20 Common-Sense Trading Principles
Day Trading
Trading becomes far less mysterious when you step back, breathe, and view markets through a common-sense lens. It doesn’t always feel that way when you’re in the heat of a fast market, but after decades of experience, I’ve learned that the most valuable trading lessons aren’t in textbooks—they’re found in real market behavior.
What follows is a collection of practical, experience-driven insights designed to help you stay grounded, alert, and aligned with how markets truly work.
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News Matters — Surprises Move Markets
News is one of the most powerful forces in trading. Markets move not just because of headlines, but because of whether those headlines meet, exceed, or fall short of expectations. Traders anticipate volatility during major releases because surprises, both positive and negative, tend to trigger the largest reactions.
While some technical purists claim news doesn’t matter, anyone who trades real markets knows better. Staying aware of upcoming releases and consensus expectations is essential.
Tip: It’s the reaction to the news and not the news itself that reveals genuine strength or weakness in a currency or instrument.
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Stay Alert — Markets React When Expectations Are Broken
Markets are constantly pricing in expectations. When reality diverges from those expectations, prices adjust fast.
Ahead of key events, positions often lean heavily to one side. That’s why it’s crucial to know what forecasts look like so you can interpret whether a result is truly a surprise.
As always, integrate technical levels into your decision-making. A surprise can either accelerate a trend or trigger a reversal depending on where the market sits technically.
Tip: Understanding the market’s expectations helps you react correctly when the unexpected hits.
Global-View Economic Data Calendar
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Complacency Can Be Dangerous
Some of the biggest moves happen when traders least expect them. I’ve lost count of the times a market looked stuck in a tight range, and the moment I stepped away, a breakout occurred.
Markets often move sharply when traders lose interest, when liquidity thins, or when stops cluster too close to current prices.
Tip: When the market feels slow, quiet, or dull, dial your awareness higher, not lower.
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Why Retracements (and Fibonacci Levels) Work
Retracements are not mystical but logical. Fibonacci levels like 38.2%, 50%, and 61.8% matter because so many traders watch them. The more traders and investors look at the same level the more significant it becomes.
Trends need periodic shakeouts. When weak long or short positions get flushed, the market becomes more capable of moving in the direction of the prevailing trend with less resistance.
Tip: Retracements work because traders treat these levels as meaningful. Once they hold (or are broken) , many traders react, making them self-fulfilling.
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When to Fade a Correction
Corrections earlier in the European or U.S. session often offer the best fading opportunities. Liquidity is highest early in the day, meaning the market can absorb flows more smoothly.
Late in the New York session, liquidity thins, making corrections riskier to fade.
But as always, context matters: if major news or key technical levels are involved, a simple retracement may become a trend reversal.
Tip: Fading is a higher probability trade when liquidity is deep, not when the day is winding down.
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Why Repeat Trades Work So Well
Some of my most profitable streaks have come from repeating the same trade or strategy day after day—whether it’s buying dips, selling rallies, or using the same levels.
Markets often reward consistency when a pattern keeps working. This doesn’t mean to trade blindly but pick your spots (e.g. on short-term charts) when longer-term charts have a clear trend pattern.
This approach works best when aligned with the prevailing trend, but ranges can produce repeatable opportunities as well. Look at longer-term charts for trend patterns as this is where large institutional traders base decisions from.
Tip: Ride a working strategy until it breaks. Then reassess and find the next pattern.
US500: Up 4 (green candles) days in a row inidicates buy on dips repeat trades was the best odds strategy as long as the pattern contineus.
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Use Stops So You Can Trade Tomorrow
One of the biggest mistakes traders make is refusing to take a loss. Even experienced traders sometimes override stops or allow losing trades to grow out of control.
This leads to massive losses or desperate hedges that only delay the inevitable.
Tip: Stops protect your capital and keep you in the game long term. Losses are part of business accept them and move on.
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Watch the Stops and Use Stop Behavior to Your Advantage
The forex market, for example, is driven by the constant search for stops. You don’t need an order book to get a feel for where stops might be as experience will teach you.
