Here is a book review I did a few years ago when I was day trading, it may help some new traders that want to be day traders. In the current market the day traders may be the most successful until a new trend is established.
Here are ten of the cardinal rules from Jake Bernstein’s book: The Ultimate Day Trader: How to Achieve Consistent Day Trading Profits in Stocks, Forex, and Commodities
1. Do your homework. You need to be prepared for all your trades through each stage of the cycle from the set up, to trigger to follow through. Keep your charts up to date, watch your signals, trail your stops to lock in profits, stick with your original stop losses. Most importantly decide on your system before you start trading do not make up rules as you go. Study how trading systems performed in the market and then follow them in real time. Everything must be quantified and there has to be rules.
2. Focus and specialize. Pick only a few stocks or markets to trade and become an expert on them. Understand their time of day action, volume, price range, and risk parameters. Do not be a Jack of all Trades and master of none.
3. Be consistent. You must be consistent in your application of methods. Work the same schedule each week. Follow the same systems take the same stop losses. Trading is a business and must be ran with the same discipline as a business. Be consistent to give your methods a chance to work. Once you have back tested and proven your system has worked in real time trading do not abandon it when you you have a few losing trades. Even the best systems can easily have several consecutive losing trades. Aim for long term profitable trading with minimum draw downs of trading capital.
4. Trade with sufficient capital. You must have a minimum of $25,000 to day trade, $30,000 is preferable to be able to withstand draw downs. Your chances of success increase with the more capital you have to begin with. You must have enough capital when you start to be able to withstand your initial losses while learning to trade and the inevitable losing streak.
5. Don’t trade any stock, option, or futures contract that scares you. You must be comfortable with the amount of risk you are taking on in any trade to be able to make good decisions under the stress and pressure of trading.
6. Avoid reacting to news reports unless you have used specific rules regarding the behavior of price action. Do not chase the market after news is reported unless you have a system for doing that. Generally the people that buy the rumor or expectations and sell the news are successful, not the people rushing in after the news is reported. The news is usually expected and priced in. It is not the news but the price movement after the news that really matters.
7. Avoid amateur internet chat rooms. The vast majority of these are filled with novices and people trying to pump or dump their holdings. I have found no value in these over the years either. Look for high quality groups of real traders or learn from them on social media.
8. A day trade is a day trade. One of the riskiest things you can do is carry a losing day trade into the next day. This one rule has saved me thousands of dollars. You must cut your losses no matter what before the closing bell each day if you are a day trader exclusively.
9. It is possible to key off multiple time frames for day trading success. However stocks move in different directions within different time frames. A day trader must take his signals each day but can find key levels on daily charts.
10. Your big money will be made in the big moves. Traders must understand that on average 80-90% of their profits will be made on 10-20% of their trades. It is important to have enough room with your stop loss to avoid the daily noise and allow your trade to be successful but to also cut your losses when your system says to. Also it is crucial to allow your winners to run by using trailing stops to lock in profits. You must have a limited down side with an unlimited upside, that is what will cause you to be a winning trader more than anything else.
Unless a trading method is 100% objective in its rules and implementation, your odds of success will be limited. Success in day trading is limited by the emotional responses that are born from subjective decisions. This book explains the psychology needed to be a successful day trader and gives many strategies and systems to get you started in the day trading game. This book will also help day traders that need to begin to win on average.