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