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Here are some of the top trading rules that any successful day trader will swear by:

Plan your trading strategies

Work with the best stock suited for day trading

Follow the day’s trend

Book profits quickly

Entry, Exit and Stop Price settings

Trade with the money you are not afraid to lose

Consider the worst case while margin trading

Do the research

Keep business and emotions separate

Do not overtrade

Record your wins and losses

Since day trading makes profit from the market fluctuations, there are some intraday trading rules to adhere to. The trader needs to follow these intraday rules if they wish to make steady profits. Here are some of the top trading rules that any successful day trader will swear by.

Read more: What is a day trader?

Plan your trading strategies:

There is a basic difference between day trading and investment trading. You have to first understand that difference and find out which format suits you the best. Is day trading what you choose? Then you will have to come up with detailed plans for your trading strategies.

A day trader has to set up intraday rules for entry and exit from the trade, the type of shares to trade on, how many trades to do in a day, and other such plans. You should also keep a journal with details of all your profits and losses. That will help you to refine your future strategies.


Work with the best stock suited for day trading:

Not all stocks are suitable for intraday trading. There are certain criteria that a stock must meet to be suitable for day trading. The qualities to look for are:

  • High liquidity: This means that the specific stocks are easy to buy and sell. They are also easier to convert to cash.
  • Of controlled volatility: Volatility measures the price changes over a time that a stock faces. The more the changes, the more volatile a stock is. Therefore, a day trader should look for stocks that are more stable in terms of their pricing.
  • Stocks of a specific sector: A day trader might have more understanding of one business sector than others. Then they can play on their strengths and focus on that sector to make better profits.
  • Stocks that correlate well with the rest of the market: Stocks often follow market trends. It is easier to trade such stocks compared to stocks that do not follow these patterns. An intraday trader has to follow the daily trends and make their choices accordingly.
  • Read more: Intraday trading formula

Follow the day’s trend:

The intraday markets move up and down throughout the day. As a day trader, you should try to move with these waves.

  • In a bullish market, day traders look for stocks that could show a strong uptrend. These carry less risk and a higher potential for profit.
  • When conditions turn bearish, the focus turns to declining stocks. One thumb rule is to short-sell stocks which are plummeting faster than the market.

However, the day trader must monitor the selected stocks closely. This helps identify when price reversals could occur. It is also important to know when to sit tight. For instance, it is tough to predict the momentum of a stock when the markets are highly volatile.

Book profits quickly:

Market trends can reverse at any time. Once profits start to accumulate, it makes sense to exit the position quickly. Day traders must stay ready to act before a price reversal occurs.

Here are some basic day trading rules to consider:

  • If you have taken a long position: Book profits at or slightly above the earlier high.
  • If you have taken a short position: Aim for the earlier low or slightly below it while exiting.

Entry, Exit and Stop Price settings:

Among the most important day trading rules that a trader can set is selecting the right value for entry and exit from a stock. They should also set an escape value for a crisis situation. These set prices will help reduce the losses and curtail the temptation for higher profits, which often lead to a downfall.

Clear entry and exit points provide an added advantage: They prevent traders from trying to time the markets. Keep in mind that nobody can consistently catch the tops and bottoms of stocks. It is better to book profits and cut losses as per a strategic plan.


Trade with the money you are not afraid to lose:

Intraday trading is a high-risk trading option. One small mistake could cost you the entire amount invested. A day trader needs to be very cautious and have an eye for trouble. These qualities come with experience and it is very easy for beginners to lose money.

Hence, it is advisable that you only invest money that you can afford to lose. Then your stress levels will be lower and you can trade better.


Take decisions based on limit orders and not on market orders:

A smart day trader will take decisions to buy or sell depending on the limit day trading rules they had set up at the start. Once the limit price is triggered, you will do the transaction instead of being tempted by the market orders.

Read more: How to be a successful day trader


Consider the worst case while margin trading:

Day traders who use margin trading pay a small percentage of the trading value. Their broker covers the rest through margin funds. So, the day trader is able to take a bigger position. This brings a higher profit potential but also the danger of big losses.

So, margin traders should consider the worst-case scenario. Otherwise, if a trade goes south they could face massive losses. This is an important pattern day trader rule for big traders. But it holds for smaller traders as well.

Do the research:

Thorough and diligent research holds the key to intraday trading success. A seasoned day trader will perform technical analysis, studying price charts and indicators before trading. But it helps to know the fundamentals of the companies being traded as well. You want a clear picture of how their business is doing. Corporate action announcements and earnings reports could bring useful inputs too.

Day traders must also keep a close watch on the news—especially if it affects certain companies or sectors. But knowledge of macroeconomic details, such as the country’s debt status or currency movements, is vital as well.

Keep business and emotions separate:

Since the intraday market is very volatile, you may experience great profits or losses in a short span of time. Hence, it is important—as a good day trader—to have tight control over your emotions. You should not be too excited by profits and should not get disheartened by losses.

Any kind of emotion like greed or even fear of losing is bad for trade. When someone is guided by their emotions, they often fail to take the best decision required. A day trader has to have a very alert mind that can take quick decisions. For this, one has to have a mind free of emotions.


Do not overtrade:

The share market may not always trend, or trend in a predictable manner. A seasoned day trader will know when the market is unsuitable for business and will refrain from any trading activity. Trading only a handful of scrips at a time is the best way to go about day trading. If you continue to trade ignoring the market response, that is a sure-shot way to lose your money.

Record your wins and losses:

The markets keep changing, and your strategy should change too. To help with this, many day traders record their trading wins and losses. This is followed by a daily or weekly evaluation. The goal is to figure out what went according to plan and what didn’t. The exercise may help to identify gaps in the strategy and adjust future trades with ease.


Summing up

Follow these intraday trading rules to safeguard your trades in the stock market. Exercise caution and discipline when navigating the world of stocks and share. And if you are looking to open a free day trading account, apply here.


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