Plan your trade and trade your plan. The first step in day “trading like a pro” is the preparation. This involves, the financial instruments to trade and the strategies of best entry point, trade management, risks control and money management. No serious day trader will ever enter a trade without first checking the economic news. It is important to know the time and the day of all important economic news before considering to enter a trade. Only careless traders disregard economic news. You can check economic at Yahoo/finance, Google/finance and at MSN/money. You will then decide what to trade based on fundamentals or on technical analysis.
As a day trader, you will respect the opening bell of London at 3 am eastern time, 8 am London time and the New York opening bell at 09.30 am eastern time, 14.30 London time. You will wait for the opening bell before placing any trades. After the preparation, there are eight steps for day “trading like a pro”.
First step after day trading preparation: 5% rule
It is important to understand at early stage that, day trading involves risks. No trading decision is risks free and will contain some elements of risks. Traders must protect their trading capital at all cost. One simple rule of money management and risks control is to use only five per cent of your trading account. If you open five trades, the total amount of money allocated to those five trades should not exceed five per cent of your trading account. When you reach the five cent, you do not place any more trades.
Second step in day trading like a pro
Very often, traders will trade during the London session, the New York session and the Asian session. It is common to miss a good night sleep, and to trade without pause. The main issue in this case is the over trading. For every trade, traders must pay their due to their brokers in the form of commissions. It is important to control the number of trades that you are taking to avoid paying too much in commissions. In order to avoid taking useless trades for the pleasure of being in a trade, traders should always ask this question: is it worthy being in this trade? The expected reward must exceed at least twice the risk. The risk-reward ratio must always be considered before entering the trade.
Third step in day trading like a pro
When you buy or sell when it is time to buy or sell at the right place, that is a win. On the other hand, when you sell or buy at the wrong time and at the wrong place, that is a loss. The ability to make excellent decisions quickly and to decipher the language of the price or the language of the momentum indicators will allow a day trader to trade like a pro. Day trading is a serious competition similar to American football or rugby. When one is buying another is selling. Therefore, one should use the right strategy for each trading challenge. Using trending strategies during trending period and range trading strategy during low volatility period.
Step four in day trading like a pro
Using indicators in day trading One of the reasons why traders fail in day trading is because they misuse or misunderstand the indicators. Many indicators are just repeating the patterns of the price. In fact they are different version of the price. No indicators can ever replace the price, the number one indicator.
The price is the universal language of all traders and does not hide anything. Traders must keep their eyes wide open and try to understand what the price is revealing. There are many indicators but the price remain the same. The best approach when day trading like a pro is to look at the price first before looking the indicators. Next look again at the price before entering the trade.