Swing and day trading rules for every trader

Day trading or swing or position trading activities should be based on every day trading rules. These rules help to maintain discipline, which is one of the most important aspects of stock market activities. A rule based market system for traders and investors is a key factor for profitable results of electronic stock trading activities.

All these rules should be placed into your trading business plan that covers all aspects of your stock (or commodity or forex) market activities.


Day trading chart sample

Every day trading lessons for stock market systems

Interviews with great traders are vey good resource of wisdom. The best source are the books written by Jack Schwager.  Here are some rules that you should include into your trading plan and system.

  • “Do not add to a losing position. Never, never, never.”

This is a very important rule that should be part of money management rules used every day. Breaking of this rule lead to ruin.

  • “Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding on to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.”

This is taken from Denis Gartman, well-known asset manager, and I must admit that there is a lot of truth in this one. Every trader should protect his/her own capital. But not only money, the mental part is important too.

  • “Stick with your winners and cut your losses quickly”

This is a rule that can be found in every interview. Cutting losses using proper stop loss techniques is critical for profitable every day trading. You can be “right” only 30% of the time and still make a lot of money. But you must have small losses and large profits.

  • “Markets are driven by human psychology and emotions”

It is absolutely critical to understand that other traders and investors are only humans. They make their own analysis and decisions. And they make errors, too. It could be more important to understand investors’ psychology than to understand economics.

It is possible to find many more every day rules and it pays to be open to such good ideas. Good traders learn all throughout their trading career.


Other good sources of every day trading rules

There are also other options to obtain new trading rules for your needs.

The first one is to develop your rules based on your education. There are several ways to learn how to invest in stocks or trade stocks online. Books, DVDs, online video, seminars, mentoring, just to name few of them.

Strategy testing provides important every-day trading rules

Good education will allow you to create first versions of your market plan. Every steps you do helps you to improve. These steps start with the creation of several stock market strategies that fit with your plan and system. These strategies should be properly tested using some paper trades.

These virtual stock trades also provide a lot of helpful swing or daytrading lessons. These lessons could lead to discovery of new rules that could be placed into your plan. FInd the way how to use some trading journal and analyze your trades regularly. You will find what works and what does not work. Make rules based on this knowledge.