Congratulations, we’re at the finish line of our “Day Trading: Tips and Tricks” marathon. This whole week, we’ve been reviewing the key rules of day trading. If you haven’t been with us on this journey and missed the first couple of articles, don’t you worry. To catch up, just read Part 1 here, and Part 2 here.
Rule # 5 News and markets drivers
During the day, try to be on the lookout for the key news and various reports, such as unemployment and payrolls data, various indices and statistics. Some of these publications can be of great importance. Most of these releases won’t be strong enough to set a trend for a currency pair, but they can produce the so-called seesaw effect when the price is moving up and down within the day. The stop orders set by the trader are not always able to withstand such volatility, which can lead to substantial losses and put a hole in your account balance.
Every self-respecting trader uses the economic calendar, which covers economic events and indicators from all over the world. When day trading, you should check the calendar in the morning, mark important events and publications and refrain from opening trades during these hours.
Rule # 6 Set Real Goals
This rule is more about discipline and self-control. If the daily volatility of a currency pair is 50–70 pips, do not bet on 100–150 pips and expect stronger movement.
The sub-rule inside this rule is – limit your potential losses.
Of course, there are days when we can observe the abnormal volatility in a currency pair, but it is always worth taking the average. When you limit your daily loss to, say, 50 points, you need to calculate how much time your account balance can sustain it. The market is constantly moving and changing: profits are followed by losses and vice versa. And it’s a pretty sad situation to sit and watch your strategy bring you profit one second, and find yourself empty-pocketed the other.
Rule # 7 Avoid moving your positions to the next day
Rolling over your positions to the next day is one of the worst mistakes any day trader could make: if trading is carried out inside the day, why would you assume that the signal received on the hourly chart should set the trend in your direction tomorrow? This is a completely different strategy, with different rules, entry points, etc. The basic rule of day trading – is closing your positions at the end of the trading day and starting the next day afresh. Keep it in mind, when you’re tempted to transfer your trades to the next day.
To sum up, discipline and compliance with the rules are essential for a day trader. Keep a cool head, do not let your emotions overpower your reason and intelligence. Making a profit becomes much easier if you stick to the rules that we’ve covered in these series of articles.
We wish you a successful day trading and a nice steady income!
