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7 Most Common Mistakes by Day Traders (Video)

7 Most Common Mistakes by Day Traders (Video)
March 10
22:05 2012

Day trading can be a very unforgiving profession. Avoid making these common 7 mistakes and maximize your future opportunities for success.

Mistake #1 Having an Underfunded Account

One of the most common issues with a day trader is lack of capital. This can cause many issues in your new career. For instance, if you have a small account, you may find it difficult to “Pull the trigger” on a trade, because of the fear of losing. You also should be able to handle a few consecutive losses. Losses can and do happen, and are simply a part of trading. If you wipe out your account in two or three trades, you aren’t going to last very long in this game. Some of the best lessons are learned by losing.

Mistake #2 Being Overconfident

While being afraid is certainly not the way to go, you can swing the pendulum too far in the other direction as well. Your last trade might have made a killing, but the next one could take all of that profit back. You must remember this, as it helps you to make rational decisions instead of trading like a Superhero, and taking on way too much risk.

Mistake #3 Treating Day Trading like a Hobby

Day trading is not a hobby. It is a very serious business, and it should be treated as such. In fact, it should be handled with the same amount of effort you would put into a “real” business.

Mistake #4 Listening to your Ego

A trader will make mistakes, and cannot always be right. There is no “guaranteed” profit in the markets, and as such, you need to accept when you are wrong. Many accounts have been blown up because a person could not admit they were wrong, and refused to take the small loss, until it became so big it was devastating. Your ego doesn’t trade your account. Don’t listen to it.

Mistake #5 No Trading Plan

Making a trading plan is a critical part to becoming a successful day trader. Not taking the time to develop your own can be among the most destructive mistakes a day trader can make. Once you have it in place, FOLLOW IT! Remember it was created by the sound principles you believed in when you were not emotionally involved in a trade.

Mistake #6 Trying to Get Rich Quick

This isn’t the lottery. You aren’t going to deposit a few hundred bucks in your account and become a millionaire overnight. Your realistic goal should be to become a good day trader. The profits will follow.

Mistake #7 Never Looking at Yourself in the Mirror

You should be supportive and constructive when it comes to trading. However, you also need to be honest and look at your weaknesses as well. It can save a lot of financial and possibly psychological damage. Trading is a tough game, but it’s not impossible. It takes discipline, and a willingness to look at yourself honestly.

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One of the most common and destructive mistakes a day trader makes is to simply not follow their plans. Temptation, an “obvious signal”, and just simple greed can lead traders down the road of being undisciplined. This is without a doubt one of the most dangerous mistakes, as traders will often lose more than they originally planned as they raised their amount risked.

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