Day Trading Rules – The One Rule You Must Know!

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Day Trading Rules – The One Rule You Must Know!

Discipline is very important in trading, much like it is in the military, and even though I dislike the military I have to admit that logic proves the case. The military could never work under democratic rules, but it does work fine under discipline and radical rules. Trading is the same thing, once you have the plan, you should not confuse your homework with the execution plan, homework requires a lot of thinking and planning, but executing the trade requires observation and following the rules, no thinking!

The extreme complexity of online charting packages and trading tools would have you believe that there has to be a lot of thought taking place in the trading business. The fact is that these tools are used for planning the trade and the whole trading plan, but when the trader places the order there is no more judgement on the markets. It is all down to your day trading rules.

The trader looks at the trading calendar, figures out volatility and the impact of news, then looks at important price levels to see if they are relevant for that day. He then makes up his mind as to whether he should buy dips or sell rallies, after that he will have a clear trading plan for the day.

Specific Day Trading Rules

• Wait up to 25 minutes for the trade to prove itself – a lapse of 25 minutes is a kind of stop loss order.

• Be out of the market during the first hour on unclear direction days.

• Use the first hour high and low as well as yesterday’s high and low for possible turning points today. If the trade goes well you should get out near these levels.

• Count 30 minute bars, 3 large, consecutive up or down bars often make the first leg of one trend, it is considered as a very likely top or bottom and stops should be tightened .

• Don’t take trades during the mid session timezone, participation is lower and trends hardly ever develop.

The markets do adhere to these rules more often than not, exceptions to these rules are indeed the exception to the statistical rule and nothing more. These rules help develop an emotionless trading plan that can stay immune to minor price volatility and panic attacks that are reflected in the price.

There are trading mentors that provide premium, advanced training, much more detailed and sophisticated than the above rules. If however you can’t afford such efficient, premium trading education, at least stick to the above rules and it will help you somewhat. Of course the premium educators do something unique, they help remove the emotions out of your trading, and that is something no book or articles can ever do!

It’s like going to the doctor and getting advanced therapy, one that exactly fixes your health problem and you get your life back.

Emotionless trading with discipline and advanced homework techniques, but always kept separate, that’s what day trading rules are all about!

This entry was posted on April 5, 2010 at April 5, 2010 and is filed under Day Trading. You can follow any responses to this entry through the RSS 2.0 feed.