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Day Trading Tips

Day trading stocks is a great way to make money however it should be done very carefully and with a great deal of knowledge. In todayfs article we discuss some day trading tips for beginner stock investors.

1. Have a system and stick to it. When trading you must have a system that includes trading rules that define your trading strategies and techniques. This includes rules that you will follow that tell you when you buy and sell stocks. Once you find a good trading system be sure that you stick with it.

2. Cut your losses. You must try to minimize your losses rather than try and win every stock trade. There is not one trader that wins every trade and always makes money. You must follow your trading plan and attempt to minimize your losses by exiting your trade with as little damage as possible, but according to your trading rules.

3. Donft be afraid to lose. The only guarantees that come with trading stock is that you will lose. This is one of the most important of the day trading tips. Greed and fear are very strong emotions that traders experience. Trading psychology tells us that we must learn to overcome these emotions if we are to become successful traders

4. Some things are out of your control. You have to be sure that you donft focus and worry about things that you have no control over. There are events that occur in the stock market and other markets that you have absolutely no control over and you have to accept that. You should only focus on those things that you can control and then you have to move on.

5. The market is always correct. You do not know better than the market, so donft fool yourself. The market always knows best and if you try to fight it, you can guarantee that you will lose. You must watch your technical indicators, follow your trading plan, and donft trade with emotion. Betting against the market is gambling, and it is not trading. 

6. Define your entry and exit points. This is a part of developing and following your trading plan. If you donft have a trading plan, stop trading immediately. This is perhaps the most important tips of todayfs day trading tips. Trading stock without a trading plan is the best way to lose your money and to lose it quickly. Part of that trading plan is setting your entry and exit points. Know what must happen for you to exit a trade and just do it. Many investors use stop loss orders in order to ensure this.

Market Direction: Each. candlestick signal has great relevance. It reveals the conditions of investor sentiment. Simply understanding the  investor sentiment that formed each signal allows an investor to accurately evaluate what is occurring and will occur in a price trend. Some candlestick formations reveal considerable strength. Others reveal indecision. As illustrated in the Doji's created on Friday, the market trend could be much better anticipated. Both the Dow and the NASDAQ formed a Doji. The formation of signals an important technical levels provide valuable insight into what should occur next. The NASDAQ formed a Doji just above the tee line on Friday. The Dow formed a Doji just below the tee line, after it tried to push it through the tee line and failed.


The Japanese rice traders made available the understanding of what sentiment was occurring to cause the formation of a candlestick signal. The Doji represents indecision. The indecision occurring at important technical levels reinforces an investors ability to project the next phase of a price trend. One simple rule for a Doji is the trend will usually move in the direction of how they open the prices after a Doji. As witnessed in both the Dow and the NASDAQ today, the market opened lower and continued in a downward direction. What can now be analyzed? The indecision at the tee line revealed the tee line was going to continue to act as resistance. This made the 50 day moving average for next viable target for the Dow. The fact that the DOW closed below the 50 day moving average today on a strong bearish candle merely reveals the 50 day moving average is not going to act as support. That makes the 50 day moving average for the NASDAQ the next viable target. This indicates the Dow and the NASDAQ should be moving lower in the next few days.

How do you take advantage of this information? First of all, the benefits of candlestick analysis allows an investor to 'have' this information. As often mentioned in the  morning and afternoon member comments, it is advised to remain nimble. Understanding what trends will do after specific signals produces the alerts to be nimble. The weak open today, after the scenario of a Doji's close at  the tee lines, produced the warning to immediately close long positions that were showing weakness or adding short funds immediately. The addition of short funds to the portfolio creates a hedge. There may be some long positions in the portfolio that may not sell off immediately in a weak market. The appearance of selling is what would create the stimulus to close the position. Unfortunately, that would have reduced the gains already made. Buying the short funds would immediately be producing profits that would offset closing out long positions at lower prices on a day like today.

This type of trading scenario helps to maintain the equity in the account. There will be days in reversing market trends where time is required to identify whether establish long positions were going to show weakness. The short funds, especially the leveraged short funds, are a good tool for maintaining equity while a trend transition is occurring. This may seem like a very simplistic trading strategy, but the more an investor can keep the portfolio equity at least flat, if not positive, the faster the compounding effect will work. Will there be losses in positions at reversals? Of course! However, being prepared allows for a drastic reduction of overall portfolio losses. Immediately establishing positions to produce gains while other positions need more time to confirm that it is time to take profits maintains the equity value of the portfolio. This process helps keep the equity at a status quo when major market directional changes occur.





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Good investing,

The Candlestick Forum Team

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