.
The spread of outcomes behind an expectancyA histogram of forty trades: a tall block of small losses on the left, a low spread of larger wins on the right, and a line marking the average outcome.NUMBER OF TRADES051024 LOSSES, AVG −$20016 WINS, AVG +$600EXPECTANCY +$120−$400−$200$0+$200+$400+$600+$800PROFIT OR LOSS PER TRADEexpectancy = (40% × $600) − (60% × $200) = +$120 per trade
Expectancy: the average trade. Forty trades sorted by outcome: 24 small losses and 16 larger wins. Weighting each side by how often it happens gives the average result per trade, marked here by the dashed line at +$120.
Slippage on a market orderA buy order clears four price levels, so the average price paid is worse than the price first quoted.Buy 1,000 shares at marketpricesell orders resting (bar length = size)20.04300 shares20.03200 shares20.01200 shares20.00300 sharesnothing resting at 20.02order sweeps up the bookaverage fill 20.02SLIPPAGE0.02 a share$20.00 in totalintended 20.00Each level fills at its own price; the average is what you really paid.
Slippage on a market order. You click at 20.00, but only 300 shares are resting there, so the rest of the order fills at 20.01, 20.03 and 20.04. The average price paid is 20.02, and that two-cent gap is slippage.