How to trade like a pro
Plan your trade and trade your plan. The first step in day "trading like a pro" is the preparation. This involves, the financial instruments to trade and the strategies of best entry point, trade management, risks control and money management. No serious day trader will ever enter a trade without first checking the economic news. It is important to know the time and the day of all important economic news before considering to enter a trade. Only careless traders disregard economic news. You can check economic at Yahoo/finance, Google/finance and at MSN/money. You will then decide what to trade based on fundamentals or on technical analysis.
As a day trader, you will respect the opening bell of London at 3 am eastern time, 8 am London time and the New York opening bell at 09.30 am eastern time, 14.30 London time. You will wait for the opening bell before placing any trades. After the preparation, there are eight steps for day "trading like a pro".
First step after day trading preparation: 5% rule
It is important to understand at early stage that, day trading involves risks. No trading decision is risks free and will contain some elements of risks. Traders must protect their trading capital at all cost. One simple rule of money management and risks control is to use only five per cent of your trading account. If you open five trades, the total amount of money allocated to those five trades should not exceed five per cent of your trading account. When you reach the five cent, you do not place any more trades.
Second step in day trading like a pro
Very often, traders will trade during the London session, the New York session and the Asian session. It is common to miss a good night sleep, and to trade without pause. The main issue in this case is the over trading. For every trade, traders must pay their due to their brokers in the form of commissions. It is important to control the number of trades that you are taking to avoid paying too much in commissions. In order to avoid taking useless trades for the pleasure of being in a trade, traders should always ask this question: is it worthy being in this trade? The expected reward must exceed at least twice the risk. The risk-reward ratio must always be considered before entering the trade.
Third step in day trading like a pro
When you buy or sell when it is time to buy or sell at the right place, that is a win. On the other hand, when you sell or buy at the wrong time and at the wrong place, that is a loss. The ability to make excellent decisions quickly and to decipher the language of the price or the language of the momentum indicators will allow a day trader to trade like a pro. Day trading is a serious competition similar to American football or rugby. When one is buying another is selling. Therefore, one should use the right strategy for each trading challenge. Using trending strategies during trending period and range trading strategy during low volatility period.
Step four in day trading like a pro
Using indicators in day trading One of the reasons why traders fail in day trading is because they misuse or misunderstand the indicators. Many indicators are just repeating the patterns of the price. In fact they are different version of the price. No indicators can ever replace the price, the number one indicator.
The price is the universal language of all traders and does not hide anything. Traders must keep their eyes wide open and try to understand what the price is revealing. There are many indicators but the price remain the same. The best approach when day trading like a pro is to look at the price first before looking the indicators. Next look again at the price before entering the trade.
It is important for traders to learn to master every indicator that they are using and to become fluent in the language of the price. If one has to sell at every overbought slow stochastic and buy at every oversold slow stochastic, the market will never trend. The misuse of the slow stochastic has caused traders more losses than any other indicator. Day trading is different from gambling and gambling is different from day trading like a pro.
Please trade like a pro or learn to trade like pro.
Step five in day trading like a pro
The understanding of stable datum in the market
"A stable data is a truth, it is a constant. A stable data is something that remains intact even in a chaotic environment".
There are many stable datum in the market. The Fibonacci retracements and projections, the Elliott wave theory, higher time frame controls all lower time frames, the market patterns (not chart patterns) and more.
One of the mistakes that the unaware traders are making is to use indicators or any other trading tools without paying attention to the stable datum in the market. Trading decisions made together with stable datum will allow traders to achieve consistent winning trades. Very often traders will violate stable datum in the market, only to lose serious amount of money.
During the third Elliott wave in the uptrend, unaware traders, will be busy selling, because many indicators are giving signals to sell, when smart money is busy buying. This simple ignorance of the stable data of Elliott wave theory will cost traders money. In a downtrend, during the third Elliott wave, when the smart money is busy selling, traders who are trading the indicators, instead of trading the price, and violating all stable datum of the market will very often fail to capitalize on the opportunity to sell, or to increase their profit, but instead will lose money. Another stable data in the market is the market patterns, not chart patterns.
Market patterns are: Trend - Pause - Trend. The market will trend, the market will pause (consolidation period or low volatility period) and the market will trend again.
The ability to master the market patterns will allow traders to design the right and best strategy in achieving consistent winning trades. Valid tested and retested trending strategies are for periods of market imbalances On the other hand, balance market rules of entry and exit are for balance markets.
As, you can see, the knowledge, the understanding and the correct application of the stable datum in the market can not be avoided.
