Daytrading the S&P500
A Visual Approach

The traders who last long-term, lead well balanced lives.

7. Trade Suspension.
If price action, your indicators, or market internals are not doing what they should, EXIT NOW. If price moves against you, then recovers somewhat and the technical picture still looks negative EXIT NOW.

You are thinking that price will now reverse and move in your favor. Statistically, however, if price does not move in your favor soon after your entry, your position is wrong. Exiting requires a quick, focused mental state.

8. Taking Profits.
It is important to be patient and allow price to move favorably toward your target. Move your stop closer to price action as the market continues to move in your direction. When daytrading, if price makes an exhaustion move with long bars on falling volume, this is your signal to exit; rapid reversals can occur, and you may lose a significant portion of your profits.

9. Daily Review.
A daily trading review provides an important transition between trading and being out of the market. It is during this time period that you review your trading to determine what mistakes you made during the trading day. A mistake here has nothing to do with making or losing money but, rather, whether you followed your trading rules and your trading plan.

You should pay special attention to mistakes made during winning trades; this is the fastest way for bad trading habits to be ingrained.
Review the trading rules associated with your low risk ideas. If you make a mistake by not following your trading rules:

• Avoid self-recrimination; simply resolve to not repeat that mistake.
• Review your price charts and replay the trade in your mind. Prior to making that mistake, you reached a decision point. At that time, you had a number of options available.
• Mentally, go back to that choice point and review your options.
• For each option, determine the outcome if you had taken it. Give yourself three good choices and mentally rehearse them. Always give yourself as many choices as possible so that you don't get stuck with limited options or a forced choice.
• Once several options are found with favorable outcomes, rehearse carrying them out in the future when you encounter similar situations. Once practiced, selecting one of them is easy when you encounter a similar situation in the future.

Once the day's trades have been analyzed, summarize the day in writing. Write down your mistakes and your new choices for that situation. These summaries will be important when you begin the task of periodic review.

Regular review is one of the fastest ways to improve your trading and increase your profits; perform this task daily.

10. Periodic Review.
The markets change and so do you; consequently, it is critical that you are sure that your rules are still valid for the markets and you. This review period allows you to change your rules. As daytraders, we need to review our rules every month. Here are the steps:

1. Read your daily review statements.
2. With this information fresh in your mind, go through your trading plan step-by-step.
3. Determine your strengths and weaknesses.
4. Review your system.
5. Review your trading rules and trading procedures.

Allow at least a day for this review; it is the ideal way to maintain consistency in your trading.

11. Being Out of the Market.
It is critical for you to meet your needs when you are out of the market; otherwise, your parts will attempt to fulfill those needs when you are in the market. This can be a huge detriment to your trading.