Create a Day Trading Routine to Avoid Mistakes (2024)

Mistakes happen in day trading. They often occur because too much information can come in all at once, causing you to become overloaded, panicked, or frustrated. Sometimes, mistakes occur during quiet/boring times when your guard is down. Then, there are random mistakes, suchas hitting the wrong button—such as buy instead of sell—or entering a wrong position size. Even automated strategies can cause problems if there is a mistake in the parameters or a program causes a problem.

Before every trading day, it can help to take a few minutes to run through a pre-trade routine or checklist to help minimize errors throughout the day. Depending on the market you trade, you may wish to add a few additional steps to the ones shown. The process of running through a routine only takes a couple of minutes, but might save you some frustration and money.

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Check Economic Calendar

High impact economic events can cause price spikes/gaps, creating significant slippage (a price change in-between the time you purchase and the transaction finalizes) on stop-loss orders. It's best to avoid being in trades for the few minutes surrounding high impact scheduled news events.

Check your economic calendar before trading, and note the high impact news-times. For U.S. stocks and futures, Bloomberg is a decent choice for news. For Forex, check out the DailyFX economic calendar.

You should always have an event calendar for the stocks you are trading.

If you trade individual stocks on a regular basis, check that the company doesn't have earnings or other announcements due out that day. The Yahoo! Finance earnings calendar works well. Be aware of these times, to avoid trading before announcements.

Launch Platform

Launch your platform. Make sure quotes are streaming (not lagging or sporadic) and that the program is running smoothly. Most brokers provide reliable data feeds, but problems can arise. If the data feed is intermittentor seems inaccurate, don't trade until the issue is fixed. If it looks right, proceed.

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Trading Correct Account and Contract

In MetaTrader and NinjaTrader (for example) you can log in to multiple accounts using the same platform. Make sure you are trading the correct account. Be especially vigilant if you practice day trading in a simulated account, and have live accounts. You don't want to end the day thinking how profitable it was, only to realize you traded in simulation instead of with real capital.

If day trading futures, make sure you are trading the correct highest volume contract. Be aware of expiration dates on the contracts you trade.

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Write Text Notes to Yourself

On your chart, put text notes stating when high impact news releases are. If engrossed in a trade you may forget about one of these events, costing you dearly. Write it down on your chart.

If the event occurs later in the day, scroll over and put the text note near the approximate time of the announcement. That way you will see it when the time comes.

Triple Check Your Automated Strategies

Even if you day trade manually, you may have some automated orders. For example, in NinjaTrader and MetaTrader, you can send out stop-loss orders and targets the moment you enter a position. Make sure these stop-loss orders and targets are set appropriately.

If trading with a "robot" or scripts, make sure all settings are accurate and scripts are loaded before starting it.

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Default Position Size

If you trade with a default position size, make sure it is set appropriately. Adding an extra digit to a position size could spell disaster. Dropping a digit means you trade a fraction of what you could have, and you missout on an opportunity.
If you manually adjust your position size based on your entry point and stop loss locations, note your account balance before trading.

Proper position sizing limits the risk to a small percentage of account capital, such as 1%. If you have a $35,000 account, you can risk up to $350 on a trade. Keep this maximum risk in mind throughout the day (or write a text note on your screen) to remind yourself this is the most you can risk on one trade.

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Key Thoughts

You could make entries in a trading journal every day, to be able to remind yourself of mistakes you may have made. Remind yourself of any problematic tendencies, and how you will handle those situations should they arise. Go over your key trading thoughts and strategies.

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Market Conditions

Make a quick assessment of trading conditions pre-market. Is it showing any volatility, or is it sedate? Are there any trends or specific tendencies you notice?

Such an assessment lets you know how to proceed, and whether you should be trading your system at all. This is especially important if using a subjective system—a system that varies slightly based on market conditions.

For example, in volatile conditions, you may have a larger expected profit target than on a day when there is almost no volatility.

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Create A Quitting Time (Optional)

If you notice a time of the day you typically lose trades on a regular basis, write a note to yourself to stop trading at that time. Many day traders tend to lose money in the time surrounding (and including) the New York lunch hour if trading U.S. markets.

If you notice this tendency, try to stop trading. Write yourself notes, set reminders or alarms, and make sure to include it in your routine as a reminder every day.

