After you prepared many things for your trades, like the setup, the entry or the stop-loss level, now, move to the next level. Ask yourself about how will you manage day trading, actively or passively.
Will you let your trades automatically react after it hits your stop-loss target? Or, will you keep adapting to the current market condition yourself?
You can use both methods. Both of them can help you gain profit, depending on how they are employed. Here are the pros and cons of each method that you should consider before choosing one of them.
Passive approach
With this approach, you have to entry order with a stop loss and target order. They are the orders which will keep your loss in a reasonable amount (usually 1% of your trading capital). Moreover, they also help you exit the trade with sufficient profit for the condition.
So, all you need to do is just waiting. Your trade will automatically exit after it hit the stop loss or target.
The only exception is when there will be news about economic-related events or it is the end of the day trading. You have to close your day trading prior to those two events.
This approach, however, does not allow you to just sit and do nothing. You have to keep analyzing the current price action or find and try other instruments.
This approach has simple math. You can easily track the statistics and see if there are problems in your trade.
Active Approach
In contrast with the previous approach, this approach lets you flexibly adjust stop loss and target level. That also means you can exit a trade earlier than the original plan.
You can also choose to stay in a trade longer than your original plan in order to make a more sizable profit.
This approach lets you continuously change your strategy to adapt to the market condition during a trade.
Yet, this approach demands you to have more skill and psychological control. Once you have those skills you can adapt to every market condition faster.
In deciding whether to manage your day trading actively or passively, remember, both approaches have their own pros and cons. If you are just starting out, then consider using a passive approach. But after some time you learn about the market and various strategies, you can consider an active approach.
