Winning day traders who have moved beyond the basic day trading techniques utilize a variety of psychological rules to stay in the game.
These day trader rules are in addition to day trading basics that most every active intraday trader knows intimately.
Learning the mechanics of how to become a day trader is the easy part of day trading. Basic buying and selling can be done by most anyone. It is the proper execution of the psychological rules that differentiates the winners from the losers.
Here are 3 rules every winning day trader must follow
1. Understand that the market is always right
This rule is very difficult for most people to accept. The type A personalities attracted to day trading are usually use to being right. This is a sure way to lose in the market. Being able to accept that you are wrong and the market is right regardless of the outcome of the trade is a key psychological rule that must be followed
2. Add to winners never to losers
This was one Jessie Livermore’s favorite trading rules. This means never average down into a loser. However, when you have a winning trade, adding to the position makes sense. Averaging into losers can work, however, on those times that it does not, the results can be disastrous.
3. Buy Weakness/Sell Strength
This is another crucial rule that requires tremendous psychological self control. The easy trade is to buy strength and sell weakness. However, institutional and hedge fund traders do the exact opposite. Winners follow the big money rather than what feels good. Clearly, when momentum trading, there are exceptions to this rule. However, in most circumstances, it is the way to trade.
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