Fatal Mistakes in Stock Day Trading

Here are four mistakes that day traders all too often find themselves making when starting out with day trading. The mistakes are easy to make without day trading experience so be sure to learn from each experience as much and as quickly as you can.

Bad timing:

The majority of day traders acknowledge the need for certainty. They always want to be sure that they are entering a winning trade. Theoretically, everyone can profit from any trade. The difference lies on “when” they decide to enter. Some people wait too long, some impulsively get in too early. There must be good timing based upon the use of technical indicators to help you spot the trade that will earn you a profit.

In most cases, day traders let trades take off without them. They tend to wait until they become very certain of what to do. Many wait too long then hop in just before the trade sells off. Just like the game of musical chairs, someone will always be left without a chair to sit in.

Being too hopeful:

Trading is a game of probability, of numbers, of technicalities, but definitely not a game of hopes and wishes. The market moves in a certain direction ignoring the number of people who are hoping and praying that the stocks they are trading will go up. The market does not care whether you are losing or winning, it is in fact neutral. Being too hopeful is an indication of losing. So sell your stocks before you go broke. Afterwards, review your mistakes and commit to not make the same mistakes again.

Deviating from a working plan:

It is a general rule in day trading that you should stick to two or three working plans. However, in the heat of excitement or the height of panicking, traders often forget that they are using a strategy that has specific objectives, direction and fall-backs. Some traders begin their trade with a specific methodology in mind but after several days of working on a set of specific rules to follow, they begin to use methods that are entirely different.

It is not wrong to invent or innovate but if it is money that’s on the line, you should always be certain that the new method won’t backfire. Nonetheless, this is often the case because in this business no one can be sure that a method is successful or not unless practiced in real time with real money.

Unrelenting ego:

Traders who are highly successful in other businesses enter day trading with one thing in mind. They have been a success at other things, why should this be any different? This kind of attitude boils down to one thing, ego or the bane of overconfidence. Day trading has it’s own set of rules that must be followed in order to be consistently profitable. One of the important rules is to know when to admit that a mistake has been made with a trade and to close it out with only a small loss.

One must also be willing to learn new things. For example, most day traders use trading software that helps them with the timing of their trades. A prospective day trader must be willing to research software offerings and to select and learn how to use trading software that fits into his mode of operation.

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