Day Trading Rules

Day trading rules are built around disciplined approaches to money management and profit taking. Day trading is a business, not a hobby. Traders must have a plan before they enter the markets so that trading is conducted without drama.

Have a Plan for the Day

Prior to trading the traders should review overnight markets in Asia and Europe, early morning announcements from companies they are following, government announcements and a list of stocks they are prepared to trade. Make certain your internet connection is working and you can trade through your online broker in a few keystrokes.

Place Orders in Stocks: MOO

MOO means market on open. Market on open orders must be placed at least 20 minutes in advance of the market opening. Market orders ensure you will get the stock you desire at the same price every open order receives.

Employ Stops for Every Trade

Every order should have a stop or price at which a stock loss will not be exceeded. This is called a hard loss and is important in assuring that profitability. Keep losses small.

Have an Exit Stategy

Know how you will exit any stock purchase. Day traders use profit targets, fallback to a moving average and other tested exits to assure profits.

Orders for Stocks Not Sold: MOC

Day trading demands that no overnight position be held so that overnight risk is avoided. Market on close (MOC) exits must be entered for any stock that is not sold during the day.

Be Disciplined

Day trading requires strict money management control and attention to markets at all times. Most profits are made by taking advantage of random inter-day movements of stock prices. Follow a few stocks religiously and with discipline to cut losses and take profits.

Keep Accurate Records and a Trade Log

Practice trading before entering real orders. The learning curve is steep and much can be learned with a practice period of paper trading. Update all your record keeping immediately after the market closes so you can tie your records out with your broker.