Before you start a day trading, you might have tried searching the ways to keep it simple. Day trading can be confusing, you need to stay alert every day to get maximum profit. Here are the three steps to have a simple day trading. Remember you have to always focus on one step at a time.
A trade set up is essential to make you an effective trader. Setup lets you filter out all of the irrelevant information on your chart.
It is a specific set of conditions that have to materialize to indicate a trade can happen. Every trader will have a different setup.
For instance, you only trade breakouts from triangle patterns in the first hour of the trading day. That triangle is your setup. Then, once the triangle appears, it will tell you that a trade could happen soon.
A trade trigger happens right after a trade setup. It lets you know the time to enter a trade, right at that moment. If you use an indicator, the trade trigger will tell you the exact moment it passes through a particular level.
Risk and reward assessment
After you have a setup and defined the time and place to enter a trade, then you do not have anything to think about. You just need to watch your setup, then define your entry point.
Once your setup in place, while your trigger pending, you just need to determine whether you take the trade or not.
If the potential reward based on your setup outweighs the risk, you can execute the trade when the trade trigger happens. On the other hand, if the potential reward does not outweigh the risk, then start to look for other setups.
Besides, risk and reward assessment also involves being aware of economic and company news. That is essential since we do not know how the market will react to those economic releases. Check on the economic calendar for the information.
Also read: 3 Essentials Trading Tips for New Day Trader