Posted by forex at 7:38 AM
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1. Select a trading system that generates a comfortable, smooth equity curve. Day trading is risky. Instead of going after big profits every time you trade, choose a system that yields small, but consistent, net profits day after day.
2. Look for a day trading system that doesn't have a million rules and is easy to understand. The stock market is volatile and complicated formulas can hinder you when you have to make a quick trading decision. Choose a system that requires only the use of a hand calculator.
3. Find a system that generates several trades every week. The more often you trade, the smaller your chances are of having a losing month. A day trading system with a winning percentage of 80 percent that generates only one trade per month will quickly turn into a losing month should that trade turn out to be a bust.
4. Start small and grow from there. A good day trading system will allow you to begin with only a few contracts and then increase your position as your trading account grows. Never use a trading system that requires you to increase position size when you are on a losing streak.
5. Consider selecting a day trading system that is automated. You can avoid emotions and human error by buying and selling without manual interference. Trading is hectic on the stock exchange, and it is important that you determine your entry and exit points fast and accurately.
6. Determine how much money you can afford to invest in software. Scalping (taking advantage of small price gaps created by the bid-ask spread) and arbitrage (manipulating the price differential between 2 or more markets) necessitate using systems that require the use of expensive software. Profits made on arbitrage trading, for example, depend on the speed of an algorithmic system to quickly identify trading opportunities and execute orders.