Day trading is one of the most challenging ways to make money in the markets. The traders who succeed share common habits and follow strict rules. Here are 10 rules that every day trader should know and follow.
Rule 1: Always Use a Stop Loss
A stop loss is your emergency exit. It automatically sells your position when price moves against you by a predetermined amount. This is non-negotiable for day traders.
Why It Matters
- Limits your maximum loss on any trade
- Removes emotion from exit decisions
- Protects you if you step away from the screen
- Prevents catastrophic account damage
The rule: Decide your stop loss BEFORE entering any trade. Once set, do not move it further away to "give it more room." If the stop hits, accept the loss and move on.
Rule 2: Risk Only 1-2% Per Trade
Professional traders risk a small percentage of their account on any single trade. This ensures that a string of losses will not destroy their account.
How to Calculate
- Account size: $25,000
- Risk per trade (1%): $250
- Stop loss distance: $0.50
- Position size: $250 / $0.50 = 500 shares
With 1% risk, you can lose 10 trades in a row and still have 90% of your account. With 10% risk, 5 losses wipes out half your account.
Rule 3: Have a Trading Plan
A trading plan defines exactly what you will trade, when you will trade, and how you will trade. Without a plan, you are gambling.
Your Plan Should Include
- What markets and stocks you trade
- Your specific entry criteria
- Your exit criteria (both profit and loss)
- Position sizing rules
- Maximum daily loss limit
- Trading hours
The rule: Write down your trading plan and review it before every trading session. If a trade does not match your plan, do not take it.
Rule 4: Never Average Down
Averaging down means adding to a losing position to lower your average price. In day trading, this is one of the fastest ways to blow up an account.
Why It Is Dangerous
- Increases your position when you are already wrong
- A small loss becomes a massive loss
- Ties up capital in a losing trade
- Creates emotional attachment to bad trades
If your trade is not working, cut the loss. Do not add to it hoping for a reversal.
Rule 5: Set a Daily Loss Limit
A daily loss limit is the maximum amount you will lose in one day. When you hit this limit, you stop trading - no exceptions.
Recommended Limits
- Conservative: 2% of account per day
- Moderate: 3% of account per day
- Maximum: 5% of account per day
Hitting your daily loss limit is not failure - it is discipline. Bad days happen. The goal is to live to trade another day.
Rule 6: Do Not Revenge Trade
Revenge trading is taking impulsive trades to make back losses. It almost always leads to bigger losses.
Signs of Revenge Trading
- Increasing position size after a loss
- Taking trades outside your plan
- Feeling angry or frustrated
- Thinking "I need to make this back"
- Trading immediately after a loss without pause
The rule: After any loss, take a 5-10 minute break. Step away from the screen, reset emotionally, then return only if you can trade with a clear head.
Rule 7: Trade the Best Setups Only
Quality over quantity. The best day traders are patient and selective. They wait for their best setups and ignore everything else.
Signs of Overtrading
- Trading out of boredom
- Forcing trades that do not quite fit your criteria
- Taking every setup instead of the best ones
- High trade count with low win rate
Some of the best trading days involve taking just 1-3 perfect trades instead of 10 mediocre ones.
Rule 8: Keep a Trading Journal
A trading journal is your most powerful tool for improvement. It tracks every trade and helps you identify patterns in your behavior and results.
What to Track
- Date, time, and symbol
- Entry and exit prices
- Position size and P/L
- Setup type
- Why you took the trade
- What you did well/poorly
- Screenshots of the trade
Review your journal weekly. Look for patterns - which setups work? What time of day do you trade best? When do you make mistakes?
Rule 9: Manage Your Emotions
Trading is as much psychological as it is technical. Fear and greed are your biggest enemies. Learning to manage emotions is essential.
Emotional Management Tips
- Before trading: Clear your head, follow your morning routine
- During trading: Focus on process, not profits
- After losses: Take breaks, do not force trades
- After wins: Stay humble, stick to your plan
- End of day: Review objectively, learn, move on
The rule: If you notice you are emotional - angry, fearful, greedy, or frustrated - stop trading immediately. Emotions and profitable trading do not mix.
Rule 10: Protect Your Capital Above All
Your capital is your business. Without it, you cannot trade. Protecting capital should be your primary goal - profits come second.
Capital Protection Strategies
- Risk small amounts per trade (1-2%)
- Use stop losses on every trade
- Set daily and weekly loss limits
- Take breaks during losing streaks
- Do not chase losses
- Trade smaller when uncertain
If you lose 50% of your account, you need a 100% gain just to break even. If you lose 20%, you only need a 25% gain. Limiting losses makes recovery possible.
Summary: The 10 Rules
- Always use a stop loss
- Risk only 1-2% per trade
- Have a written trading plan
- Never average down on losing trades
- Set a daily loss limit and honor it
- Do not revenge trade after losses
- Trade only your best setups
- Keep a detailed trading journal
- Manage your emotions actively
- Protect your capital above all else
Track Your Trading Rules
Pro Trader Dashboard helps you follow these rules by tracking every trade, showing your risk metrics, and identifying patterns in your trading behavior.
Final Thoughts
These rules are simple to understand but hard to follow consistently. The difference between profitable and unprofitable traders is not knowledge - it is discipline. Print these rules, review them daily, and hold yourself accountable. Your trading account will thank you.
Ready to put these rules into practice? Learn about proven day trading setups or explore trading psychology tips.