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Daytrading Rules
Home » Daytrading » Daytrading Strategies » Daytrading Rules

Daytrading Rules


Before you start

We assume that you have already experience in day trading. A lot of good books have been written about day trading and trading principles, so we just want to mention some important rules which concern our indicators.

Our trading principles

  • In the markets you have trading ranges (flat, up and down), uptrends and downtrends.
  • Don't trade in a trading range market, especially when you are highly leveraged and you work with close stops. It's just like a sparrow trying to dance with the cranes.
  • Don't trade every day - wait for a trend. A trend is the only way for a small guy to stand a chance in the market. It is better to make two winning trades a week than churning your account every day and make your broker rich.
  • We define a trend as a powerful move in one direction which is likely to continue.
  • There are various ways to define a trend; a good way are the Global Futures Trend Indicators shown on the start page.
  • Don't go long in a downtrend and don't go short in an uptrend, no matter how much it hurts to miss an opportunity.
  • Since it is impossible to anticipate every market move, a good way for small traders is also to trade by market behaviors which frequently appear.
  • Become the master of one or two market behaviors you feel comfortable with (market behaviors don't work when economic data are released).
  • You have to fight two enemies, namely fear and greed and the latter is by far the biggest one, especially if you are very greed driven as most of us are and find it very difficult to sell. To overcome fear you need discipline to stick to your market behaviors, because the market has a lot of tricks to suck you in at the wrong time.
  • The best way to fight greed is by putting a limit order together with your stop, especially if you trade the S & P futures. This will limit your profits too, but how many days are there when the market moves up in a big way - very few. And usually everybody who goes for the killing gets killed himself. Besides this you are out very quickly with your profit and a lot of things can happen during trading hours as you have probably experienced. Therefore wait for the herd, take only a third, as the pros say. It will of course hurt when you see the market go higher after your limit was hit, but in most cases you will be grateful for your limit order.
  • The market is not a one-way street; it gets stronger with every low and weaker with every high which is taken out. Day trading and high leverage are therefore not a good strategy for folks who want to catch every high of the market. The only exceptions are The Global Futures Long and Short Entry Signals and The Global Futures Bullish Take Off Formation and The Global Futures Bearish Sell Off Formation. Once you are familiar with them you might use trailing stop loss orders.
  • Don't ever chase the market - always buy weakness and sell into strength. That means if you want to go long in an uptrend on a 60-minute chart, wait for a break on the 5-minute chart to get a decent fill if you buy on market orders.
  • Don't overtrade so you can use wider stops.
  • Remember that even the most reliable indicator can fail, so don't bet the ranch on it.
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