Top 7 Rules For Effective Day Trading
By Christopher M. Knight
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- Do not day trade until you understand, at least on a beginners level what TA (Technical Analysis) and FA (Fundamental Analysis) as it relates to the companies you'll be buying/selling.
- Never buy stocks. Think in terms of buying and selling companies. Stocks are more unpredictable than companies.
- Do your research BEFORE you buy into a company, not AFTER.
- "Buy on the Rumor, Sell on the news." This is a common saying, which means if you already like the company you are tracking, and they have a great rumor floating that you believe strongly could become true, it's best to buy on the rumor and then when or if the rumor comes true, to sell on the news.
- "The trend is your friend." This means that if a stock is going up or reaching new highs every day, then it will continue going up until it begins a downward trend (as identified when it starts reaching new daily lows). If it's going down, it will continue to go down, until it begins the reverse trend. I like to buy after 20% into the upward cycle.
- Do not overtrade. Create rules for yourself and stick to them very strictly. One example: If you set a goal to earn $2000 today via day trading, do NOT continue to trade, just to trade, but rather stop and enjoy that you've made a profit.
- "You can never go wrong locking in a profit." Another old saying, which means that the "Pig gets slaughtered" or don't get greedy by believing you can beat the market. Some folks lock in profits when they have a 1/8 to 2 point gain, others lock in profits when they have a 7%-12% gain. Again, create a rule for yourself and stick to it.
Disclaimer: This is not investment advice, I am not a broker, this information comes with no guarantees or warrants, and you should do your own due diligence before making any investment. Consult a professional for advice before day trading. Day trading is risky and you could lose all of your investment. Past results are not indicative or guarantee of future performance. This information is purely for educational and entertainment purposes.
Article Submitted On: April 20, 1999