Asking day traders to take the emotion out of their trading is like asking an athlete to not be competitive during a sporting event. Anyone that has ever been in either a losing or winning trade knows it’s virtually impossible not to react emotionally when day trading. We have to admit that the emotional rides through the trading day are part of the allure to trade. What we truly should control is our commitment to day trading discipline. Here are 10 rules that can play a positive role in your approach:

1. Have a plan, Trade the plan – The most critical approach to your trading is to have a trading plan and be disciplined to stick to your plan. Your plan should consist of why and when you enter/exit trades, the size of your trades, etc. Stick to what works and repeat it like a machine.

2. Treat your trading as a business – Don’t trade just to make money. Conduct your trading decisions as if you were running a business. Only enter positions when your day trading system tells you to. Don’t just trade for the action. Review your trading everyday – Evaluate why you took trades. Did you follow your rules? Learn from your mistakes.

3. Prepare for the trading day – Setup key support and resistance areas on your charts. Make sure you are aware of pending news that may affect your trading. Don’t trade if you are tired, angry, or distracted.

4. Look at risk before profit when entering positions – It is often said that successful day traders first look at loss potential before profit potential of their trades.

5. Trade what you see, not what you think – You should only trade what your charts are telling you. Avoid directional bias. Don’t continue to trade against a trend because you think “it has to reverse”.

6. Follow strict trade management as soon as you enter a trade – Take small profits as your trade runs positive. Stay focused when you are in a trade and be prepared to move your stop losses as the trades require.

7. ALWAYS use stops – The number one ruin of day traders is trading without stop losses, or moving your stop losses as the price nears. Set them as soon as you enter a trade. If you get stopped out of three consecutive trades you are out of sync with the market. Walk away for 15 minutes and come back for a fresh start.

8. Take losses – Until you can accept stopping out of losing trades, you will not become a consistent, profitable trader. No one wins every single trade. Cut your losing trades according to plan.

9. Take profits – Nothing is more frustrating than watching a winning trade turn into a loser. Small consistent gains will add up. You will fail in the long run if you always swing for the fences.

10. Don’t over trade – One effective way to avoid over trading is to stick to your discipline of only entering highly probable trades. Set a daily goal and quit when you reach it.

Have fun! – Profitable trading will reinforce your discipline and increase your confidence. Enjoy the ride.

Author: Armando Pena
Article Source: EzineArticles.com
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I am sure that you have seen a news report or two that claims that 90% of all day traders “bust out” and lose all of their money. Further, the report usually depicts some poor fellow who has spent the family savings and is in the process of bankruptcy or losing his home.

Is it true?

Well, in a certain sense the stories are true. As a long-time trader, I have seen more than my share of day traders lose all of their money and been forced to leave the profession. Sometimes these individuals have left high paying jobs to day trade full time and are forced to re-enter the workforce under-employed, or at least at jobs that pay considerably less than the jobs they left to day trade.

Why?

There are many reasons individuals fail trading, and it’s not because the day traders are less-than-intelligent people. There have been several articles written in recent years concerning the failure of day traders, and most point to the emotional aspect of maintaining a proper trading perspective. All to often traders abandon great systems of trading and take unacceptable amounts of risk in hopes of hitting “the big one.” Trading on emotion is the recipe of certain failure in day trading.

Why do rational traders sometimes act irrationally?

One of the toughest tenets of trading to accept is that certain trades are going to be losers. No trading system or methodology can assure that every trade is going to attain success. The market just doesn’t work that way. My personal philosophy is to never risk more than 5% of my money on any given trade and have target profit limits set and stops loss orders in place in case my trade goes sour. I never ride a trade down in hopes of it turning around. I never “double down”. Quite simply, if a trade doesn’t work the way I expected, I cut my losses and move on to look for another trade set up that looks appealing.

Failure is an unpleasant aspect of trading, yet every trader fails in one trade, or more, throughout the course of the trading day. Further, it is common to see traders increase their lot size if they are having a bad day in an effort to “catch up” to their trading expectations.

These are all part of the undisciplined traders emotional make up and are symptoms that doom a trader to failure. There are days when I make two or three clunker trades and decide to turn the computer off. Either the market is acting in a way that is not conducive to my style of trading or I am trading poorly, I never try to over analyze the reasons for my failure. I only know that on a given day my results are unsatisfactory and the best thing I can do is go golfing.

