Online trading can be a big thrill for beginners… and even more so with the super fast paced day trading. Day trading can be one volatile roller coaster since traders buy and sell stocks continuously, numerous times in the course of a single day. The internet has opened up the world of trading to even the most inexperienced of traders and trading is one of those things that can go horribly wrong if not handled properly. Let’s take a look at three common day trading mistakes that both new and seasoned traders often make and what you can do to avoid these pitfalls.
Lack of knowledge: The importance of educating yourself cannot be stressed enough when it comes to day trading. Many traders just jump into the arena and find themselves massively unprepared and minus quite a bit of cash! If you are new to the trading world first educate yourselves on how the market works and what entails. You will have to learn how to strategize and develop your own trading strategy and plan. Many traders don’t put in the effort to analyze trading instruments, learn to watch the markets or do some detailed research; the result- failure. Do your homework, make a detailed trading plan and stick to it.
Letting emotions take over: One of the costliest mistakes a trader can make is trading with emotions. It is a huge mistake to let your mood determine your investing activities; always undertake any trading activity with a clear head. Greed, over-enthusiasm and fear can be some of the worst emotions and letting these emotions overtake a logical and well thought out trading plan will most likely backfire big time, especially with the sheer volume involved in trading. Making emotion based decisions most probably have you altering your buy or sell positions and the wrong time. A little discipline goes a long, long way.
Playing with money you can’t risk: Never, ever fund your trading activities with money that is essential to your day to day living expenses like your mortgage or your bills. Playing with money you can’t afford to lose will drive you to trade with fear and trepidation….not a good combination. Plus the face that day trading in itself can be pretty risky will just keep perpetuating the cycle and you could end up losing more than you began with. You also have to keep into the account that you will be paying broker fees, account fees and transaction fees that can add up to quite a bit with the volume involved in day trading