Day Trading is a trading activity for the short term. People who do Day Trading are called Day Traders. They have the habit of opening and closing their positions in the forex market within one day. Usually, Day Trading lovers are those who do not like to hold their positions for days. Additionally, they want to get profits immediately. However, being a day trader isn’t easy, you must understand the day trading rules.
Let’s look at some of the following Day Trading rules that you must follow:
Not an Investment
You must understand that Day Trading is not an investment. Day Trading is a short-term activity that is purely carried out to benefit from the difference in price movements in one day.
There are many Day Trading Risks. One of them is the risk of volatility in which currency fluctuations occur so fast. This can bring benefits if you use it wisely. However, it can be disastrous if you do open positions without consideration of analysis and good money management.
Not Gambling
Don’t ever have the mindset that Day Trading is gambling. That mindset will make you trade without a plan, and tend to hunt for profits randomly.
Traders who have the mindset as gamblers will consider the market as a playing area, not as a place of business. This kind of trader will usually lose money. Meanwhile, those who see trading as a business area will be able to last longer. The reason is, they can generate profits consistently by referring to money management and careful analysis.
Applying 5W and 1H
You must have careful planning in trading. The plan will make your trading more directed. If you are confused about where to start, you can apply the 5W and 1H strategies, which are What, Who, When, Where, Why, and How.
Observing The Market
In the initial 15 Minutes when a market session starts, the price usually will experience quite high volatility. It will make you difficult to do the analysis, especially for Price Action traders. Thus, you must wait for the market sentiment stable.
After 15 minutes have passed, you can start looking for opportunities based on your trading plan.
Reviewing Your Trading
These day trading rules are often missed by novice traders, even though the benefits are very important. There are always lessons to be learned at the end of every trading session. Therefore, you have to take your time to identify the success or failure that you have after closing the trading session.
Using Stop Loss
To determine Stop Loss, you must pay attention to the state of price movements. Do not put Stop Loss at a level that is disproportionate or not commensurate with the real conditions that occur in the market. According to Investopedia, by using Stop Loss, you don’t have to monitor how a stock is performing daily.
For example, you can randomly place a Stop Loss on the amount of the pip at will, between 25 pips or 50 pips. This has the potential to cause your account to close a position too early, even though the price can still move in the direction you previously analyzed. The best day trading rules for determining Stop Loss are to place it below the closest support level for buy positions, or above the closest resistance level for short positions.
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