7 Essential Steps For Profitable Daily Trading

Timeframe

This step involves determining the desired timeframe for the trade, which can vary from day trading on shorter timeframes (m15 to h1), swing trading on intermediate timeframes (h4 to d1), or position trading on longer timeframes (d1 to w1). Choosing the appropriate timeframe helps establish the trade duration and the level of monitoring required.

Risk Management

This step focuses on determining the level of risk to allocate to each trade. It is recommended to risk a certain percentage of capital per trade, typically ranging from 1% to 3%. This ensures that losses are limited and helps maintain consistent risk across trades.

Conditions

Identifying market conditions is crucial for trade planning. Traders need to assess whether the market is ranging (moving within a defined price range) or trending (showing a clear upward or downward direction). Understanding the prevailing market conditions helps in selecting appropriate trading strategies and indicators.

Markets

This step involves selecting the specific financial markets or instruments in which to trade. Traders can choose from a wide range of options, such as equities (stocks), options, bonds, futures or Crypto. The choice depends on individual preferences, market knowledge, and the availability of suitable trading opportunities.

Entries

Determining entry points is essential for initiating a trade. This step involves selecting entry strategies based on the identified market conditions. Common entry methods include taking advantage of pullbacks (temporary price retracements within a trend), breakouts (entering when price surpasses a key level), or trading news events that can cause significant price movements.

Stops

Placing stop-loss orders is crucial for managing risk and protecting capital. Traders need to determine stop levels that are strategically placed away from market structures, such as support and resistance levels. This helps minimize the chances of premature stop-outs due to normal market fluctuations while still ensuring that losses are controlled.

Targets

Setting profit targets is essential for determining when to exit a trade. Traders can choose between fixed targets, where a predetermined price level is identified to take profits, or trailing stops, where the stop-loss order is adjusted as the trade moves in the trader's favor. Both approaches aim to capture gains and lock in profits while allowing the trade to run if the market continues to move favorably.