The Pre-Market Checklist: 10 Checks To Run Before The Open

It's a minute before the open. A stock on your screen is up big in pre-market, someone in a chat is calling it the trade of the week, and you haven't looked at what you're already holding. Whatever you click in the next five minutes won't be a decision. It'll be a reaction.

A pilot doesn't skip the walk-around because the plane flew fine yesterday. The pre-market checklist is your walk-around: ten checks, about fifteen minutes, done before the bell so the hard thinking is finished before the pressure starts.

Why A Checklist Beats A Feeling

The open asks for a lot of decisions in very little time. A checklist moves those decisions earlier, to a moment when nothing is moving and your head is clear.

The SEC's Investor.gov bulletin on extended-hours trading gives the timing: regular trading hours for stocks on exchanges run from 9:30 a.m. to 4:00 p.m. Eastern Time. Everything below happens before 9:30. If you hold positions overnight, the same checks run the evening before, too.

The Market: Checks 1 To 3

• Check 1: Your open positions. For each one, note the pre-market price against your stop. If a stock is quoted through your stop, decide now what you'll do at the open, using the gap rule in your plan. A gap through a stop is a loss your plan can't cap at 1R, so it deserves a decision made in advance.
• Check 2: Today's scheduled events. Look at the economic calendar and the earnings calendar for anything you hold or plan to trade. If a stock on your list reports soon, our earnings week checklist covers what to change.
• Check 3: Pre-market prices, taken with care. The same SEC bulletin warns that the prices of some stocks in extended-hours trading may not reflect their prices at the opening of regular trading the next business day, and that the reduced trading interest generally results in wider spreads between the bid and ask. Treat a pre-market move as information, not as a trigger.

Your Watchlist: Checks 4 To 6

• Check 4: Cut the list. Keep only the names that fit one of your written setups. If you can't name the setup, the stock comes off the list, no matter how much it's moving.
• Check 5: Mark the levels. For each name, write the entry trigger, the stop from the chart and the first target. The stop goes where the idea is proven wrong, not where it makes the size you'd like.
• Check 6: Size every name before the bell. Our guide to calculating position size from your stop walks through the method.

Here's a hypothetical example. The account is $25,000 and risks 1% per trade, so R is $250. The plan is to buy at $42.00 with a stop at $40.75. Risk per share is $1.25, so the size is $250 ÷ $1.25 = 200 shares. That ties up 200 × $42.00 = $8,400. Write all of it next to the ticker. When the trigger hits, you place an order you already worked out, instead of doing math with your heart rate up.

Your Limits: Checks 7 And 8

• Check 7: Write today's loss limit in R and in dollars. For example, 2R, or $500 on the account above. Add your maximum number of trades for the day. Our post on overtrading explains why that second number matters as much as the first.
• Check 8: Add up your open risk. Total the planned loss on every position you already hold plus every trade you might enter today. If two overnight holds each risk $250 and you plan up to two new trades at $250 each, a bad morning could cost $1,000, or 4R. If that's more than your plan allows at once, cut the list or the size now.

Your Head: Checks 9 And 10

• Check 9: Your state. Did you sleep? Are you carrying yesterday's loss into today? If something is off, use a rule you wrote in advance, such as trading half size or sitting out the first half hour. Deciding that before the open is easy. Deciding it after the first loss isn't.
• Check 10: Your order plan. Decide how each entry goes in. The SEC bulletin notes that many brokerage firms accept only limit orders in extended-hours trading, so know your broker's rules if you trade outside regular hours. During the session, enter as a bracket order with the stop attached where your broker supports it, so there's never a moment when the stop is "coming later."

Run It In 15 Minutes

Put the ten checks on one page, in this order, and keep it next to your screen. Tick each box every morning, including the mornings you feel sure. The rule that makes it work: if the checklist isn't finished by the open, you don't trade the open. You trade later, once it is.

Then log it. Use your journal's notes to record whether you ran the checklist before each trade, and compare those trades with the rest in your weekly review.

Join The Pod and walk into every open with the work already done. Lesson 7 helps you build your plan and pre-trade checklist on one page, the Position Size Calculator sizes every name on your watchlist before the bell, and the private trade journal records whether you followed your plan on every trade, so you can compare your prepared trades with the rest in R. Join The Pod monthly and make tomorrow's first trade a planned one.