Day Trading Mistakes
“Don’t Reinvent the Wheel”
1. Not having a plan
“The most common day trading mistakes traders make is entering a trade without a “good” plan.
Many newbie day traders enter the market without appreciating that they are entering into potentially dangerous waters. Protecting yourself against losses means you need to know why you entered the trade, at what price and what your anticipated payday is to be.
One thing that and destroy a day traders account is the misuse of margin. Margin is when you borrow from a broker to buy securities. If used properly, margin is an amazing tool that can boost profits and give traders an edge. When margin is used improperly, financing a trade with borrowed money can be dangerous to your wealth and health. In the past, many people misused margin, borrowing more from the brokerage than they could handle or know what to do with. Margin has wiped out some traders’ accounts and helped to give day trading a bad name. It’s best to day trade with money you actually have, not money you borrowed if you don’t understand one key skill set, and that of course is money management.
3. So you like to chase trades huh?
One of the most common day-trading errors is chasing a fast-moving stock either up or down. This is a recipe for disaster “When traders see a stock go higher and higher or lower and lower, we all want to join in the party. “The problem is we pro’s are exiting through the back door, while new traders are just coming in.” If you miss a stock on the way up or down, let it go. There will always be other trading opportunities.
4. Day Trading Mistake: Check Your Ego at the Door
A day trader need to be humble. A professional day trader knows that he/she cannot always be right on every trade. Day traders should not go into trading with anything to prove to anyone. The markets are not judging the day trader. A day traders’ sole goal should be to make money and that requires the acceptance of some ups and downs as well.Have confidence, be confident but never ever lose your humility.
A common mistake and a mistake thats hard to break for day traders is the temptation to not follow the day trading plan. The reason for this is usually an impulse, or an emotion that has overtaken the day traders trading plan. Stick to your plan. It is hard, but eventually you will see the importance of having a well thought out plan and implementing it.
5. Tips: 11 out of 10 Stock Tips Lose Money
Stay away from other peoples stock tips and trade your own ideas. At least once, nearly every trader gets fooled into buying stocks based on tips from other sources. Even when the tipsters are right, they don’t know what your risk tolerance is and if it’s right for you. They aren’t there to tell you when to sell. It takes a lot of self-control to keep your ears closed, but successful day traders rely on their own judgment — not on what others are saying.