Posted on 23 June 2012.
There are several different sets of guidelines to day trading, such as day trading options rules or range trading rules. There are some rules that are valuable to all day traders. They need to apply these general rules differently to their specific daily trading environments.
When you engage in day trading, you need to adhere to a plan that guides your purchases. Many people enter into this profession and soon leave it because they treated it like gambling. They based their purchases on tips from friends and colleagues. Essentially, they acted like bad gamblers at a casino.
The second most-important rule concerns sales. Day traders need to know when to get out of a stock rather than stubbornly hold on and wait for a magical price bounce. Automated stop-loss orders can keep such poor instincts from ruining a career.
The day trading options rules are even more important. If you want to be a day trader who deals in options, you have to be very careful about your decisions. The good thing about this particular form of day trading is that you can make money from options whether the market is good or not. Your profit will be determined by whether you placed a call option or a put option on a specific futures contract.
You make a call option when you believe that a particular asset is going to increase in value. The option gives you the right to buy the asset at a prearranged price. If the value does increase, you can buy it cheap and then sell for a profit.
A put option is just the opposite. When you hold a stock and believe that it will decrease in price, you can buy a put option. This detail in the day trading options rules gives you the right to sell it at the present higher price if that decrease does occur.
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