Use stops no matter what they say
Some people may feel that a stop is not a good thing as it would put you out of a position just before a move that could net you huge profits. However, stops also protect you from huge losses, as they would put you out of a position just before the market plunges. The key is to place your stops intelligently, perhaps just below a fixed spread from your starting price. You should make the decision right when you place your trade - this ensures that you do not later get influenced by market emotions.
Day Trading Technique: Trailing profit targets are your friend
When day trading, letting your winners run indefinitely might not always be a good idea, since you are unable to predict market movements fully. Yet, you do not want to get out of a winning position prematurely. What should you do then?
The best way around this is to set trailing profit targets depending on the chart patterns. If the bullish pattern you had been expecting continues, allow your winners to run - set progressively higher profit targets; but if you notice a reversal, get ready to get out.
Day Trading Technique: Cut losses
This is the rule #1 to success in day trading. Most people do just the reverse and wonder why they are losing so much from their trading. They let their losses run while cutting their winners short.
Unfortunately, this cardinal rule is easier said than done. Learning to cut your losses short requires significant discipline. You should determine exactly how much of a loss would indicate an exit point for you right when you make a trade, and stick to that always.
Day Trading Technique: Select the right markets
Day traders can only make money in liquid markets; they thrive on volatility. Markets that hardly move are very dangerous to day traders and can be very risky if you do not have the time to watch your trades all the time. There must be large enough daily or short-term movements to make trading worthwhile.
One more day trading tip: Avoid markets where trades tend to occur erratically, with periods of low activity followed by sudden gaps in prices. These gaps are very difficult to predict and can spell a huge loss for you as a trader.
Yuen is a financial expert, personal finance specialist and motivational speaker who writes for the Financial Freedom Guide and other major financial blogs. His writing emphasizes financial independence and the creation of long term residual income streams. Read his success story at Site Build It Reviews
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