Set Up Your Day Trading Rules

In Day Trading it is critical to ensure that your trading rules support your trading game.

That’s why you’ll want to have a list of rules that are geared toward your thoughts, emotions, and behaviors that underlie your trade as well as your trading system (i.e. setups, price action, indicators, news, economic reports, etc).

In other words, you want to support your trading mind-set and manage your internal emotions in order to focus with laser precision on what-matter-most in the trade.

Below are a number of rules that are designed to support your day to day trading.

Flexibility is the key (both literally and figuratively).  Learn to change if necessary. If you always do what you have always done, you’ll always get what you have always gotten.  And, if you always think what you have always thought, you’ll always do what you have always done.

Stick to your exit rules:  If you find that you are violating a rule, exit the trade…even if you are making a profit.  If you stay in you are only reinforcing bad behavior. Especially if you are making a profit.

Eliminate wishful thinking: Refuse to take that trader drug “hopium,” it means that you’re gambling and putting your hard earned money up to pure chance.  Remember, there is a reason why Las Vegas is full of casino high rises.  They don’t call it “Lost Wages” for nothing.

Know your risks: Always calculate your risk to reward ratio and stick to the parameters.  This is the way you can have a 33% hit rate and still be profitable.Be accountable for your performance:  Set goals and document your thoughts and emotions (Internal Data) and as well your Mechanical Data (the mechanics of the trade).  You are responsible for your own decisions.  Own your mistakes.

Mind-Set:  Learn to manage your negative emotions and harness your positive emotions for example inspiration, passion, joy, etc and understand the emotions of those around you.   Also the famous Buffett quote: “Be fearful when others are greedy and greedy when others are fearful.

Consistency:  Do not adjust a strategy, a rule or principle in order to conform to the market. Instead, let the market conform to your strategy. Have a target, set a rule, let a particular part of the market conform to this rule, follow the rule without deviating. “If you stand for nothing, you’ll fall for anything.”  Alex Hamilton

Let your rules be the compass to your trading… having the right tools for the job of constructing consistent trading results is the key.