How and When to Apply the “Wait 1 Day Rule of Trading”
If you are planning for stoke trading, let’s see the importance of wait 1 day rule of trading. For the first time all of us are skeptical about whether or not we enter a trade. Whether we should invest on stocks or on options or it’s better to invest on futures or index and as a result we decide to wait and watch and stay on the sidelines of trade to observe its movements. Suddenly, as it starts going up rapidly, we feel that it might be wrong. But since you have decided to wait and watch, you opt to pullback.
Shortly after that moment, what you see the stock goes even higher and gained another 5%. You cannot help and stand anymore and suddenly decide to enter the trade. However, you return back the following day only to find that the stock is going down and started to go down and down and down… leaving you moneyless as it takes all of your money.
Look, how the stock market can fire your emotions. It happens most when the share market is at its extreme. When you think like you should enter a trade and start trading, whether it’s stock trading or options trading, or any other type of trading, it simply indicates that what you are looking at is at its extreme.
Now, according to the Law of Regression to the Mean, every stock or market that is making an extreme move will naturally and definitely come down and pullback. So, you may ask, what is the answer?
Follow the ‘wait 1 Day Rule of trading’. The wait 1 day rule of trading is one of the most crucial rules of trading, especially if you are into stoke or option trading.
What is ‘wait 1 day rule’?
According to ‘wait 1 day rule, every investor must always wait 1 day before he enters into a trade that he believes he must enter right away. In case of stock or option trading it’s even more important to wait for a day.
Suppose you wait for a day when you were so impassionate and eager to enter into stock trading. If the stock goes down and according to the law of regression to the mean, it’s almost possibility that it will pull back definitely, you can save yourself from huge loses that may have incurred if you have traded on that day itself.
In that case you will have an opportunity to make assessments on the reasons. You can consider and analyze that whether it was a good trade or not or is it still a lucrative on. And in case if the stock continues to up even the next day as well, that means there are good chances that the trend is real and it may continue for a longer period. Since it seems intact, you can start investing with due consideration.
Therefore, apply this ‘Wait 1 Day Rule of Trading’ and play safe.
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