Whether you want it or not you do need at least a
few rules in your life. There are things that you tell yourself you ‘should’
do, but there must be a few things which you ‘must do’. If you label everything
under should you will hardly achieve anything in life. “I should lose weight,
stop smoking, sleep less, work more and etc.) It does not work. Have a few
‘musts’. The same can be said about day trading. You need a few rules and you
must have a trading plan to be a successful day trader. I want to talk a little
about it in the post.
Read my other posts on the subject:
eur/usd quick trade
Read my other posts on the subject:
eur/usd quick trade
If you do not have a plan you will be ruled by
emotional impulses and illogical behavior. You cannot trade on the hunch all
the time. Occasional trade is ok, but not regular. Do you get what I mean? I
hope you do. Trading rules help you to shape and filter your trading system and
keep you from making spontaneous trades. I would say that a bad plan is much
better than no plan at all. No army general would go to battle without a
strategy and a plan. The same can be said about successful traders. Trading is
battle for money. Somebody is after your money and you are after somebody’s.
Cruel truth, but truth!
Before you ever consider of opening a trade you need
to look through your plan and see if a possible trade meets your criteria for a
‘good trade’.
Some of the points you might ask yourself:
Is there some technical pattern that indicates a
reversal or continuation? I wrote a number of posts on the topic and the series
is not finished yet, but as I wanted to make a short break I decided to write
on day trading. Be sure to check my series on chart patterns.
Is price near support or resistance level? It is
very important as it indicates a reversal level if you a security is in a
range.
Is the price close to a trend line (upward or
downward)? When price comes to a rising trend line (especially on daily charts)
it is very usual for price to find support and jump off the trend line as
strong demand comes to market. See how gbp/jpy pair bounced off its’ daily
trend line when price hit it on the 13th of June 2013.
Do you see long bullish or bearish candles
indicating that support/resistance is strong and you may trade in the direction
of the tendency? These candle patterns indicate strong supply and demand areas
(or accumulation/distribution zones). I haven’t written on candle patterns yet,
but intend to do it after I finish chart pattern series.
Is the move I see is in the direction of the trend
or is it a counter trend rally? Day traders can capitalize on both, but most
successful traders trade only in the direction of prevailing tendency. Buying
on dips in an uptrend and selling rallies in a downtrend should be a common
practice for any day trader.
These are just some of the things that should be on
your trading plan. I hope to add more stuff on the subject in my future posts.
I hope you benefited from the post. If you liked the
post I would also be happy if you gave a plus on Google+, tweeted, liked it on
Facebook and other social platforms. Have a nice day.
Disclaimer: All trading involves risk. Only risk
capital you’re prepared to lose.
Past performance is not an
indication of future results. This
content is for educational purposes
only and is not investment advice.