| Volatile markets can send your positions into the | | | | idea to make the trade. The marginal benefit from a |
| negative. Indeed, bad trades frequently happen to | | | | support bump is not worth the risk of a trend |
| good traders. Regardless if you are a scalper or | | | | breakdown. Create your own risk and money |
| momentum trader, the most important part to any | | | | management criteria to determine when the time is |
| strategy is knowing when to intelligently and rationally | | | | right to make a trade. |
| walk away from a trade. | | | | 4. Topping Out |
| 1. No Support or Resistance in Sight | | | | Tops are difficult to call until they are over. |
| Technical analysis is the backbone of day trading. Day | | | | Understanding candle sticks and candlestick chart |
| traders use technical analysis to find support and | | | | patterns can make calling a top a much easier task. |
| resistance levels to determine where the price will go | | | | In a market top with significant support, the price |
| next. Most day trading strategies are built on support | | | | could drop dramatically or go into a sideways trend. A |
| and resistance, with some heed paid to news events | | | | sideways trend is a dangerous market because the |
| over the course of the day. When holding a position | | | | ups and downs eventually breakdown to send the |
| deep in the red, or if you are contemplating taking a | | | | price in one direction, giving you a 50/50 probability of |
| position, look at the chart for support and resistance | | | | profitability. |
| lines. In an area with no support, it is likely that the | | | | 5. Late in the Day |
| stock could go in any direction. | | | | Late day breakouts can be profitable, but holding a |
| 2. Momentum is Against You | | | | position overnight can ruin your trading capital by |
| With a quick breakout out of an uptrend, you | | | | market open. Swing traders might be able to |
| suddenly find that the market is moving against you. | | | | weather the market open, but highly leveraged day |
| Upward gaps symbolize that the position has legs and | | | | traders should avoid late-in-the-day positions. Most |
| will keep running. Momentum strategies usually send | | | | trading strategies avoid late-in-the-day trades to cut |
| day traders and swing traders alike to place heavy | | | | interest costs and limit exposure to volatile market |
| bets in their momentum calls. Once a trend is | | | | opens. In day trading, it is always best to start your |
| established, traders from all around the world jump | | | | trading day anew, limiting your risk to any overnight |
| on and push the market further - meaning your trade | | | | or pre-opening bell surprises. |
| runs further from your profitability. When the market | | | | The most successful traders know how to read |
| gaps away from you, get out of the trade. | | | | strong trades, but equally as important, they also |
| 3. Low Reward | | | | know exactly when to cut their losses or lock in their |
| Trading success is dependent on producing returns | | | | gains. Developing your trading acumen means trading |
| and minimizing risk. When support and resistance | | | | your exit strategies and analysis. |
| levels are both within sight, it is generally not a good | | | | |