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Start Trading With Your Key Thoughts in Mind

You're set to trade. This process should help eliminate some mistakes related to position size, trading the wrong account or contract, trading during news or just not preparing your mind to trade.

As you start looking for potential trade setups, keep your key trading thoughts in mind. This will help keep you out of trades that are not in your trading plan, keep you alert and ready to pounce on good opportunities.

Create a Day Trading Routine

Your day trading routine may vary slightly from this, depending on your trading style and the market you trade. However, it helps to create a routine. It only takes about a minute or two to go through and can save you a lot of frustration.

Create a Day Trading Routine to Avoid Mistakes (2024)

FAQs

What is the 3 5 7 rule in trading? ›

What is the 3 5 7 rule in trading? A risk management principle known as the “3-5-7” rule in trading advises diversifying one's financial holdings to reduce risk. The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal.

What is the routine of a day trader? ›

Day traders use fundamental and technical analysis as well as keep a disciplined trading routine so they can make the most of short-term price movements. Remaining vigilant, closely watching price charts or using pending orders to grasp opportunities whenever they arise, can make day trading very demanding.

Is there a trick to day trading? ›

The so-called first rule of day trading is never to hold onto a position when the market closes for the day. Win or lose, sell out. Most day traders make it a rule never to hold a losing position overnight in the hope that part or all of the losses can be recouped.

Why do 95 of day traders fail? ›

Lack Of Discipline

However, many new traders enter the market with a casual mindset, often influenced by the stories of quick riches. This lack of discipline leads to impulsive decisions and poor trading plans that fail to analyse the market thoroughly.

What is the 80% rule in trading? ›

The 80% Rule is a Market Profile concept and strategy. If the market opens (or moves outside of the value area ) and then moves back into the value area for two consecutive 30-min-bars, then the 80% rule states that there is a high probability of completely filling the value area.

What is the 11am rule in trading? ›

It is not a hard and fast rule, but rather a guideline that has been observed by many traders over the years. The logic behind this rule is that if the market has not reversed by 11 am EST, it is less likely to experience a significant trend reversal during the remainder of the trading day.

Is it possible to make $100 a day day trading? ›

You're really probably going to need closer to 4,000 or $5,000 in order to make that $100 a day consistently. And ultimately it's going to be a couple of trades a week where you total $500 a week, so it's going to take a little bit more work. Want to learn more about trading?

Is $1000 enough to day trade? ›

Believe it or not, you can start forex day trading with $1,000 or even less. It requires mastering position sizing and managing risks, but if you navigate your way to success, the rewards can be significant. In this article, we will discuss in detail how you can day trade with $1000.

Can you make $200 a day day trading? ›

A common approach for new day traders is to start with a goal of $200 per day and work up to $800-$1000 over time. Small winners are better than home runs because it forces you to stay on your plan and use discipline. Sure, you'll hit a big winner every now and then, but consistency is the real key to day trading.

Is Warren Buffett against day trading? ›

A classic Buffett quote indicates that he is no fan of day trading: “If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes.” This emphasis on holding a position for the long term means a very low level of trading activity.

Why do 90% of traders lose? ›

Most traders fail because they do not invest enough time and effort in learning about the markets and trading strategies. They enter the market without a proper plan or strategy, which leads them to make poor decisions and lose money. Another reason why traders lose money is because of emotional decisions.

How much money do day traders with $10,000 accounts make per day on average? ›

On average, day traders with $10,000 accounts can make $200-$600 per day, with skilled traders aiming for 2%-5% returns daily.

What is the 3-5-7 rule of investing? ›

The 3–5–7 rule in trading is a risk management principle that suggests allocating a certain percentage of your trading capital to different trades based on their risk levels. Here's how it typically works: 3% Rule: This suggests risking no more than 3% of your trading capital on any single trade.

What is 90% rule in trading? ›

Understanding the Rule of 90

According to this rule, 90% of novice traders will experience significant losses within their first 90 days of trading, ultimately wiping out 90% of their initial capital.

What is the golden rule of trading? ›

Key Rules from Iconic Traders

Trade with the trend: Follow the market's direction. Do not trade every day: Only trade when the market conditions are favorable. Follow a trading plan: Stick to your strategy without deviating based on emotions. Never average down: Avoid adding to a losing position.

What is the 60 40 rule in trading? ›

60% of the gain or loss is taxed at the long-term capital tax rates. 40% of the gain or loss is taxed at the short-term capital tax rates.

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