day trading mistakes

Day Trading Mistakes

This describes some major mistakes which will almost certainly cause your day trading career to end in failure.

Mistake 1. Lack of a Trading Plan

Many day traders fail because they trade without the benefit of any pre-determined trading plan. It is absolutely critical to have a complete, well-thought out plan of action before entering any trade. If a plan proves to be wrong, so be it. This includes the number of contracts you will trade and when you will enter, when you will exit, and when you will exit to cut your losses. You should decide in advance how long you will hold your position if the price fails to move at all, and at what price you may wish to add to or reduce your position.

Once you develop a plan, stick to it and do not change it solely as a result of your emotions. This is where failure begins for many traders - not sticking to their plan. This mistake is often caused by making false steps, or misjudgements.

Mistake 2. Failure to Control Emotions

It is highly unlikely that you will become a successful day trader if you allow your emotions to control your trading decisions. Greed, fear and pride are the most destructive emotions leading to poor trading decisions.

Greed tends to keep a trader from closing out a position when a reasonable profit has already been made, in the hope that the price will go even higher. Staying in the market for too long (hoping for a big win) will backfire more often than not. Greed also tends to result in impulsive dangerous trades.

Fear causes traders to sell existing positions too soon or avoid entering a signaled position in the first place. In other words, fear leads to trading decisions becoming "paralyzed".

Pride tends to keep a trader in a losing position for too long because of a reluctance to admit that the original trading decision may not have been the right one.

Use the discipline that a good trading plan is designed to foster and try to keep your emotions from unduly influencing your trading decisions.

Mistake 3. Over-Trading

Many traders feel the need to trade constantly at all times on every trading day. There are many occasions, and times of day, however, where it is best to stand aside and avoid holding any position in the markets at all. Always conserve your trading capital for those trading days offering good trading opportunities. Its always a miscalculation to over-trade, no matter how good the opportunity looks.

Failure often results when things look too good to be true.

Mistake 4. Failure to Accept and Limit Losses

Another major contributing reason to day trading failure, is the reluctance of many traders to exit from a losing position. Many traders hold on to losing positions for far too long, in the hope that the price will recover. It is essential to limit and accept losses in advance, in accordance with your trading plan, by pre-determining your exit point if the price moves against you. Stop-loss orders provide a convenient and essential tool to do this. Better to accept an error now than later when losses are much worse.

Mistake 5. Lack of Commitment

Day traders who are unwilling to make a serious commitment of time and effort to study and monitor the markets, engage in training and education so as to enable them to learn about technical analysis, new trading systems and methods, order routing software, etc., will almost always fail. Thinking that you know it all, is the sign of an immature trader. A winning trader cannot afford to be lazy. A simple lapse in judgement or omission of information can cause a big mistake to happen.

The above trading mistakes are avoidable if the trader doesn;t take unnesesary risks or make foolish trading moves.

The risk of loss in stock, stock/options, futures, futures/options, and forex trading is substantial, and site visitors and subscribers should consider whether trading these markets is appropriate in light of their financial situation. No warranty, express or implied, is made by daytradingforincome.com or its providers of information, as to the results to be obtained from use of daytradingforincome.com’s information or the fitness of its use for a particular purpose. Trading results of subscribers attempting to replicate the activity of any daytradingforincome.com account may differ significantly from the results obtained in the daytradingforincome.com account due to slippage, market volatility, lack of liquidity and other factors. Hypothetical performance results, while clearly labeled when used, do not represent actual trading results and have inherent limitations. Trades not actually executed cannot reflect the true impact of market factors, including lack of liquidity. daytradingforincome.com makes no representation that site visitors or subscribers will experience profits or losses similar to those shown. Past results of any performance published on daytradingforincome.com are not indicative of future returns.