The Three Most Important DAYTRADING Rules

One of the keys to being a successful day trader is to have a summary of rules that you consistently follow. Unlike a regular job where you would have a boss overlooking your shoulder, as each day trader you’ll be your personal boss and thus be responsible for your own results. By recording and following your entire day trading rules, you’ll develop a system that reinforces your trading discipline and prevents you from making costly errors. In this article, I’m going to share my three most significant day trading rules.

Rule #1: Manage Risk On Every Trade

This rule is really the building blocks of my trading philosophy. This means that on every trade I make, my first consideration is not how much potential profit I possibly could make, but how much cash I could potentially lose. Way too many traders focus too much on the potential profit and forget the importance of risk management. Before I make any trade, I know 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 and not necessarily home runs.

Rule #2: Limit Midday Trading

Another key to learning to be a consistently profitable day trader is to understand the importance of that time period of day. With regard to trading opportunities, not absolutely all times are created equal. Generally, there is a lot more volatility and volume in the currency markets at the open and close of trading and a pronounced lull in trading activity through the middle of your day. Because day traders need volatility to create money and also must overcome their transaction costs, trading in the center of the day is frequently a negative 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 existing market. One of many beauties of trading is that you will get instant feedback on your own decisions. In this review process, I focus my attention not on the results 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 plenty of times where poor trades end up being profitable while excellent trades don’t workout. So that you can improve as a trader, it is important that you learn from every single 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 ahead of 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 out of every trade I make by having a thorough review process. Take the time to write down your trading rules to create clarity to your trading and ensure you stay disciplined.