BREAKING THE RULES

When I was a kid, I remember playing a game called Adventure on my Atari 2600. You were this pixalated knight (looked like a duck hanging in a Chinese restaurant window) wandering around castles in search of stuff. The instruction book advised you to stay away from the walls, but there was some magical cheat in the game where you could go through a wall into some hidden rooms. It's been a couple decades and I forget what was so great about those hidden rooms, but it was really cool and worth it. Years later when I graduated to my Sega Genesis, I used to play a great game called Street Fighter 2. The rule book advised to keep out of the corners, but after playing awhile I figured out the best place to stay was in the corners, because you could kick serious butt while the opponent was jammed halfway on the screen and halfway off.

Anyway, experience tends to show us that rules are meant to be broken, and this is no exception in the realm of daytrading. Most rules, that is. There are some ironclad tenets which one must adhere to, all dealing with prudent money management, to ensure you don't blow your whole wad in one shot. Do that and it's game over, time to hang up the daytrading cleats and that's no good. But the other myriad of rules you've undoubtedly come across in books and chats are definitely tossable... if you wish.

For instance, you'll find many gurus preaching never to trade the 1st half-hour of the day. It's too volatile. Let it settle down and establish a trend before plunging in. The way I see it, the opening 30 minutes is probably the best time of day to trade. Daytraders want volatility. We want big price swings. Of course you have to be on your guard and quick with the trigger getting in and getting out, but how's that different from any other day trade?

Many gurus also preach setting a daily goal and being satisfied with that, ie "Don't get greedy, because pigs gets slaughtered." But why limit yourself when things are going good? This is the same limiting mentality that makes "cutting your losses and letting your winners run" so impossible for most traders. Instead they let their losses run, thinking it can still turn around, and they cut their winners, thinking it's a sin to make too much money and they better not jinx it. Instead, I just trade as long as I feel 100%. Concentrating on the markets, staring at charts and whatnot, does take a lot of inner energy. It's nearly impossible to keep that up for the full day. As soon as I start to wane, I call it a day. Even if it's after the first hour, if I'm pooped, I'll pass on the rest of the day. I find that most of my mistakes and bad trading come from lack of concentration and lack of energy, not from rotten chart patterns or market manipulation or any of the other bogeymen that traders use as scapegoats. Losses are my fault only, and that's one thing I won't compound by extending my stay and hoping and praying that I can make it back.