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Day Trading: 5 Things You Must Avoid

Oct 12, 2007
Day trading can really be a great money making opportunity, especially if you have the resources to spare. All updates are posted in real time online and the trading floor is constantly active that it is truly impossible for you not to be in the loop, unless, you do it deliberately.

Some investors say day trading is really simple. And there really isn't nothing to it - that is, If you have the proper background. There are some individuals, however, that make common mistakes during trading and end up losing so much money because of their ignorance.

Here are five of the more common mistakes associated with day trading:

1. Lack of Commitment

Day trading need constant and careful monitoring. Thus, if you are not able to devote your time and review market movements and study financial trends, you may as well throw yourself off a trading cliff.

Trading requires deals with sporadic market conditions and should therefore be studied frequently. Individuals who want to pusue day trading should invest not just their time to the actual trading session itself, but also to learning about all new methods and strategies outside of it.

2. No emotional control

Greed is the weakness of an effective trader. That is, you should not bite off more than you chew. Sure, day trading may spell massive windfalls, but if you do not know how to play your cards right and let yourself to deliberately lose a little along the way, you are more likely to encounter a lot more pain when the actual losing part starts.

Often, when a reasonable profit has already been attained, some traders opt to hold on and do not want to close in anticipation of a higher value, which sometimes does not come. Never stay in the market longer than you should, even if that little ego voice in your head tells you that there may still be a chance that values would go up. Trade the next day to get a greater win. Just don't place all your cash in just one trade at one time.

3. Trading too much

You do not need to trade every single day and hold several positions in the market to ensure a win. Some investors have this misconception that more cards are laid out there, the better is the chance of them winning. This is not bingo. You should not put it all out there, unless you want to lose all of them at the same time.

Always trade wisely. Analyze market movements and know when the best time to put out is. Save your trading capital for good days and hold out on doubtful period. Remember, the active trader is not always the wisest trader on the block.

4. Lack of a planning

When you get involve in day trading, you can not just decide to trade anything and expect fate to move things for you. This is not the casino. And, hey, even in a casino you will need some sort of strategy.

Since trading is greatly influenced by economic and political events, you must know how to map out a trading plan that will reap the best possible benefits for you. Having a trading plan will help in certain surprise situations, like the sudden downfall of a resource stock because of an unforeseen earthquake. It will help you find out what courses of action are available before any instance of such sort happens.

5. Failure to accept a loss

Day trading is a gamble. Therefore, you must know when to back down when needed. There are investors that hold on to their losses way too long, hoping that by some miracle the stock values will go up and recover. This is often not the case when trading in the stock market, so you will need to learn to be humble and accept defeat.
About the Author
Andrew Chin is a recognized authority on the subject of Online Trading. His website Trading Exposed provides a wealth of information on stock trading. Articles may be reprinted as long as the content and links remains intact.
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