Stops shouldn’t be the only reason for a trade, but understanding where they are helps you judge where the market is vulnerable and which side is stronger.
Tip: Avoid being on the side where stops are likely to be triggered. When stops run out, markets (e.g. algos) m often stall, lose interest on that side shift to hunting the other side.
GBPUSD: Stops run above the high of the day
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When Trading Against the Trend, Exit Quickly
Contrarian trading can be profitable, but countertrend moves rarely stretch as far as traders expect. They often reverse sharply once the impulse fades.
Tip: Take profits faster on countertrend trades. Don’t linger as contra trades rarely reward patience.
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The Hard Trade Is Usually the Right One
The best trades often feel uncomfortable. Easy entries, those that feel like bargains, are often traps.
Getting on the strong side of the market, even when it requires a difficult entry, puts the odds in your favor.
Tip: The hard trade is usually the correct one because it aligns you with the side less likely to hit your stops.
EURUSD: Hard but right trade is to be buying (or step aside) rather than guessing at a top
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Treat Trading Like a Business, Not a Casino
Trading isn’t gambling unless you treat it that way. Businesses track expenses, profits, performance, and risk and so should traders.
You need to know your average win, average loss, and win/loss rate. If the numbers don’t add up to profitability, your plan needs revision.
Tip: Trading requires structure and risk management. Casino-style trading leads to casino-style results.
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Remove the Word “Hope” From Your Trading
Hope is deadly. Traders who hold losing trades “hoping” for recovery often blow up accounts.
Successful traders exit when their analysis is no longer valid.
Tip: Hope has no place in trading. If your trade no longer makes sense, exit and reassess.
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Watch Out for Widening Broker Spreads
During low liquidity or high volatility. especially around major news and the crossover time to a new trading day, brokers widen spreads. Trades can be stopped out even though the real market never touched those levels.
Tip: Be cautious placing stops during volatile moments or session opening time. A widening spread can stop you out unfairly.
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Remove Emotion From Your Trading
Markets are not personal. They don’t punish you. They don’t care about your position.
Emotional trading leads to revenge trades, overtrading, and irrational decisions.
Tip: Treat the market as the emotionless system it is. Leave feelings out of your trades.
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Trading Is a Marathon, Not a Sprint
You cannot force the market to give back your losses in one trade, and you shouldn’t expect to hit a home run every time.
Longevity in trading requires pacing, discipline, and consistency.
Tip: Build steady results. Save the big swings for when the setup and risk-reward truly justify it.
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Identify the Market Type and Adjust Your Strategy
Markets move through phases: trends, ranges, congestion, consolidation. Trading the wrong strategy in the wrong environment is costly.
Tip: Don’t trade breakouts during range days or fade trends during breakout days. Adapt to the environment the market is giving.
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Trade the Path of Least Resistance
Markets behave like flowing water. They seek the path of least resistance. When they find it, momentum often accelerates.
Currencies (and equities) rotate as traders search for vulnerability from instrument to instrument.
Tip: Trade in the direction the market finds easiest to move, not where you wish it would go.
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Beware of Tight Ranges
In narrow ranges, small moves can look exaggerated on charts and trigger emotional reactions. Traders often get chopped up chasing false breakouts.
Tip: Be aware of the psychological impact of tight ranges. Small moves aren’t always meaningful even though thyey may look that way on a chart.
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Don’t Mix Time Frames Incorrectly
Many traders enter short-term trades based on long-term views, only to get stopped out because the shorter time frame wasn’t aligned.
Long-term bias doesn’t justify short-term entries.
Tip: Match your trade horizon with the time frame you’re analyzing and executing on.
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Trade the Strong Side but Don’t Leave Yourself Exposed
Trading on the strong side improves your staying power, even if your entry isn’t perfect. But you must also respect upcoming events.
If major data releases or low-liquidity periods are approaching, plan ahead so you’re not forced to exit in a poor market environment.
Tip: Don’t let the market trap you. Manage timing as carefully as direction.
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