Day trading isn’t for everyone. To be successful, one must be confident, decisive and willing to admit when they’ve made a mistake. New short-term traders make all sorts of mistakes, some of which are more serious than others are. Below are some of the most common mistakes day traders make, as well as some tips on avoiding them.
Not Planning Ahead
When someone is new to the process, they may enter positions without having a goal for a certain stock. Or, they’ll over-plan the entry but fail to figure out how they’ll get out of a trade. In both instances, not having a strategy can increase the chances of failure. Before a trade, it’s important to have a price target, a time limit and a way to get out.
Not Following a Plan Once It’s Made
Sticking to a plan is just as important as making one to start with. Many see this as the most difficult part of becoming a day trader; when things get busy, it’s easy to lose track. Traders shouldn’t be ruled by emotions; they should find a workable strategy and follow it until it stops working.
Leverage gives a trader additional buying power and it allows them to increase their exposure using someone else’s money. When a trader is right, they can net significant returns but when they’re wrong, it can be devastating. New traders shouldn’t use leverage unless they can afford the consequences of being wrong.
Many people get into short-term trading in the belief that nonstop is the only way to go. Because of that philosophy, a new trader can easily go overboard. While duplication of a once-successful strategy may work for a while, it can become exhausting—and it can prevent a trader from coming up with new plans.
Failing to Log Trades
Both rookies and veterans alike may forget to keep a trading journal. While logging each trade may seem like menial work, the information can have future value. A consistent, concise record of mistakes, methodology and management can tell a trader what worked in the past.
Doing it Alone
Finally, while most new day traders have some knowledge or guidance, everyone will face questions and issues they couldn’t possibly anticipate. Use online forums or follow Rockwell Trading online for additional tips, tricks, and advice.