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The Golden Rules of Day Trading

The Golden Rules of Day Trading

Let’s face the facts for a minute: day trading is definitely one of the more risky careers that you could pursue. There are much more “safer” routes out there if you are looking to make your fortune.

With that being said though, there are some people who just can’t get enough of day trading. These people enjoy the thrill of making profitable trades, and the excitement of making multiple trades in any given day.

If you are one of these people, then you no doubt accept the risk that comes with your chosen profession, and stand by the motto “live by the sword, die by the sword.”

You accept that one wrong move could see your entire trading capital completely blown in a week, or even a few days. At the end of the day, if you don’t take any risk then there is no reward, and you wouldn’t have it any other way.

The 3 Golden Rules of Day Trading

There are ways to reduce the amount of risk in your day trading activities though. Ultimately, the main reason why most people go broke is because they get too risky in their trades, and end up making stupid mistakes. This can be avoided altogether by following these 3 simple rules.

Entry level

They say if you don’t plan, then you plan to fail, which is why you must spend some time planning exactly where you want to enter a certain trade.

Deciding on the correct entry level can often mean the difference between making a profit or a loss.

Once you decide that a trade is “ripe” for getting into, then you must also act fast and not delay your decision, as things change quickly in the day trading world, and failure to jump on an opportunity means you miss the boat.

Profit target

Another golden rule of day trading is to decide on your profit target for each and every trade. This doesn’t mean to just have a general idea of how much you want to make, but to have a specific number in mind so you can accurately measure your progress.

This is one of the main keys to success in day trading, as every elite day trader has a long term strategy where the name of the game is all about making consistent profits. You can achieve this by setting a profit target on every trade and being disciplined in your approach.

Stop loss

The main aim of day trading is to make consistent profits while minimising your losses. With this in mind, it makes perfect sense to set a stop loss on every trade that you make.

As with anything in life, things don’t always go to plan, and the same thing applies to day trading. The markets can be topsy turvy at the best of times, and things can change in the blink of an eye.

Determining how much you are willing to lose on trade is essential, so if things go wrong you won’t take a damaging hit to your account balance.

More Rules to Follow:

If you were just to follow the above 3 golden rules of day trading then you would be in pretty good shape, as they should be the foundation of any plan or strategy that you set in motion. Here are some more rules to keep in mind…


The Golden Rules of Day Trading

The temptation to overtrade will always be there. Due to the sheer amount of action to be found on a daily basis, it’s really easy for the average day trader to get drawn into trades that they have no business being in.

A big problem with overtrading is that you end up spreading yourself too thin, which means you can’t properly analyse every trade correctly.

Instead, it’s much better to only select a few trades a day based on the markets you know the best, and then religiously stick to this day trading strategy even if you feel the urge to get involved elsewhere.

Be proactive, not reactive

This one is huge, and is a big reason why many traders lose their shirt. Basically, your main focus should always be on your day trading plan, so that you remain in control at all times and are pro actively trading in the markets.

Problems start to occur when you lose sight of your plan and start to become reactive to things happening in the markets.

Always remember that making profits in day trading is a long term endeavour, and you should be very careful about deviating away from your strategy in order to make reactive trades.

2 percent of your trading capital

If you are just starting out in day trading, then should make it a point to never risk more than 2 percent of your trading capital on any one trade. In fact, a better starting point might even be 1 percent.

This might not sound like a lot, but it’s important to understand that day traders who trade at say 10 percent, can quickly go broke.

It only takes 10 bad trades in a row to go bankrupt which is more common than you might think. It’s much better to operate with a lower percentage of your trading capital, especially when you start day trading, as it gives you the chance to gain experience.

When you first begin your day trading career, you are going to make a lot of mistakes casino. Everybody does. It’s much better to make these mistakes while not breaking the bank!


If you were to just follow the 3 golden rules of day trading then you would be in good shape. Add to this the other 3 rules mentioned above, and you should have all the information you need to become one of the elite day traders who makes 6 figures a year out of this profession.

Just remember to always keep your eye on the prize, and don’t be tempted to get distracted away from your long term day trading strategy.