Keep Your Day Trading Simple: Here’s How to Do It
“Keep your (day) trading basic.”
Although that’s sound advice, the person giving it almost never takes the time to explain how to simplify things. How do you simplify things when there are hundreds of publications, indicators, techniques, and traders, all of whom say something different? What is the best way to reduce everything to its most essential components? To keep your trading straightforward, you should stick to the same three procedures for each and every deal, but you should only concentrate on one step at a time.
3 Simple Steps
You need to have a trading setup in order to be a successful trader. In a sea of constantly shifting circumstances, you need to sort through the information on your chart and remove everything that is not relevant. A specific collection of factors that must materialize in order to signal that a transaction might possibly take place is referred to as a setup. If, for instance, you are only interested in trading breakouts from triangular patterns in the first two hours of the trading day or in the first hour after lunch, your setup will be different from that of other traders.
Your trade setup is represented by the triangle. The appearance of a triangle alerts you to the possibility that a deal is about to take place. However, up until the point when the triangle occurs, you remain calm and your whole concentration is on locating triangle chart patterns.
By establishing a setup, you keep your trade easy. You aren’t interested about whether the price goes up or down or if there is positive or negative commentary in the press. You don’t have anything to worry about since you don’t have much to think about anything until a triangle pattern arises (or whatever your particular trade setting is).
You won’t be able to go on to the trade trigger until the setup has taken place.
The Indicator of Trade
The most effective trade settings make it possible for you to (at least somewhat) anticipate where you will enter the market. When a chart pattern that looks like a triangle develops, you can be sure that your entry will happen when the price breaks out of the triangle (if that’s the way you want to trigger your trades). A trade trigger is an event that takes place after a trade setup and indicates that it is time to initiate a transaction. A trade trigger tells you when it is appropriate to enter a trade. If you are using an indicator, the trade trigger may be the precise instant when the indicator reaches a certain level or crosses another indication line.
When step one has been completed and you have a legitimate trade arrangement, the issue of whether or not you have a valid trade setup is no longer relevant since this has already been determined. After you have recognized a potential trade setting, the only remaining duty is to determine what the trade trigger will be.
A setup has taken place, and you have specified the precise location and time at which you will join the transaction. There is nothing more to consider at each step; for example, in the first stage, your only job is to keep an eye out for setups, and in the second stage, your job is to choose your entrance point. Your next stage, after putting up a setup and waiting for a trade trigger, is to decide whether or not you will participate in the trade.
When the trade trigger event happens, you should execute the trade if the potential gain based on the setup (as well as your research and testing) is greater than the risk involved. If the possible gain does not justify the potential loss, you should return to the first step and begin exploring for another configuration.
As part of the risk/reward analysis, it is important to be abreast of any recent economic or company-specific news developments. Avoid entering into trades (or being in trades) three minutes before or after a high-impact economic or company-specific data release. This is because it is impossible for us to tell in advance how the market will respond to an economic release. Before the start of the trading day, you should look at an economic calendar to determine when the data will be released. Remove such periods from your charts so that you are reminded not to make any transactions during that time. This will allow you to concentrate on each stage as it occurs.
The Crux of the Matter
During the course of the trading day, there should never be more than one item on your mind at any one time, and what that one thing is should change according to the stage you are now operating on. Every other piece of information is completely irrelevant.
First and foremost, you should just concentrate on locating your trade setup. After you have identified a potential trade setting, your exclusive emphasis should be on locating the point at which the transaction will be triggered. As soon as you are aware of the trade trigger, you will be able to choose the location of your stop-loss order as well as your profit objective. When the trade trigger event happens, you should be concentrating on whether or not you will enter the trade based on the stop and target (or the win rate of the technique). When you reach the trade trigger, you should execute the deal if it makes sense to do so. If the transaction does not seem reasonable, go to the first stage.
Keeping your trade straightforward in real time might be accomplished in this manner. However, it does require that you have completed all of your assignments. You need to have established a trade setup, decided what an acceptable risk-to-reward ratio is (and how you will construct your risk and reward), and it also implies that you have identified a specific occurrence that informs you when to engage into trades.