Day Trading Rules You Should Know Before Making a Trade

If you are new to prop trading, you should know that having a set of day trading rules is mandatory to become successful. By following a specific set of rules, you will have these guidelines in place that you can follow to build your trading account and understand the complexities of the trading markets. With that said, here are the rules that you must follow to become a successful prop trader.

The Use of Limit Orders

The first rule that you must follow at all costs is the use of limit orders. The use of limit orders means that you will be missing out on some trades, but you will know the price of what you are buying and selling. The use of limit orders prevents your order from getting filled at a less favorable price.

The use of limit orders provides you with control over the trade execution price, which can be particularly useful in a fast-moving market. With that said, price control is at the core of this rule of limit orders.

The Use of Hard Stops

The use of hard stops is another one of the day trading rules, the purpose of which is to sell a security electronically when it reaches a predefined price level. With that said, you should know that the number one thing that sets winning traders apart from losing traders is discipline and patience. You should be disciplined enough to undergo the same daily trading routine, especially when it comes to using stop losses.

As a beginner trader, you will be prone to moving your orders around. For instance, you might feel anxious and actually close your trade before hitting the stop loss. Nonetheless, with the stop loss rule, you can save your trades from catastrophic events.

The Use of A Tested Strategy

Another rule to know before you start day trading is that you will need to backtest your strategy in all sorts of market conditions. This way, you will feel confident about the strategy and your trading skills altogether.  You cannot expect to make big wins without thoroughly understanding the trading market and the rules of day trading. Also, you cannot expect to find a chart that looks good enough to start trading and winning at trading. A successful trading strategy incorporates set parameters that clearly outline when you should buy or sell a stock. Also, your strategy should clearly outline when to stay flat.

The Importance of Taking Breaks

As a newbie trader, you might feel overwhelmed to the point that you make rash decisions and indulge in impulsive trading. With that said, you should understand the importance of taking breaks and the rules. Ideally, you should take a break after every two hours or so. Take a break of fifteen minutes or so before resuming trading.

Conclusion

Incorporate patience and discipline within yourself, as these are two of the most important characteristics of a successful trader. Nonetheless, by following the right rules, you will set yourself up to become a successful day trader.