Thursday, September 15, 2011

Trading tactics for day traders

1. Set a daily limit for losses. If you are trading in more than one instrument, have a limit for each instrument, as well as a total limit. once that amount is touched, stop trading for the day. No exceptions.

2. Markets open at 9.15 AM. Have a view before the open. Then revise the view, if neccessary by 9.30 AM. In another half hour, say 10 AM, you know if you are in sync with the market or out of sync. If you have a losing trade in the first 45 minutes and your views are not in sync, take that day off. Work on your charts, paper trade, do research but do not trade.

3. If market is moving according to your view, then increase your trading volume. Take advantage of good days by being aggressive.

4. Trade in multiple positions, so that you can take some profits if there is a Range Expansion (RE) in your favor. An RE bar is visible on the chart for its unusual length. As a simple rule, it should be atleast twice the average range, almost certainly closing in the top 20% (if trend is up) or bottom 20% (if trend is down).

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