Day Trading Rules to Live By
- The consistency you need is in your mind, not in the market. Many in the market get frustrated because the market often behaves differently than they expect. You can’t rely on the market to be consistent. It is largely a random walk. But there are times when the market does setup with a probability scenario that gives you an edge. Your job is be consistent in trading those probability setups and trade them every time they occur.
- Trade like a cat. Most beginners over trade. It’s one of the most common trading sins. Your job is to be better than other day traders in having the discipline to wait like a cat in the brush until just the right moment (your high probability setup) and then jump on the trade without hesitation.
- Successful trading is simply a game of not making mistakes. Keep a list of your day trading rules posted on the wall or on your monitor and then follow those rules perfectly. You must be more disciplined than the average trader. Never depart from your rules no matter how good a trade ”looks” or ”feels” to you if it violates your objective and back-tested rules.
- Only trade when you are in an optimal emotional state. Never trade when you are tired or are in an emotionally unstable situation (after a fight with a spouse or friend for example). Day trading is more like athletics than academics. Trading on such a short time frame requires you to be able to make split second decisions, and you’re risking a lot of money when you do. Make sure your mind is sharp and your emotions are centered.
- Keep a detailed trading log. Every day trading course I’ve seen has a trading log. Yet my experience in dealing with trading students demonstrates that less than 10% of them actually use it. This is a huge mistake. Not only should you log every trade, but you should also record how you felt and what you were thinking as you took the trade. In this way your logs will become a type of ”biofeedback” mechanism for you. Personally, this was the difference that made all the difference for me.