Trading is a lifetime skill. The learning itself is a lifetime process.

If you’re just starting out, or if you’re new to trading and want to educate yourself with the do’s and don’ts of trading then it’s never a bad idea to carefully learn the ins and outs of what you’re about to get in to – and even more so in trading. Even if you wish to trade part-time. These rules will help you stay out of trouble – to some extent 🙂

In day trading, you can see the reflection of your expertise almost instantaneously. The reason for this is due to the fact that in other professions a lot of minor imperfections or shortcomings don’t account for anything.

Let’s suppose I drive a taxi, and I am having a bad day. I feel fussy, grumpy and irritated. It might not effect my day as much. I can skip the casual conversation with my customers – as that’s not what they pay for. They pay me to drive. I may perform just well enough to finish my day successfully.

Whereas in trading, human emotions account for most of your trading success. Also the results can be instantaneous  when it comes to day trading.  You will have to learn the principles, mold your thinking in a new ways, and let go of your old established habits.

It’s a proven fact that human mind forgets 80% of the knowledge it acquires within 3 days.

Therefore it’s important to learn the rules and constantly remind ourselves to adhere to them at all times.

First and foremost, you will have to accept the fact that trading comes with its own risks. No matter how much you educate yourself ,and no matter how much you prepare and study the market before taking on your first trade. You will never be able to guess what real trading entails – unless you actually start trading. If you have already started; then we have checklist to remind yourself of these do’s and don’t before you take on any trade.

Successful traders will do what unsuccessful traders won’t do.

What doe’s it mean when we say successful traders will do what unsuccessful trader’s won’t do? It’s the same thing as saying – unsuccessful people in the world don’t do what successful people do. Does it make more sense now? I short – its about applying yourself. In a broader perspective – success comes from being more aware, more vigilant and being more educated and prepared for the challenges you face in life.

Being successful at day trading requires a lot of education, planning and preparation to make healthy profits.

Do Start To Learn

There are plenty of get rich quick systems being touted from all corners of the world. Start your own learning, and you will have a high chance of success, once you start to trade with your own interpretation of the market – rather than relying on someone else’s formula. Trading strategies do work but you need to understand the principles and underpinnings of – why a strategy works in a given market condition. That will give you more confidence and more trust in your trading abilities.

Do Seek Professional Advice

It’s always a good idea to follow a professional coaching program, or if you trust your own DIY capabilities then make sure you start with a reliable coaching program. It will help you cut down on the time you will spend with exploration, experimentation and rules that are known to the experienced traders. It can save you a lot of time and money in the long run – and potentially avoid a bad end to your trading career – given the fact over 90% of traders lose money – they surely end up somewhere not so pleasant.

Do Idea Generation – Using Macro & Micro

Learn to scan the market for opportunities. Learn your own psychology, and learn to beat your biases when you look at the market data and before you jump to any conclusions. Learn what factors to look for. Whether you engage in long-term or short term trades – macro and micro economic factors have a direct affect on the markets. Learn to correlate events, indicators and drivers so you can better understand the current and future market sentiments.

Do Fundamental Analysis

If you’re trading stocks then it’s important for you to learn as much as you can about a company. You should seek to look at all the available financials of a company to ascertain its health. A stock price that trades below a company’s intrinsic value is considered a good investment opportunity and vice versa. A lot of the day traders do not rely on fundamental analysis, as most of the their trades only last a few days to a week at most, and the ‘current price’ or ‘price action’ along with the current ‘going trend’ is considered the most important factors they base their technical analysis on.

Do Technical Analysis

Technical analysis begins with looking at the current price of a stock, commodity or currency and trying to determine the direction it may be heading. Technical analysis involves analysing historic performance, current price and direction and use of tools/indicators to determine the market sentiment.

Do Action

Once you determine where the market is heading towards and you feel the need to take action – it’s time for you to make a plan with the precise timing to enter the market. You should set yourself targets to take profits and set your limits – regardless of whatever direction the market takes.

Do Control Your Emotions

Given the fast pace of day trading – the experience is often intense and mentally draining. You must control your ‘fear and greed‘ when in a trade, as emotions play a big role in your trading success. If you have a trade going your way – you must not exit the trade too quickly, or let it run for too long – before all profits dry out.

Do Set Your Limits

The golden rule is to use ‘hard stop losses’ and ‘soft limits’ to maximise your profits. Using hard stop losses mean you should put your stop losses close to the previous lowest low or highest high depending on whether you’re going long or short.  If you see the market heading in the direction you anticipated – then you should let the position run as long as you can to maximise your gains.

You should also limit the number of stocks, currencies or commodities you trade in. Every stock or currency has it’s own unique characteristics or personality, so with experience and time you will learn those traits and become better in your judgments.

Do Make Mistakes

You should be ready to accept failures and knock backs – even the most experienced traders can’t always be right about their market analysis and judgments to enter and exit trades at the right times. You will become better at predicting and executing profitable trades as your experience grows. You can read all you like, and educate yourself with the best trading strategies – however the experience of trading in a live environment is always different from theory.

Do Recap and Improve

If you lose a trade – never shrug it off – instead, you should take note of what you anticipated and the outcome you received. Try to identify where you went wrong in your judgements, and also the underlying factors that influenced the market direction.

Don’t Take Big Risks

Every trade you take should be worth the money that you can comfortably lose. The chances of winning a trade are 50/50 – even with the best strategies in place. Learn the rules of money management and gatekeeping. Also, depending on the stocks, commodities or currencies you trade, you should learn the exact ratios that apply – as some stocks or currency pairs tend to fluctuate more than others.

Don’t Revenge Trade

It’s our very human nature to respond to sudden failures with more vengeance and react quickly. However, in day trading this can be lethal. If you lose a trade – study and learn the reason behind your failure, rather than trying to jump straight back in to trading to make up for the loss.  I can guarantee – it will do more harm than good.

Don’t Trade Too Often

You should only trade when you see a real opportunity. You must do your analysis before entering a trade. Spending too much time trading, and less time analysing the market is simply a recipe for disaster.

Don’t Scalp If You’re A Newbie

Another important point to mention here is the fact that there are many trading programmes teaching newbies to scalp the market. Scalping refers to taking very short trades that only last a few seconds, however it’s extremely risky and requires a certain level of skill and understanding to predict a sudden sharp movement in the market. Given the fact that you pay a spread (fee) on every trade you take. This means; even if a trade goes in the direction you anticipated – your profit from the trade isn’t guaranteed – unless the momentum is strong enough to achieve extra pips above your ‘spread’ cost.

It’s always a good idea to try different strategies and take notes. Having more knowledge and experience are probably the most important factors when it comes to long term trading success.