Day Trading Rules You Need To Know

By Author: Francisco Mandelbaum
Total Articles: 28
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Day trading rules allow an emini trader to minimize the risk of loss. Having an entry and exit price before you enter the trade will save you from unnecessary disasters. Another rule, use limit orders and not market orders for trading as this will prevent loss from slippage.

When under pressure, emini futures traders tend to throw out their own rules and decide to make decisions based on emotions which can lead to disastrous results. Day trading rules are meant to act as guidelines that a rookie trader should follow to the letter, to be consistently successful. Here are a few important rules you need to know as a novice trader.

Rule 1: Have an Entry and Exit Price

Before you go out and start trading, you must clearly define the entry and exit prices you will use to navigate through the trading session. You need to know when you will get in the trade and when you will get out of it. A professional trader will know these prices to the tick based on his technical analysis of the emini chart he is day trading. These prices are usually determined by how much you are willing to invest in the trade. As a rule ...
... of thumb, you want to buy low and sell high. If you are shorting the market, you want to sell high and buy it back lower. By doing this, you stand a higher chance of maximizing your profits. At the same time, you need to select the best price to get out of the trade when it is not working out as you expected. The escape price helps you to minimize the losses that you are likely to incur if you proceed. It is important that you set these prices early in advance since they will help you in locking in profits and at the same time save you from potential disasters.

Rule 2: Never use market orders, use limit orders

Market orders is an trading technique whereby you are willing to simply buy or sell and emini contract and the current bid or ask. Market orders tend to be generated by fear or greed. They are not part of the typical trading plan of a successful emini trading business. You will almost always lose several ticks on the transcation and possibly even more. You are giving the market a license to steal. The danger associated with this kind of technique is that you are never in control of the price where your order will be filled on an emini contract. The more contracts you are trading, the more slippage you will experience.

As such, you end up not making any profits or minimal if any. On the other hand, when you are using limit orders techniques, you are the one in control of the minimum price you are willing to sell the emini contracts in your possession and the maximum price you are willing to pay for them. In short, you are the one setting your trading parameters giving you higher chances of making reasonable profits as a result.

Rule 3: Start trading 15 minutes after the market opens

Right after the market opens, the trading is usually hectic as previously placed orders are traded. Entering trades during this period may be disastrous as there is uncertainty on how the trading day will unfold. When you are not trading, use the time to study how the market paradigm is shifting. With this insight, you can be more confident of making reasonable and realistic profits when you begin trading. However, if you detect that the trend is not going as expected, do not start trading immediately. Rather wait for the trend to reveal itself.

While these are the most essential day trading rules, there are many others that one should be aware of. The good thing about these rules is that one, with experience, can set up their own rules to follow. You must have a plan. You do not need to be a great trader to be successful, you simply need to be great at following your plan. Even is your plan is mediocre, if you are great at following it, your chance for success is quite good.

You gain expertise in e-mini trading as you practice. It takes years to become a pro, but with patience and perserverance, the odds are in your favor.

Author of this article enjoys listening to the CFRN Emini Futures Live Market Commentary each day and also watching the CFRN Professional Emini Traders place live trades in their Live Emini Trading Room.