The Three Most Important DAYTRADING Rules

One of the keys to being a successful day trader is to have a summary of rules that you consistently follow. Unlike a normal job where you'll have a boss looking over your shoulder, as each day trader you'll be your personal boss and thus lead to your own results. By writing down and following your entire day trading rules, you'll develop a system that reinforces your trading discipline and prevents you from making costly errors. In the following paragraphs, I'll share my three most important day trading rules.

Rule #1: Manage Risk On Every Trade

This rule is really the building blocks of my trading philosophy. It means that on every trade I make, my first consideration isn't how much potential profit I possibly could make, but how much cash I could potentially lose. Too many traders focus too much on the potential profit and overlook the need for risk management. Before I make any trade, I understand what my downside is and the price at which I will exit the trade if it goes against me (my stop-loss). This means that no single losing trade will undoubtedly be catastrophic. As a trader, my goal is to hit consistent singles and doubles rather than necessarily home runs.

Rule #2: Limit Midday Trading

Another key to becoming a consistently profitable day trader is to understand the importance of the time of day. In terms of trading opportunities, not all times are created equal. Generally, there is a lot more volatility and volume in the currency markets at the open and close of trading and a pronounced lull in trading activity through the middle of your day. Because day traders need volatility to create money and also must overcome their transaction costs, trading in the center of the day is frequently a negative idea. To enforce this rule, I keep my eye on the clock and drastically reduce my position sizes and risk in the middle of the day (generally from 10:00 am -2:00 pm CST).

Rule #3: Review Every Trade I Make

I view every trade I make as a learning experience, both for more information about the strategies and techniques I'm using as well as to gain information about the current market. One of many beauties of trading is that you get instant feedback on your own decisions. In this review process, I focus my attention not on the outcomes of the trade but on the decisions I made. Was my position sizing ideal? MUST I have moved my stop-loss? Did I follow my risk management plan? As any experienced trader will let you know, there are various times where poor trades end up being profitable while excellent trades don't workout. So as to improve as a trader, it's important that you learn from each and every trade you place.

Conclusion

By following these daytrading rules, I know that I could be consistently profitable and make excellent risk/reward trades. While risk management may appear to be an abstract principle, I implement it by knowing my stop-loss prior to placing any trade. I'm also aware of probably the most opportune times to trade and limit my trading when conditions aren't ideal. Finally, I gain insight from every trade I make with a thorough review process. Take  海外fx 人気  to write down your trading rules to bring clarity to your trading and ensure you stay disciplined.