One of the keys to being truly a successful day trader would be to have a summary of rules that you consistently follow. Unlike a normal job where you would have a boss looking over your shoulder, as a day trader you’ll be your personal boss and thus be responsible for your own results. By writing down and following your day trading rules, you’ll create a system that reinforces your trading discipline and prevents you from making costly errors. In this post, I’ll share my three most important day trading rules.

Rule #1: Manage Risk On Every Trade

This rule is really the foundation of my trading philosophy. It means that on every trade I make, my first consideration isn’t how much potential profit I could make, but how much cash I could potentially lose. Too many traders focus too much on the potential profit and forget the need for risk management. Before I make any trade, I understand what my downside is and the price at which I am going to exit the trade if it goes against me (my stop-loss). This means that no single losing trade will undoubtedly be catastrophic. As a trader, my goal would be to hit consistent singles and doubles and not necessarily home runs.

Rule #2: Limit Midday Trading

Another key to becoming a consistently profitable day trader is to understand the importance of that time period of day. When it comes to trading opportunities, not all times are created equal. Generally, there is much more volatility and volume in the currency markets at the open and close of trading and a pronounced lull in trading activity through the middle of the day. Because day traders need volatility to create money and in addition must overcome their transaction costs, trading in the middle of the day is frequently a negative idea. To enforce this rule, I keep my eye on the clock and drastically reduce my position sizes and risk in the center of your day (generally from 10:00 am -2:00 pm CST).

Rule #3: Review Every Trade I Make

I view every trade I make as a learning experience, both to learn more concerning the strategies and techniques I’m using in addition to to gain information about the existing market. One of many beauties of trading is that you get instant feedback on your decisions. In this review process, I focus my attention not on the results of the trade but on the decisions I made. Was my position sizing ideal? Should I have moved my stop-loss? Did I follow my risk management plan? As any experienced trader will tell you, there are various times where poor trades become profitable while excellent trades don’t work out. As a way to improve as a trader, it is important that you learn from every single trade you place.


By following these day trading rules, I know that I can be consistently profitable and make excellent risk/reward trades. While risk management may sound like an abstract principle, I implement it by knowing my stop-loss ahead of placing any trade. I’m also alert to probably the most opportune times to trade and limit my trading when conditions aren’t ideal. Finally, I gain insight from every trade I make with a thorough review process. Take the time to write down your trading rules to create clarity to your trading and make sure you stay disciplined.



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