5 Rules for Day Traders

5 RULES

Day Trading involves a lot of time focus, and it becomes difficult to concentrate on the current trend. At the same time, traders face trouble such as the market noise. The little difference between current trends and market noise, bring a lot of possibilities for profits if carefully managed.

Trading binary options never came without risks but certainly with proper brokers like BigOption, these risks have been minimized. If market noise is not handled properly, it may definitely interfere with current trends, where market stakeholders might twist and turn fundamentals.

What is Market Noise?

Market noise refers to the confusion often encountered on markets, which are differences between price and volume fluctuations. Very often instances and rules are made up to create divergence on the market. This exploitation is done so as to manipulate certain trends in a given market. Success, on the contrary is guaranteed in the trading field when proper guidelines are met.

 

With shorter time-frame, it is difficult to be able to separate meaningful market movements from the noise. Traders who like to take advantage of such differences are called noise traders. These noise traders attempt to process buy and sell transactions without the aid of fundamental data.

Rule no 1:

 

      • Scrutinize the current intra-day trend and trade

It is advisory for traders to trade within the given day trend while choosing day trading. While a trader follows exact trends, making high profits becomes a definite advantage. Thus, risks of losing on trades also diminishes. It is important to follow price movements carefully, while keeping in mind that there are reversals do occur once or twice.

Often traders use intelligent strategies so as to minimize risks. The stop-loss strategy can be useful as while trading during the day, a trader can choose a trade which is most certain to generate profits. Following trends is part and parcel of day trading, and as long as trends change, it is advisable to look for new trends. Here, fundamentals play an important role, whereby trends are heavily affected by these fundamentals. That is why, elimination of market noise becomes crucial during day trading.

 

      • The term stop-loss explained

Stop Loss refers to trades placed by brokers which can be bought or sold when it reaches a certain price. The principal function of stop loss is to limit an investor's’ loss during a particular trade.

 

Rule no 2:

 

      • Understand the concept on Uptrend and Downtrend.

Many traders have a preference in trading stocks aligned with preferred indices such as the S&P 500, the Dow Jones and NASDAQ. Certain stocks have high correlation pertaining to major indices. But traders need to understand that they need to know how an uptrend and downtrend move can change the course of a particular session.

Moreover, while isolating particular stocks a trader has more options to make more profits. a uptrend indicates when a stock is bullish in a session and a downtrend is represented by bearish candles, which represent a negative session. Many times traders wait for pullbacks during a session, so as to wait for stock to move upwards, but many times strong stocks do not provoke pullbacks. traders always look for selling or buying signals while a market is down. Therefore, uptrends and downtrends are a measure of scrutinizing the market well before trading.

 

 

Rule no3:

 

      • Pullbacks are good indicators

Trading do not pertain to only stocks, trading covers almost all assets that are available. Pullbacks are a nice way to bounce back on the market. Many traders enter long positions during a particular trade. Long trading sessions, often relate to high opportunities of pullback. Traders wait for pullbacks so as the assets being traded can bounce back into action.

Traders should be patient and not trade instantly without thinking. Pullbacks can offer a lot of opportunities, as an asset has limitations of going above, having a resistance line. There will be a moment, when the asset will move on a downtrend, and bounce back. This is when the asset gets pulled back in the lower regions. A pullback, is a good opportunity for selling an asset and buying at cheaper prices.

 

Rule no 4:

 

      • Take profits when time comes

Choosing the right trade now becomes an important step. Many traders choose short trades, and think that shorter trading times, bring a lot more profit. But market are more volatile within short terms, but the right strike can generate huge profits. As traders have a tendency of losing more money on small trades, thus, taking profits at the right time becomes a wise thing to do.
Two ways a trader can take profits are:

  • Take profits in an uptrend move, when the level is slightly above the former high price.
  • Take profits in a downtrend move, when the level is slightly below the former low price.

 

Rule no5:

 

      • Reversal Trend

Reversal trends are very annoying sometimes. Say for example, you are currently trading in a positive trend, and suddenly fundamentals change the course of the session, then you are about to lose a lot of money. Reversal trends mostly refer to change of trading trend. If the dollar is on a superb rise, traders have a tendency to move away from commodities and trade only on currencies. If currencies rally more than commodities, traders prefer to have a trend reversal, by shifting from Gold, or Crude and trade on dollar or other currency pairs.

 

This is the time when traders should know how to step aside. The reversal trend does not affect the market overall, but it does occur in a given range. While scrutinizing the given range, and if a trader notices a trend reversal, he should know that it is time to take profit and step out of the market.

 

Conclusion

Those 5 rules are golden, and offer many opportunities if traders follow the same trends. These rules can be highly beneficial, especially in the Binary Options field, where markets are highly volatile. Therefore, scrutinize your market and trade safely.

Priscilla Camryn By: Priscilla Camryn
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