5 Major Principles during Intraday Transaction

Initiative Principle:

You have the final say on entering or exiting the market instead of the other way around. You will usually lose if the market forces you to make decision without any hints given.

Enter: entering the market should meet preset requirements. Think before you leap.

Exit: leave after making profits. Don’t lose the money you make.  

Leave quickly when you lose. You must sell immediately when it reaches the stop-loss price you set. Never leave it alone when it starts to lose, which means you can’t let the market take it in control or wait for a rebound. Uncertainties are where a big loss comes from. You must take the risk under your control.

Immediate Action Principle:

Buy in immediately when the market goes up, while sell when reaching the stop-loss price.

Avoid 4 types of wrong behaviors:

1. Never taking chances without stop-loss. When reaching stop-loss price, some might hope the market will turn around. Yet most of the time you will only suffer greater loss. Therefore, you should stick with your stop-loss price firmly.

2. Never entering without a second thought. False appearance may make the market looks rather positive. You may find it regretful for entering too late and making less money. However, the false appearance will often be gone. Remember, never entering before your preset requirements are met.

3. Never entering halfway with zero preparation. Even though the market rises, you will probably still lose if you step in the wrong beat. Wait for the next opportunity to enter if you miss the first entering point.

4. Never entering again after you close order in a same period. You may make some money after your first entering, yet it continues to rise after you closed order. Hold on if you want to reenter, because it will most likely go down. Remember not to take chance no matter how tempted it is.

Profit Equivalent to Loss Principle:

The chances of winning and losing are pretty much the same for intraday trading. “Probability” is the reason why some intraday trader win. Assume you trade 5 times with winning and losing the same amount of money, but you will still make money if 3 out of 5 times are winning.

Therefore, the stop-loss point should be set up within the win rates. In the meantime, profitable orders could be delayed (several seconds or minutes), but losing orders should be stopped loss immediately after it reaches stop-loss level.

Stop Trading Principle:

There are three scenarios that you should stop trading:

1. After stopping loss, don’t open conversed position immediately. You could stop trading for a while to calm down, and pick it up again when the next opportunity appears. Never let your emotion control you.

2. If the trading during the day is not smooth and you lose money for several orders. Please do close a position and leave, and stop all trading at once. You should adjust yourself to prevent bigger loss.

3. After big wins, stop all trading to avoid inflated mentality. If you think you are almighty and keep trading orders, you usually lose.

Relatively Stable Single-Lot-Size Principle:

No matter how large your capital size is, it’s suggested that you only do one fixed lot size. Don’t try more lot size because of the smooth trading and good situation. On the other hand, don’t do less lot size because of the bad situation.