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Basic day trading rules for rookies
Basic rules in trading
Thanks to advancements in technology, virtually every boss who fancy trading in the financial markets can easily open a brokerage account (from the comfort of their homes) without breaking a sweat.
While access to the financial markets is increasingly made easy ( which is a good thing), there is a need for new traders or will-be traders to be cautious about how they get into the markets, especially as traders.
A quick peek at the online platforms will lead you to a very long list and a vast library of trading ideas and strategies from experienced traders and amateurs alike on how to enter trades.
Even though some of the resources you will find online are not far from what’s obtainable in day trading, some are entirely off course. As such, to make the right decision about trading, you must make time to grasp the basic day trading rules and opt into mentorship programs that will take you by hand and provide all the support you need to make your trading a journey relatively smooth.
Importance of trading education
With the proper trading education on day trading, you would have saved yourself the heartbreaks of running into brick walls and getting caught on the wrong side of the swing. Also, you won’t be downloading whatever app that crosses your path.
Apps like Robinhood and Webull are pretty easy to get, and anyone can download them within minutes. Downloading trading apps has never been an issue. The big question is, now that you have downloaded your choice app, what’s next?
Have you got the skillset and experience to start taking trades, or are you going to wing it? Starting your trading journey by “Winging it” is arguably one the quickest ways to fail as a day trader or stock trader. Between 90% to 95% of day traders lose money trading blind or winging it, simply because they don’t poses some of the basic day trading rules.
Why do you need to follow basic day trading rules?
Unless you are looking to “blow” your trading account even before you get started day trading, you will invest in trading education, which most people overlook before trading or investing in the stock market.
To be on the safer side and not continuously throw your money to the sharks (speaking of unethical brokers) and avoid making avoidable mistakes, it will help a lot if you make time to understand basic day trading rules before risking your hard-earned money in the open market.
For starters, every day trader should learn to conserve/manage their capital and be mentally prepared to take on the ups and downs of trading.
Yes, it takes time to learn the basics of trading and even longer to learn how to control one’s emotions during trading. And controlling one emotion is a big part of day trading.
Speaking of emotions, having your emotions in check is an essential aspect of trading. If you are constantly struggling or grappling with your emotions, then you may have to step on the brakes and figure out how to be in control. You wouldn’t want to be second-guessing yourself before taking trades.
As a day trader, your primary concern is catching as many profitable movements in the markets. It’s the little wins that compound into something big — more like the proverbial drops that make an ocean.
Compounding profits and keeping losses low is the driving force behind every trader. And that leads to developing suitable trading and learning proper risk management techniques/practices.
When making decisions regarding your trading strategy, you must learn how not to allow your emotions to get in the way of your trades. This is why you often hear traders (experienced and inexperienced, profitable and non-profitable) talk about the importance of sticking to basic day trading rules.
What are day trading rules?
There is a long list of basic trading rules to follow to become a successful or profitable day trader. However, they can be classified under the following: trading strategy, risk management, and of course, having control over your emotions.
Contrary to popular misconceptions, trading rules are not the same for every trader, even if they share the same trading ideas. For instance, every trader has a unique personality which is often reflected in their trading plan.
Every day trader also has a different risk appetite, and they all come into the market with varying amount of capital. As you know, the size of your trading capital goes a long way to determine how much you can risk in every position.
Basic day trading rules will save you from making costly trading mistakes
You can’t afford to make rash decisions while opening positions because you may end up making the wrong decisions and losing your capital or running your account aground.
While it may take time to establish your trading rules, you don’t necessarily have to take “forever” to develop your strategy. With the aid of mentorship programs like the day trader mentorships, you can shorten your learning curve and get on your feet in no time.
While you are at it, you don’t have the time to make all the mistakes like other traders who turn their backs in expert guidance before trading. Instead, you can learn virtually everything from position sizing to making the right choice of time frames from pro-traders.
In addition to learning how position sizing and choosing the right time frame to impact your trading, you can also learn the rules behind other aspects of trading, such as knowing what equities to trade, the price of equities, and how to be consistent in making profits.
How to apply trading rules
As we mentioned earlier, there is a myriad of basic day trading rules out there, and every trader has a unique trading style. While some traders prefer a hands-on approach to trading — technical and fundamental analysis, others rely on trading signals and alerts or automated trading systems.
Regardless of what trading rules you adopt, you can always consider trading rules from other traders. For instance, some traders don’t trade stocks under $1.00 and don’t initiate trades until it’s 9:45 am EST.
Pro-traders don’t chase momentum but instead wait for patterns to develop — trading price action. These are a few rules you should consider while developing your trading strategy.
Trading rules are not binding. However, they will help you make an informed decision and guide you on your trading journey.
Factors to look out for in trading rules include getting an education on how to trade (knowledge is power), and your trading rules must be realistic. You also need to keep your emotions in check and determine how much capital you want to start with.
We are rounding off
Your trading rules should take into consideration your entry and exit plan, the number of stocks or positions you should hold at any given time, trading time frames, rush hour, and limit orders, among others.
Lastly, day trading requires time, skills, and discipline. If you can strike a balance between these criteria, you will be amazed at how far and smooth your trading journey will be.
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