The following is a list of my day trading rules Laws I have created for myself:
- Wait for price confirmation before initiate a long or short position.
- Price is more important than indicators.
- Apply different strategies based on the market condition, let winners run in the trending market, observe the momentum, set realistic goals in the range bound market.
- Pay attention on the price relationship with EMA/MACD (trending market), Stochastic (range bound), and S&P e-mini (general).
- Don’t try to pick top and bottom; it is very expensive way to trade.
- Don’t trust the support and resistance or any pivot points, take the partial profits or liquidate the trades if you concern about the support and resistance. BUT don’t place bid or offer position on the points, unless the price shows confirmation.
- Don’t take the trade if you are not confident with it.
- Don’t over trade!
- Cut the loss quickly in any kind of market condition, discipline is the KEY.
- Loss from top reaches 20% of your limit, stop trading for at least 30 minutes.
- Don’t try to cheat the market, because 99% of the time you will be the one who lose.
- Psychological management is critical. STOP trading for at least 30 minutes after experiencing 3 continuous losses.
- Set realistic goals everyday, stop trading for at least 30 minutes after the goal is achieved.
- Get enough sleep, it helps you to focus.
- Take it easy, it is a hyper intensive job, don’t get to emotionally involved, after all, health first, then money…
From Dr. Steenbarger: Ten Generalizations That Guide My Trading
October 15, 2007 at 1:10 pm
Good tips! Would you explain #10 a bit more though?
October 15, 2007 at 1:53 pm
Thanks for the comment.
Well, when you are doing day trading, you should have a stop out limit preset for the day. Let’s say 1000 $, it means you should stop trading when your loss reached 1000$.
20% of 1000 = 200 $
When your Loss from top reach 200 $, at least you should take a 30 minutes break, to adjust yourself mentally/strategically.
Loss from top means loss from your highest point of the day, no matter it is break even or 500 profits. Stop trading for 30 mins when you down 200 from breakeven point or down to 300$ from 500$.
Daytrading is all about discipline, sometimes it is hard to stop trading for just 30 mins when your are losing control.
Good luck.
October 17, 2007 at 5:18 pm
Good summary! I especially believe not to pick tops and bottoms:-)
November 7, 2007 at 11:07 pm
How did you get into trading?? how often and how much money do you let yourslef trade? You say to take brakes when you are losing or winning, but how much time do you spend in a day or week in total?
November 8, 2007 at 12:32 am
I started stock investing as an interest, and also treated it as a part time job. I started daytrading only about more than a year ago as a coop student. One year stock daytrading experiences helped me to realize how challenging this career is and how much i love it, how frustrating it could be…, and how much time I should devote into it in order to make a living…
I trade/invest only if I have at least 5k disposable cash on hands. But when I trade for the company, the money is not really a problem.
Due to the fact I am back to school, and not doing daytrading, I only spend about 2-3 hours per day to observe the market and make some swing trades, and spend about 1-2 hours on stock research and analysis, more on the weekend.
Doing daytrading need to spend a looooot more time…
Hope this answered your questions
Thanks for the comment
Cheers,
Edward
April 8, 2008 at 3:43 pm
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