To become a successful day trader, here are the top 5 rules you must follow religiously.
Rule # 1 – Create A Plan And Stick To It
Once you create a plan, it is very important that you stick to it. If you have a sound strategy then you will ever make money. If you constantly switch strategies and never stick with anything, you will without a doubt fail very quickly. A good, sound strategy is objective. It deals with the facts and only the facts. It does not allow room for your personal feelings to get in the way and cause you to make bad decisions.
Rule # 2 – Know Your Market
All successful day traders know their market. They do not dabble in multiple stocks. Instead they focus on a small select few and get to know them intimately. By doing so you will naturally develop a 6th sense and start to recognize certain trends and movements in the market. You will be able to better gauge when you should and should not make a trade.
Rule # 3 – Prepare, Prepare, Prepare
Preparation is very important if you want to be a successful day trader. You must do your homework so you can make an informed decision about when and where you will get in and out of the market. Proper preparation will help you avoid any huge losses.
Rule # 4 – Do not Be Greedy
This is a big one. Being greedy usually leads to you losing more money then you could ever imagine. Do not squeeze every trade to the last tenth of a point. Get out at a decent time so you can avoid major losses. DO NOT BE GREEDY!
Rule # 5 – Take A Loss If You Have To
Most day traders fail because they do not know when to let go of a bad trade. They hold on to it hoping it will turn around. Sometimes you are going to have to take a loss. It's just part of the day trading game. A savvy day trader knows and understands this. The idea is to keep your losses small. It's all about management. Because it's the end result that really matters. A few small losses here and there will not affect your profit margins and the end of the month. But if you hold on to a bad trade for too long, your losses will mount up and could have a devastating affect on your profit margins. So make sure you know when it is necessary to take a loss.