- Know your set up for a day trade. When you open your charts you should know what you are looking for. Those might be: direction of a trend, support and resistance, supply and demand areas, reversal patterns, candle patterns and etc. You should know a situation that would trigger a trade for you.
- Trade only in the direction of a bigger trend. Stop going after those counter trend moves. They do happen quite often, but you will lose more money than you make by chasing those.
- Be patient and wait for the best set ups. Most traders lose money, because they take just about any set up that they think is good. They end up overtrading. Any number of trades beyond 3 per day is too much.
- Do not trade choppy markets. Wait for tendencies to develop. Then trade in the direction of a trend on a daily basis till market conditions change. There is too much noise in the markets that go sideways. Try not to trade and set more time for analysis when markets enter these ‘noisy levels’ – choppy trading times.
- If you miss a trade just let it go. Going into a trader later might be just as bad as overtrading or simply trading a strategy that you do not understand. Let that missed trade go. There will be enough opportunities around if you are patient.
- Trade from one support to resistance and from resistance to support by taking profits (at least partial). In day trading reversals are quite common and you should be willing to take small profits as price goes from one level to another. There will be profit taking by big market dogs and you do not want to be left behind.
- Take your profits at or before an even number. That’s where big hedge funds take their profits. You might get out 10 or 5 pips before the area just to be sure you are not left behind when prices reverse.
- Always have stops and let them always be smaller than your profit targets. That is the only way you can be successful in the long run.
- Use limit orders for both your stops and profit targets. It helps you to stay disciplined and follow your plan and to be proactive, not reactive. You can exit market manually if you see that something goes not in the way you have planned, predicted or imagined.
- If you had a bad trade, do not try to reenter market immediately. Do analysis before making a decision. Maybe market conditions changed and you should refrain from trading. If they haven’t you can enter another trade. Just do not rush!
- If you day trade with a few orders take profits with the first one as soon as there is any and move stops with other trades by placing them below (above if you are selling) 1 or 4 hour lows (highs if you are selling).
- If you want to leave your trades through the night put stops further from the price. You do not want to be stopped out during Asian sessions when profits are often taken and price moves against you. Leave room for these Asian session swings and wait for opportunities during London session.
- Do not worry about a bad day. Better concentrate on your weekly and monthly results. Smile your losses off.
- Do not trade when you are tired or under emotional stress. It is also wise not to trade for a few days if you have a losing streak. Do more analysis and less trading during these bad days. Trading psychology, not only a good strategy is one of the keys to success.
- Write a journal analyzing your mistakes, winners, losers and predictions. A journal will help you to find out weaknesses of your system and trading style. It will help you to understand flaws of your character and perfect those.
- Analyze your trades at the end of the day and prepare for next day making intelligent predictions as to where this or that security can move. Try to see if those perfect set ups for your strategy are coming or not.
- Trade constantly even amounts of lots, amounts of securities till you double your account. Then you can change the number. The same about stop losses. You should start risking no more than 2 percent of your deposit and slowly move to 3-5 percent.
- Identify direction of a security by looking at daily charts and implement your trades on hourly charts.
- Find out what an average range of a security is and try to figure out the best place to enter your trade. If gbp/jpy range is a little bit over 100 pips and the pair has moved 80 pips it may not be wise to jump on a trade in the direction of the daily micro trend.
- Use filters and confirmations on your trades. These may be higher time frames or technical patterns or any other things that gives your trade a higher probability to succeed.
- Do not use breakout trading strategy too much. Prices are often overbought or oversold when breakout point is reach. This is particularly true about day trading.
- If you are trading profitably cash out some money regularly. You want to enjoy your earnings by spending them not just looking at them in electronical form.
Ok, enough of these rules. If I get any more ideas I will expand the post. Hope it was useful and you will be able to apply the knowledge in your day trades. It takes time to learn day trading. So be patient.
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