Develop a System

• A systematic approach to trading is essential for success. A trading system is made up of rules used to define technical entry and exit points for trades, the types of securities traded, the types of technical chart setups used, chart scanning techniques, and any other processes used routinely while trading. By formalizing a system, a trader defines the techniques that are most successful, most often, and sticks with those techniques. A systematic approach also removes emotion from the trading process.
  
  

Trade with the Trend and Use Stops

• Many market technicians are trend traders. Once a stock has established a direction, by setting a discernible pattern of higher lows and higher highs, for example, prices will tend to continue in the direction of the trend. Traders can reduce risk by purchasing shares near chart support levels, such as trend lines or horizontal consolidation zones, and setting stops below the support levels. Alternatively, buy signals can be taken when prices rise through resistance levels. By setting stops and profit targets, traders determine trade risk before the trade is executed. Managing risk -- and minimizing losses -- is essential to successful trading.
  
  

Pay Attention to Volume

• When trading equities, trading volume provides a clear indication of investor participation. Many retail traders look for patterns of institutional buying, which is often indicated by heavy trading volume. When large institutional investors start buying or selling securities, the patterns can be readily apparent. When a security sees heavy trading volume, with institutions accumulating or reducing holdings, the process can continue for an extended period of time, resulting in significant price changes. Short-term traders, by identifying such a pattern at an early enough stage, can ride the subsequent price movement with trades in multiple time frames, including intraday trades.
  
  

Do not Overtrade

• Overtrading is one of the most common mistakes made by all levels of traders. Day traders often spend the entire day sitting in front of the trading screen. Overtrading can result from a desire to catch every move and make money at every opportunity, or from simple boredom. However, the most successful traders are those who make trades with the highest probability of success, not the traders who make the most trades. Traders who overtrade are likely to take a relatively higher percentage of losing trades that destroy trading capital.