Day Trade Successfully – 10 Rules For Day Trading Stocks
Any person seeking to undertake day trading of stocks must develop a steadfast habit of trading using a structured set of rules. Otherwise, you may find yourself lost in a limitless maze of decisions that can be detrimental to your trading. Trading in general, and day trading in particular, creates a free form environment which allows you to make almost any type of decision whatsoever with respect to when and where to buy or sell a stock. Many of the reasons that day traders wash-out can be traced back to a few universal rules that many traders fail to put into practice. Whether you are new to day trading or a veteran looking for new ideas, the ten rules outlined below are worthy of strong consideration for incorporating into your trading plan.
1.) You Must Have A Winning Methodology. Without a reliable method for consistently extracting profits from day trading, implementing the remaining nine rules will be a futile endeavor.
2.) You Must Always Protect Your Capital. Your capital is everything. No Capital, No Trading. Plain and simple. You must always consider the amount of money you have a risk before you take a trade. If your risk is larger than you can tolerate, then, by all means, pass on the trade.
3.) You Must Always Employ A Hard Stop. Always enter a Hard Stop on every trade because this sets a limit to the amount of money you can lose on a trade.
4.) Never Turn A Winner Into A Loser. Never let a winning trade turn into a loser by banking some profits when you get them. This can be accomplished by selling-out portions of your position at predetermined profit targets. In fact, this rule is the cornerstone of many successful traders.
5.) Losers Average Losers. You must never add to a losing position under any circumstances because markets can remain illogical far longer than you or I can remain solvent. A losing trade is one which has triggered your Hard Stop.
6.) Trade For Extremely Consistent Gains. Develop a mindset of banking steady and consistent profits instead of a few home-run trades.
7.) You Must Take The Best Setups From Several Different Stocks. You must only choose the best trade setups from an analysis of many different stocks in order to ensure that you are taking the best trades possible.
8.) Don’t Bet The Farm On Any Particular Trade. Successful trading only exists in probabilities. This simply means that you can only “enjoy” the edge of a particular strategy after an adequate number of trades have been made. It may take a considerable amount of trades before you are able to turn a profit with a method that has a positive expectancy.
9.) You Must Be Disciplined To Stick With Your Method Through The Drawdowns. Yes, you will have losing trades. However, after you have developed a winning methodology, you must be able to continue taking trades even after a series of losers by remembering that a winning methodology will eventually drive your account equity back to new highs.
10.) Your Day trading Plan Must Be Designed To Fit Your Personality. Continually refine your methodology to fit your personality and style until you are comfortably taking trades without reservation.