Rules of day trading
for dummies
How to prepare
for successful day trading
I have prepared "day trading for dummies" rules and free day trading tip list below. There are plenty of day traders starting their trading journey every year. And these rules of "day trading for dummies" could be usable for them.
Trading is a business
Every trader should understand that trading should be taken as a business activity. Only then it is possible to make money by trading. So the first decision that should new trader takes, is to understand how to prepare complete
business plan for trading.
This business plan must be done by day traders and all other trader types: swing traders, position traders, active and passive investors too. Such plan has specific structure. The details will vary based on needs, goals and trading approach of every single trader.
Account size does matter
It can looks strange but it is much easier and less risky to trade with bigger accounts then with small accounts in this business. Traders with small sized accounts (few hundreds or few thousands USD) tend to open positions with much higher risk then traders with larger amount of money on their account.Of course, having larger account does not mean that all money are used every time. My personal experience is that most of the time I have spare cash on my account and I do not need to use any margin at all. It is possible to make money without using all money. It is needed only to have them on the account for better risk management purposes.
Money management and trade management
are part of every
day trading strategy
First and foremost goal of every trader is to protect his/her trading capital. It is not possible to trade without money on the account. So it is critical to develop day trading rules for
money management.
Every trade should be based on
risk reward ratio
calculation and when trade is opened it must be
properly managed.
Only using these day trading rules will assure that intra-day trading could make money.
Day trading education
I mentioned already that trading is business. It is tough business. And nobody can do it without proper
training and education.
It is very important to take time and learn all important aspects of daytrading. Stock trading education is absolute must for every starting day trader. It is good to study best day trading books and also attend some good day trading courses. I have very good experience with using stock trading newsletter for education. I did not use them to blindly follow picks and recommendations of day trading newsletter publishers. I read them to understand how trader who publishes it thinks, why he/she does what is described in newsletter. How money management and risk management methods are used by him.
Develop your day trading strategy
and test it properly
You have to be able to develop several day trading strategies during education process. It is important to describe all of them with day trading rules and test them properly. Testing should be done without using real money first. Use
paper trading
methods or stock
trading simulators
to test if day trading strategy is working and can make money on the paper. Second phase will be to test this strategy in real trading but with very small positions. With extremely low risk. This period is not for making money but for testing of day trading strategy in real trading. If this strategy proves to be profitable then it is OK to start trading this strategy with real money and also with standard risk size. I would like also to recommend to develop several day trading strategies. Each stock market trading day could be different from another one. One strategy fits for standard trading days, another is better for trading days after huge gaps up or down. Is it also OK to stay in cash and do not trade. Cash is also position !
Keep your day trading strategy simple
I found that simplicity is important. Complicated strategies are hardly trade-able. I prefer (and recommend) to use simple stock day trading strategies.
Free day trading tip
These rules of day trading for dummies could look little bit strange and you may thing that some are obsolete. But they are not. All points are important and it pays to follow them.
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