Several Rules for Day Trading
Short-term, or day trading, is mostly played out by reading cost and volume. Understanding this rate/bulk relationship is vital if you're to exist the fast pace of short-term, leveraged trading. Being capable to read the course of sales and the market's depth is imperative, like a musician reading a score; understanding the layered, intricate rhythms and where the next note or bar is coming. The same goes for trading, which is a digital mind game.
You need to understand how the numbers flow from the market. All the indicators traders have created will only confuse the issue. They are derived from price and volume anyway, but they are walking sticks. When trading derivatives you'll need to sprint. Indicators only interpret the market action, so don't take your eye off their foundation; price and volume.
Investing capital long term is fairly easy compared to short-term trading. Numerous research companies proffer suited advice and virtually are easy to access, but if you're looking to maximize your capital return, or just fancy a flutter, look into short-term trading.
Choose your "trading time frame" and understand it: who's in control of your frame, where is the momentum, where's your entry and exit within that time frame? So, trading the little, friendly trend till it ends takes condition, courage and patience.
Trading shorter time frames also brings a whole host of complications; emotional trading is the number one complication, as price, in technical trading, is psychological.
I say this since new traders think they are trading money, and that's rightful, but the numbers follow much later. In the beginning it's their belief about money they're trading; the primary emotional obstacle that needs mastering. Our relationship to our money is deep; it's our security, safety and happiness. When our money goes into the market, a part of us, our psyche, has also entered the market. Our thoughts have connected us to the market; we are the market.
Whenever the market goes on the roller coaster along with our trading capital, we're at the emotional mercy of ourselves and the markets and the markets reflect that. The most common comments I hear from new traders are "shoulda, woulda, coulda". Total responsibility for all your own actions is an absolute in trading professionally. Until a new trader can become detached from the emotional - fear/greed/money/thingy - they are doomed.
My motto while learning to trade is less is more, meaning using less capital per trade so that at least one can think more clearly. But the irony here is that new traders find using small amounts of capital boring, so they tend to use an amount that gives them an emotional experience, ultimately leading them into deep waters. Defensive trading and capital preservation is number one on the learner's list.
Once a trader's mind becomes detached from the fear of loss and starts to focus on the game at hand, the natural flow of numbers coming from the markets becomes clearer. See destiny unfold and then without reacting, clearly choose clean entries and exits, based on a knowing faith about the market, such as volume, price, action and its momentum, supported by a little money management. You'll be on your merry way as a budding new trader. Now you begin to realize the importance of trading methodologies and having systems in place.
An expensive pitfall for the new trader is trading software programs promising to solve all your problems. You finally realize that if these programs actually worked they wouldn't be selling them. You realize this trading-shorter-time-frames business is going to take some actual work and understanding, so later some hard thinking you search out a mentor, anyone who is essentially out there trading. Now you're on the right track. All you demand in software is a suitable charting program with a right data feed that shows you the bars and the volume. Next is getting alongside someone in your local area who has been trading for at least five years. This is one of the best first moves you can make. They are probably happy to help for free because they have been along the same path.
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