The Three Most Important Day Trading Rules


One of the keys to being a successful day trader would be to have a list of rules that you consistently follow. Unlike a regular job where you’ll have a boss looking over your shoulder, as each day trader you’ll be your own boss and thus lead to your own results. Matt Poll Trading By recording 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 significant 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. Way too many traders focus an excessive amount of on the potential profit and overlook the importance of risk management. Before I make any trade, I understand what my downside is and the price at which I will exit the trade if it goes against me (my stop-loss). This ensures that no single losing trade will be catastrophic. As a trader, my goal would be to hit consistent singles and doubles rather than necessarily home runs.

Rule #2: Limit Midday Trading

Another key to learning to be a consistently profitable day trader would be to understand the importance of that time period of day. Regarding trading opportunities, not absolutely all times are created equal. Generally, there is much more volatility and volume in the stock market at the open and close of trading and a pronounced lull in trading activity during the middle of the day. Because day traders need volatility to make money and also must overcome their transaction costs, trading in the middle of the day is frequently a bad idea. To enforce this rule, I keep my eye on the clock and drastically reduce my position sizes and risk in the middle 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 for more information concerning the strategies and techniques I’m using in addition to to gain information about the current market. One of many beauties of trading is that you get instant feedback on your decisions. During this review process, I focus my attention not on the outcomes 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 many times where poor trades become profitable while excellent trades don’t workout. To be able to improve as a trader, it’s important that you learn from each and every 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 appear to be an abstract principle, I implement it by knowing my stop-loss prior to placing any trade. I’m also aware of the most opportune times to trade and limit my trading when conditions aren’t ideal. Finally, I gain insight from every trade I make by having a thorough review process. Take the time to jot down your trading rules to bring clarity to your trading and make sure you stay disciplined.



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