Step six in day "trading like a pro"
The time and the place of the trade
Very often traders will know if the price will go down or up but they will be wrong about the time and the place. When and where to enter the trade successfully. The difference between a consistent winning trader and a consistent generous loser is the ability to recognize the time and the place to enter the trade. Using a higher time frame with a lower time frame, will allow traders to enter the trade at the right time. However, the understanding of the language of the price is the key to best entry point. Two questions traders should always asked are:
Is it the best time to enter the trade?
Is this the best place to enter the trade?
This is about locating valid "hot spot trading zones"
It is common to receive a valid trade signal at the wrong time and at the wrong place but smart traders will wait for the price to reach the best entry point before entering the trade. A typical example of this is a sell or buy signal within the Bollinger band (50,2). These imperfections are usually rectified by the market when the price is quickly push to the edge of the Bollinger (50,2). Usually, unaware traders will lose. In order to achieve consistent winning trades, it is important to enter the trade at the right time and at the right place.
Step seven in day "trading like a pro"
The discipline
The first step in becoming a discipline trader is the willingness. Serious traders will at one stage discover the root of their failure. After losing abundantly and consistently, after an honest analysis of their trading circumstances, they will find out that, lack of discipline is hindering their progress and will be willing to take the right steps. That realization and willingness are the first steps in adopting a professional approach to trading.
Three things are important
1/ The first is excellent money management plan
2/ The second is a tested and retested "valid trading system"
3/ The third is self control.
One of the simplest but powerful money management rules is: never ever expose more than five per cent of your trading account to risks at any one time. Never ever. You can promise us that, you will be discipline enough to follow this simple money management rule. If you place ten trades, the total amount of those ten trades must not exceed five per cent of your whole trading account. And when you spend the five per cent, you will wait until you close some trades or you make more money before initiating another trade.
No one else will do it for you. The choice and the decision are yours
There are hundreds of trading systems but few can stand the heat of day trading like a pro. A valid trading system includes at least one stable datum and gives priority to the price, the number one indicator. Traders know that, we are trading the price not the indicators. A valid trading system is a trading tool, but like every other tool, one must learn to master it and become fluent in using it. It is not sufficient to have a valid trading system but to know and to understand how to use it. This requires total discipline. Very often traders will go from one system to the next system without achieving consistency. Some traders will not test the system before hand or will fail to familiarize themselves with the system. All professional traders have their trading systems which they have tested, retested and understand. Professional traders do follow their trading systems religiously but not blindly. Trading systems are essential in day trading and will assist traders in trading like a pro. However no trading system will ever replace a trader. A trader without a valid trading system is usually inconsistent in his or her decisions. Examples of trading systems that work are "TSTW24", "TSTW SYS 08".
Please note that not all trading systems are valid trading systems. A valid trading system must incorporate the price, and at least one stable datum. And a trading system is not a trading robot. Traders must always be responsible for all their trading decisions.
Self control and day "trading like a pro"
Knowing what type of trader you are is the beginning of self control in trading. Are you an aggressive trader? Are you an impatient trader or an emotional trader? Are you an irresponsible trader, a serious trader or a courageous trader? Will you consider yourself as a stubborn or a careless trader? It does not matter what type of trader you are, the market will make you humble until you learn to control yourself. It is not enough to know what type of trader you are but to recognize clearly your weaknesses and your strength. You will take a piece of paper and write in two columns, your weaknesses and your strength. The purpose of this exercise is to discover the root of your failure and handle it once and for all. Please note that there is a clear divergence between solving a problem and handling a problem. Please refer to our previous article about handling a problem. Once, you know the mistakes that you are repeating, you will do your best to actually stop repeating the same mistakes or seek a professional assistance. What you are trying to do, is to take control of yourself and your actions instead of going round and round aimlessly. We count you to do it properly and to start enjoying your trades, instead of enduring your trades. As we have said before trading can be enjoyed but you will have to control yourself and your actions.
Step eight in day trading like a pro: Understanding and enjoyment
Trading is not for fun or for excitement only but for financial gains. This is the reward of the work well done. The key for consistent reward is the understanding of the market. Anyone can take money out of the market here and there but to be able to achieve consistent winning trades and start enjoying trading, requires total understanding of the market. This is about understanding other participants in the market, the price, the financial instruments and the trading tools. This understanding will allow the trader to recognize clearly the place and the time to enter the trade. As the trader becomes one with the market, so to speak, he or she can at any time recoup previous losses. Not only did the trader has developed the mindset of a professional trader but he or she has matured as a leading player in trading the market, capable to control the outcomes of his trades. This is the final step in day trading like a pro.
Trading must be enjoyed and can be enjoyed but the enjoyment does not come through passive and careless trading attitude. It will come through practice and understanding.
Whatever, you do, wherever you are, enjoy yourself and be very happy. We wish you the very best in your trading. We hope you will find this article useful and that you will put it into practice in order to day "trade like a pro".
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