Today I’m going to discuss important day trader rules that many beginners either forget to follow or avoid following for one reason or another. Most day trading tactics are based on technical analysis and momentum techniques, with that being said many traders completely ignore the fundamental news and reports that are related and relevant to the stock or market that they are trading. For example if a stock is coming out with earnings after the closing bell, it will trade very differently than on a typical trading day or if economic reports are going to be released within the hour the index futures market will go through a choppy range bound period prior to the announcement. These are just three basic examples of fundamental news that can have major impact on the financial markets that traders need to know about ahead of time.
Most professional traders look at economic calendars after the closing bell and before the opening bell so that they know all potential and foreseeable factors that can influence the market during the following trading session.
Many traders begin their day disciplined and ready to execute their trading strategy according to the rules but often times as soon as they experience a few losers or the market doesn’t do what they anticipate will happen they forget their trading plan and begin trading based on emotions and pure feel. Just last week I saw a veteran trader completely ignore his exit strategy and lose several thousand dollars in a few brief minutes.
What I do each day before the opening bell is prepare for 5 worst case scenarios and I write down each of these so if any of them occur, I know exactly what I have to do and how I have to react. There is only so much time in the session each day and there is only so much ground prices can cover in that time. You probably heard this rule hundreds of times but do you really follow it each and every time. Avoiding stop loss orders is the biggest reasons why small losers turn into large highly unmanageable positions that can turn your trading career into a nightmare quickly. Relative strength analysis is simply comparing the instrument that you want to trade with a very similar instrument. If you are going long you probably want to pick the strongest stock out of the industry group and if you are trading short you would probably want to pick the weakest stock in that industry group.


Most professional traders rely on relative strength analysis on a daily basis and I suggest you begin doing the same if you want to become a professional trader. Next time I will show you some more day trader rules that will improve your profit potential and reduce your stress level. GOVERNMENT REQUIRED RISK DISCLAIMER: FUTURES & FOREX TRADING HAS LARGE POTENTIAL REWARDS, BUT ALSO LARGE POTENTIAL RISK. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING.ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY.
Most often traders simply lack the required experience to know which rules can make or break their account and unfortunately learn the hard way after the fact. Don’t let this happen to you, follow your trading plan accordingly and make contingencies for situations that are not likely to happen. For example if you are trading semiconductor stocks you would compare the stock you want to trade with other stocks in the semiconductor industry group or if you intend to trade  e-mini futures contracts you should compare the e-mini NASDAQ to the e-mini SP futures contract. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. Most of the time traders lose their discipline when they are faced with unforeseeable circumstances. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
This offers you some very important clues as to what related stocks or other markets are doing and can give you important information about the stock or market that you intend to trade.
If you are not going to take it seriously and put in hard work, do not even start.The first two rules seek to adjust your attitude towards day trading. Keep refining it and add to it.If you have your trading plan in your computer, open it before the trading session each day.


If you have it printed out, place it beside your trading computer where you can see it.The Alpha and Omega of Day Trading4. Alpha – Sit on your hands for the first 15 minutes of the trading sessionThe first 15 minutes are usually very volatile, without much price action available for analysis.
Omega – Review your trades after each sessionAfter each session, there is a learning opportunity. Each trade contributes to a feedback cycle that can improve our trading performance.Each trading session starts with doing nothing and ends with reviewing everything. Use limit orders at target priceWe close our trades before the session ends, so the profit potential is smaller. Waiting for the bull run of the century is not for day traders.Use a trading platform that allows you to enter stop-loss orders and target limit orders together with your trade entry.
Taking the best trades is so important that we devoted an article on it.Day Trading Rules That Will Save You9.
When in doubt, lower your trade sizeLower your trade size when you are in doubt of your trading edge.
Accept losing days when day tradingSomehow, day traders expect to end each day with profits. If you refuse to accept losing days, you will do stupid things like overtrading and ruin your trading account pretty soon.The last three rules are lifesavers. Cancel reply Get Updates via EmailSubscribe for TSR updates and get a free eBook - “Day Trading with the Anti-Climax Pattern”.




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Comments

  1. neman

    These instances the generated lengthy stock positions from large draw.

    09.03.2014

  2. Ledi_HeDeF

    Have many years experience beneath.

    09.03.2014