When you turn on your computer in preparation for the trading day, the one and only thing you should care about is finishing up on the day. I personally do not subscribe to the idea of only trade the charts and everything will take care of themselves. You have to make a conscious decision of whether you want to finish up or down for the day. You are the only person that controls if this becomes a thought or a reality.
10-Run Rule
My mom recently sent me an article from my high school baseball games from my senior year when we won our conference championship. In the clipping it described how we ran through our division dishing out 3 10-run rule spankings. I thought to myself, every day trader needs a 10 run rule. This 10-run rule is the point you set per day that tells you that the game is over. If you do not know your 10-run rule, a ugly day will turn into a debacle and you are not ready to trade on a professional level.
Take the first pitch
My coach Paul Bernstorf would tell me to work my count. Don't just go out there hacking at every pitch. In day trading, one needs to exercise this same sort of patience. Depending on how actively you trade the market, you will be presented with more than enough trading opportunities. So, take the first pitch, wait to see how the market is trading and how well your system is fairing in the current market environment.
Swing for singles
Whenever you start trading, the first thing you want to do is swing for small gains. Depending on your investment style and timeframe, you need to decide what small gains means to you. For me it is anywhere between .5% and 1.5%. My goal is for every $10,000 I use per trade, to get a minimum of $250 dollars in the bank before 2pm. From this point on I will not risk more than .75% per trade, thus allowing me to make three blunders and still walk away a winner for the day.
Swing for the fences
Once I have my $250 per $10,000 invested safely in the bank, I can now swing for the fences. This does not mean that I let my stops go, but rather when I'm in a winning trade, I look for larger price targets and are willing to give back more of my gains. The power of this is that I'm now allowing my gains from earlier in the day to compound while still ensuring I walk away a winner.
Final Box Score
Day traders make the mistake of always looking to hit the big one, or rather putting on too many trades in one day. Because you are day trading does not mean you can just toss aside common sense rules of how to make money. If you are down $100 dollars and you are in a trade that's up $210, take the money. Get in the black for the day. The worst thing you can do is to not get ahead. What will happen over the course of a month is losing days will make up 20% of the days, winning days 60%, and homerun days another 20%.
Al Hill is the co-founder of mysmp.com (My Stock Market Power) which provides education on all topics finance; including stocks, bonds, options, futures, forex, technical analysis, and more! Please visit http://www.mysmp.com for more free financial educational content.
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