The emotional side of trading is the least studied and most poorly understood aspect of trading. Many traders spend thousands of dollars learning trading technique and complicated systems of trading, yet fail to conquer the emotional side of trade. The emotional side of trading is fairly simple, albeit very difficult to master, and is to simply not allow emotions to enter into your trading psychology. Sounds easy, doesn’t it?

It’s far from easy, and I can tell you that I have fallen victim to my own emotions on numerous trades. I know that any time I feel like I know what the market is going to do and become convinced that a trade “must” work…I am in deep trouble because the maxim “the market is always right” is important to understand. The only variable that can be wrong when you trade is YOU.

The chaotic nature of markets causes many inefficiencies in market pricing that can come into play at random times. If you are in a trade when these market inefficiencies come into play, you lose. It is really that simple and a smart trader exits his trade, takes his losses and moves on.

The study of emotions in trading is fairly new and several books have been written on the topic, I recommend “The Psychology of Trading”, by Laura Sether and Russell Wasendorf. (Note: I have no financial relationship with the authors) as a good starting point. A Google search will also turn up hundred of articles on this topic.

Learn to control your emotions and execute the your trading systems and you will have great results.

Author: David S. Adams
Article Source: EzineArticles.com
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Investors are always looking for ways to make money; for some this means buying and selling futures contracts, for others means buying and selling stocks. One such method is Forex day trading. Day trading in general, and specifically Forex Day Trading, is the practice of buying and selling various assets, such as futures, options, stocks and currencies, with the intention of profiting from the price volatility on a particular day. Trading Forex entails looking for variations in pairs of currencies and attempting to buy when their difference is low and sell when their difference is high.

A Specialized Form of Trading

In the beginning, day trading was only possible for financial companies such as banks because of the fact that few had access to the market exchanges and live market data. Now with the advancement of both the Internet and the processes of the stock and futures markets, individuals now have access the same market data and futures exchanges as these financial institutions. In addition, trading has become so affordable that just about anyone with a computer can make trades. Thanks to the computer age, Forex day trading is now more available than ever before.

Trading in your Bathrobe?

For many people, the year 2000 image of Forex day trading was middle-aged guys who quit their regular jobs to sit at home in their bathrobes making trades. Thanks to the Internet, we don’t have to see a sight like this! While this is definitely possible, it is a broader picture; if you have an Internet connection, you can receive Forex news. If you can receive news, you are able to do the technical analysis necessary to make decisions and then to make trades, no matter whether you are at home, in an Internet caf or on the beach. It sounds simple because it is; the hard part of Forex day trading isn’t implementing trades, it is knowing what trades to make.

Forex Day Trading is not for Everyone

As with any kind of trading, Forex day trading is not for everyone. The stories of great successes in day trading (which are usually sold in EBooks on the Internet) are more than overshadowed by a large percentage of people who lose money day trading Forex or any other commodity. The money that you invest is called risk capital for a good reason; when you start investing, you have put this money at risk of loss. Successful traders know that when they expose their money to risk, it takes research and experience to make Forex day trading profitable.

Forex currency trading for beginners includes some important steps. Like any other form of trading, the investor needs a trading plan to outline his or her strategy; do you plan to trade by scalping (only holding positions for a few seconds or minutes)? Do you plan to use trend trades, counter-trend trades, or ranging trades? These are the kind of decisions that come into play and you need to know what you are going to do before you do it.

In addition, Forex day trading requires the new investor to understand the importance of research and technical analysis; if you don’t follow the news, you can’t really know what’s going to happen with the currencies you trade. These days, there is a wealth of technical analysis tools available on the Internet. Finally, beginners need to have a system for charting trends and analyzing the movement for each currency they trade. For Forex day trading (and for all other types of trading for that matter), Japanese Candlesticks offers the best system for seeing movement in the market.

Conclusion

Forex day trading is not for everyone. It can be unpredictable and it is possible to lose more than you originally invested. If you learn Forex trading and the techniques and processes involved, it is possible to profit from Forex day trading. The good news is you don’t have to work in your bathrobe! (Unless you want to!)

Author: Stephen Bigalow
Article Source: EzineArticles.com
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