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10 Trading Tips And Rules For Day Traders

10 Trading Tips And Rules For Day Traders
Day trading is a convenient way for most people to make money when they dedicate a couple hours on it or, for some people, make it their full-time job.

Almost everyone’s dream (not to say everyone’s dream), is to be their own boss and work for as many hours a day as wished. 

With trading you can live your dream and have plenty of time to spend with your family, friends or doing the things you like the most.

When it comes to money, there's really no limit as to how much you can make as a trader. 

However, even though the upside is huge, it requires skills, knowledge, patience, and consistency; otherwise, you will be losing money instead of making money.

In this post I'm going to give you some of the best day trading tips and rules common among successful traders you can copy to become a better day trader and avoid common trading mistakes.

10. Day Traders Set SL And TP

Successful Day Traders Rules
It's normal as you start making some profits in a trade to desire more and more. This is going to be bad for your trading results in the long run.

You might take a trade because you anticipate a reversal. 

Or you might take a breakout trade anticipating continuation of the trend.

Whatever your position is; you have to set a TP, take profit target (where to take your profit). You also need to set a SL, stop loss (where to exit if your trade doesn't work out).
Successful Day Traders Rules
Once you set your stop-loss and take profit, stick to it, this way you will protect your trading account (risk management) and avoid the mistake of being too greedy.

Trading Rule: Always set a stop loss and take profit target when you enter a trade.
Want a beginner friendly strategy that actually works? Download your free pdf strategy guide.

9. Day Traders Are Patient

One if the most important rules when being a day trader no matter if you are a beginner or an advanced trader, is trading with patience. 

Trading is a really risky business where everything can happen and you need to be able to stay patient when there are no trade setups and act fast with confidence when you get a trade setup.

The majority of people that quits day trading, are too greedy and lack patience, which leads them to rushing decisions and making big losses.

Can you sit on your hands a whole day waiting for your setups without taking any unnecessary actions?

Trading Rule: Patiently wait and only take trade setups that follow your trading plan.

8. Day Traders Know Technical Analysis

In day trading, is very important to know your technical analysis.

Among day traders, price action trading is king.

One of the most popular price action trading strategies/techniques is support and resistance trading.

Make sure you always look to buy (go long) at support levels and sell (go short) at resistance levels.
Waiting for confirmation is rarely profitable in day trading, you need to be confident in your levels and trade them with no fear.

Day traders who wait for confirmation from (for example) a moving average crossover will be late in the trade and their risk reward ratio will suffer. The moving average crossover can work for swing traders and investors, but rarely for day traders.

Trading Rule: Trade strategies and signals based on price action.

7. Day Traders Understand The Markets

Every trading strategy you use should be based on the behavior of the market.

You have to understand how the market works from the really simple details like trading hours to the complex details like trading psychology.

Not every market is the same and you have to consider every detail. In fact, in 1990´s day trading had a bad reputation due to “novice traders” that thought trading was a "get rich quick" thing.

You might trade futures, forex, stocks, options or ETFs, etc. they all are traded in slightly different ways.

You have to understand the specific differences between each one before you trade them.

Lack of knowledge and understanding will most likely lead to losses.

Trading Rule: "Before you invest in something, invest in time to understand it. " ~ Warren Buffett

6. Day Traders Master Risk Management

We all know that higher risk equals higher potential profit.

However, in day trading you should have a Risk/Reward Ratio (RRR) above 1 on every trade you make in order for you to always have a higher potential reward compared to your risk.

Here is an example of a trade with RRR below 1, a trade most successful traders would ignore. The setup for this trade is a piercing candlestick pattern confirming a support level.
Risk/Reward Ratio RRR Forex Trading Strategy Example
Now same trade with RRR equal to 1, wich is still not good enough for most traders.
Risk/Reward Ratio RRR Forex Trading Strategy Example
Now let's look at the best option, RRR above 1 which means you reward is greater than your risk.
Risk/Reward Ratio RRR Forex Trading Strategy Example
As you become a better trader you'll learn how to better manage risk. 

Nevertheless, I recommended (no matter how experienced you are) to always take small risks and aim for big rewards on every trade.

In fact, the psychological impact that causes a high loss because of a bad trade can lead to revenge trading (to get back what you lost) and this will most likely end up with you losing even more money.

Trading Rule: Only take trades with a Risk/Reward Ratio above 1.

5. Day Traders Stay Consistent

The most important rule to become a great day trader and make consistent profits is, well, to be consistent.

By consistent I don’t mean to trade every single day, but to always stick to your plan, risk management, strategies and most importantly control your mindset.

Unlike what the majority of people think, the best and most successful traders in the world don’t trade every single day. 

The best traders are best because they wait for the best opportunities to trade.

They get consistent results because their trading is consistent.

More is not always better. 

In day trading, it's not that important how many trades you make but if they follow your plan or not.

Trading Rule: Be disciplined and consistent in your trading.

4. Day Traders Have More Than One Strategy

Having several trading strategies or at least two strategies can be really helpful.

In case one of your strategies doesn’t give you setups, you can use the other one.

The more strategies you have the better (as long as you don't get confused and can't follow your plan).

If you trade too many strategies you will find it really hard to stick to your risk management because of all the open trades you might have in the market.

Like I said before, more is not always bette, especially for beginners.

Trading Rule: Have more than one strategy but not more strategies than you can handle.

3. Day Traders Invest In Education

The truth is, letting other people manage your money is a waste of money, and can lead to huge losses.

The best way to invest your money is, without a doubt, in education.

Learn for someone that been where you are and can help you speed up your learning curve by giving you all the knowledge you need to make money yourself, instead of getting scammed by managers.

Don't believe me? Listen to these brilliant minds on why investing in education is very powerful:

"No other investment yields as great a return as the investment in education. An educated workforce is the foundation of every community and the future of every economy." ~ Brad Henry

"An investment in knowledge pays the best interest." ~ Benjamin Franklin

"Risk comes from not knowing what you're doing." ~ Warren Buffett

Trading Rule: Read books and learn daily.

2. Day Traders Trade In The Zone

"You have to train your mind to be stronger than your emotions or else you'll lose every time." ~Unknown

Don't let your emotions carry you away. 

The psychology of trading is a big subject. Trading when your exited or worried will most often cause you to make mistakes (more mistakes = more money lost). 

It can be very difficult to follow your plan, especially after you've experienced a losing streak. But by keeping a calm mind and trading in the zone, trade with no fear of trading, you will stay objective, so you can make good trading decisions. Whenever you let your emotions get the better of you, you expose yourself to unnecessary risks. 

Trading Rule: Only trade when you you're calm and focused.

1. Day Traders Never Trade With Borrowed Money

Unfortunately, you won’t win every day even though you trade your plan right.

Even if you're a successful trader you don't know when the next drawdown is coming.

Accept that you will have losses now and then. There's always new trade setups coming tomorrow.

So never use borrowed money to trade the markets. 

It's important that you day trade with money you actually have and can afford to lose.

Also, the money you trade with should not be the part of your savings or emergency fund.

Trading Rule: Only trade with money you can afford to lose.
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I'm a family guy in my early 30's who learned how to trade the markets in a simple yet effective way. During university I studied investing and graduated with a master's degree in risk management. Quickly, I realized that I was onto something. I started helping friends and taking students. My students started getting results, spent less time in front of their screens, and their accounts grew consistently. Learn more about me here.
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