Whether you want it or not you do need at least a few rules in your life. There are things that you tell yourself you �should� do, but there must be a few things which you �must do�. If you label everything under should you will hardly achieve anything in life. �I should lose weight, stop smoking, sleep less, work more and etc.) It does not work. Have a few �musts�. The same can be said about day trading. You need a few rules and you must have a trading plan to be a successful day trader. I want to talk a little about it in the post.
If you do not have a plan you will be ruled by emotional impulses and illogical behavior. You cannot trade on the hunch all the time. Occasional trade is ok, but not regular. Do you get what I mean? I hope you do. Trading rules help you to shape and filter your trading system and keep you from making spontaneous trades. I would say that a bad plan is much better than no plan at all. No army general would go to battle without a strategy and a plan. The same can be said about successful traders. Trading is battle for money. Somebody is after your money and you are after somebody�s. Cruel truth, but truth!
Before you ever consider of opening a trade you need to look through your plan and see if a possible trade meets your criteria for a �good trade�.
Some of the points you might ask yourself:
Is there some technical pattern that indicates a reversal or continuation? I wrote a number of posts on the topic and the series is not finished yet, but as I wanted to make a short break I decided to write on day trading. Be sure to check my series on chart patterns.
Is price near support or resistance level? It is very important as it indicates a reversal level if you a security is in a range.
Is the price close to a trend line (upward or downward)? When price comes to a rising trend line (especially on daily charts) it is very usual for price to find support and jump off the trend line as strong demand comes to market. See how gbp/jpy pair bounced off its� daily trend line when price hit it on the 13th of June 2013.
Do you see long bullish or bearish candles indicating that support/resistance is strong and you may trade in the direction of the tendency? These candle patterns indicate strong supply and demand areas (or accumulation/distribution zones). I haven�t written on candle patterns yet, but intend to do it after I finish chart pattern series.
Is the move I see is in the direction of the trend or is it a counter trend rally? Day traders can capitalize on both, but most successful traders trade only in the direction of prevailing tendency. Buying on dips in an uptrend and selling rallies in a downtrend should be a common practice for any day trader.
These are just some of the things that should be on your trading plan. I hope to add more stuff on the subject in my future posts.
I hope you benefited from the post. If you liked the post I would also be happy if you gave a plus on Google+, tweeted, liked it on Facebook and other social platforms. Have a nice day.
Vytas.
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Disclaimer
Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog http://trend0.blogspot.com/ is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.
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