The Rules of Day Trading

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The Rules of Day Trading

Post by vivek042 on Fri Feb 12 2010, 22:14

Note: These Rules Are Only For Day Trading, Not For Long Term or Position trading.
A trading plan is essential for success. It is utterly impossible to succeed at trading without a concrete plan. The following are suggestions, some general, some specific, that I think will help traders achieve their goals.
GENERAL POINTS
Homework:
The study of specific scripts and their relationship to the overall market is essential. It is suggested that the trader work at least one hour outside of market hours on familiarization with scripts that could be traded the next day. As time goes on, the trader will have greater understanding of the widely traded scripts, and will be able to better judge information for potential opportunities. Weekends require at least 2-3 hours of study to setup for the following week. The trader should be prepared to spend a minimum of 10 hours a week outside market hours on this planning and study.
Schedule:
A standard schedule is essential. The trader should arrive at the trading center 45 minutes before the market opens (or more) and plan on being there all day. Before the market opens: The trader should have a list of potential trading scripts from his homework from the prior evening.

He should look at these as to how they traded intraday the day before, and draw conclusions as to whether or not he will follow them when the market opens. The trader should have his attention on the market, and on nothing else, be rested, and be ready to attack the market. If there is some outside influence that could take attention off the market, the trader should cease trading until the situation is addressed and handled, and he can trade without external influences that could have a detrimental effect.
Taking heat:
This is the term used for watching a trade go the wrong way. It is the number one reason why traders lose money. Losses are inevitable. Nobody makes money every day. The key to winning overall is to limit the losses and offset them by winning trades.

The trader should never take more than a set limit of heat. In our personal experience, it is extremely difficult to set a number limit on how much heat, such as one-half a point, etc.
Maximum Shares per Trade
Traders with little experience get wiped out by trading large amounts of shares. Until the trader is making money consistently, i.e. 10 trading days in a row with no losing days, the number of shares should be limited
Mistakes
Traders make mistakes. The most common mistake is to sell when one wants to buy, and vice versa. The computer can go down, the feed to the exchange can be interrupted. There are a lot of things that can go wrong. The trader must assume full responsibility for any mistake that occurs. Open positions should be exited immediately (almost always at a loss) when a mistake occurs.
Number of Trades Per Day
Trading too much in one day is the third reason why traders lose money consistently. There is absolutely no reason to trade more than 5 trades per day. The maximum number of trades should be limited to 5 per day.
Maximum Positions at One Time:
The trader should try and limit himself to one open position at a time. Two positions is acceptable, but three is not. This is more of a general rule

Holding overnight is usually done to try and avoid a loss. Holding overnight for an expected gain is too risky for the trader.

keep in mind this is for day traders All rules are made to be broken. All rules can be safely broken under certain circumstances. But in my experience, breaking more than one rule is a grave mistake, and reduces the possibility of success to less than 25%. It should not be done.
Trading Regimen
Every trader has a regimen; a style or set of rules that he follows to choose trades. For example, most day traders use technical analysis as part of their personal regimen to form conclusions.

The personal regimen would include the specifics of what indicators are used and why. These regimens are constantly being refined and polished, due to the fact that the market changes all the time, and what worked 6 months ago may not work now. The trader must have a personal regimen, a specific set of rules or guidelines that he follows.

This must be in writing. These guidelines must be his own, in other words, he must not use another trader screaming or some computer program, or anything else, to make his FINAL decisions.

He must make his final decisions himself, and he can't do it without a personal regimen.

The personal trading regimen helps the trader refine his skills and learn what works and what does not. He can change his regimen at any time, of course, but he must have something to change.


Best Regards
Fortunate Management India

vivek042
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Re: The Rules of Day Trading

Post by nitikasnv on Thu Feb 18 2010, 15:59

All the posts are very important to keep in mind while choosing trading, a profession as, today you will find so many people who are doing trading in different fields so it is like you have to update yourself with the market everytime a new stuff about the prices appear or the costs of purchase.

Thanks

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Re: The Rules of Day Trading

Post by pankaj joshi on Thu Mar 04 2010, 20:14

thanks,nice to hear so many voices. what about reliance's claim that
you can do trading even after trading hours get over.is it realistic?

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Re: The Rules of Day Trading

Post by nitikasnv on Sat Mar 06 2010, 13:19

Well, I dont know much about it but I think it may be done like this as it is always necessary to check the market for the updates, as there will be many downfalls you will see in every 24 hour.

I will find this out and let you know so that to make you facilitated by this.

Thanks

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Re: The Rules of Day Trading

Post by pankaj joshi on Wed Mar 10 2010, 14:34

Do online platforms like kotak securities,hdfc and reliance money super trade provide you

the flexibility to apply in ongoing IPOs through either online or offline channels or for

applying online you do need to fill tedious forms and write cheques?can i apply conveniently

in IPOs from the comfort of your home / office through our Website/PIB. For applying

offline, do i have to contact the Relationship Manager/ Service Branch?

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Re: The Rules of Day Trading

Post by pankaj joshi on Fri Mar 12 2010, 17:31

and do they charge more for this?

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Re: The Rules of Day Trading

Post by jimmy narang on Mon Mar 15 2010, 19:06

here are a few comparisons between various platforms!


http://www.iwebie.com/online-trading-demat-account-and-brokerage-firms

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Re: The Rules of Day Trading

Post by pawankumar on Wed Mar 17 2010, 16:03

thanks jimmy.but i wonder why people dnt go for mutual fund trading online?

http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Few-takers-foronlineMFtrading/articleshow/5532790.cms

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Re: The Rules of Day Trading

Post by pawankumar on Tue Mar 30 2010, 18:01

any answers anyone?

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Re: The Rules of Day Trading

Post by srujanaa4 on Wed Aug 04 2010, 17:08

hi..hi..Thanks for your information.
Its really a knowledgeable thing and everybody should know this.

regards,
phe9oxis,
http://www.guidebuddha.com

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Re: The Rules of Day Trading

Post by Filson on Fri Oct 08 2010, 17:54

I completely agree with you.You have done an great job.. Such an informative and well formed post!

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Re: The Rules of Day Trading

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