What Mistakes should i Avoid During Day Trading
What Mistakes should i Avoid During Day Trading Mistakes to Avoid with Day Trading
Everyone wants to achieve financial freedom. But no one said the journey to financial freedom would be easy. So here you are, trying to learn day trading—the most difficult and rewarding form of trading out there. Is it possible?
Yes, it is possible. But it is also a very challenging task. The market is volatile and there are a lot of risks involved in trading stocks or shares. You can lose your money if something goes wrong with your trading account. The good news is that I have compiled a list of day trading mistakes that you should avoid! Ready? Let’s jump in!
Not Having a Trading Plan
Day trading is all about minimizing risk while maximizing profit potential. The best way to do that? By sticking to your plan and executing it as planned. Day trading is tough because it requires you to be constantly monitoring your positions, making adjustments on the fly, and putting a lot of faith in your instincts.
It’s also tough because it doesn’t always work out—and when it doesn’t work out, traders need a way back on track quickly! So what are the mistakes that you can avoid? Mistake number one is not having a trading plan. Many beginners jump in with a lot of FOMO, not knowing why they are buying a stock in the first place.
They don’t know why the stock was running, nor their risk reward and exit plan. This is also known as chasing and will easily lead the trader to buying the VERY TOP. Having a proper plan helps you reduce your risk while increasing your chances of winning big.
A trading plan will help you in knowing how much money you need to keep on your trading account so that you don’t lose all your money in a single trade.
A trading plan is also essential for helping you understand how to manage your emotions while trading which is quite important because emotion plays a very big role when it comes to trading stocks.
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Not Paper Trading
This will lead you to mistake number two: Not Paper Trading If you’re new to day trading, you might be wondering if the process of paper trading is necessary. Paper trading, according to Investopedia, is a simulated trade that allows an investor to practice buying and selling without risking real money.
It’s a way to practice your broker interface, how each stock reacts, and practice your technical analysis on LIVE charts. Paper trading will allow you to gain market screen time and prepare your mind emotionally for the ups and downs of stock trading.
Indeed, paper trading is a great way to get your feet wet in the world of stock trading, without taking on the risk of losing your money. To be honest, paper trading is not for everyone, but if you’re interested in learning about how stocks really work and if you want to learn how to trade using real money, then paper trading might be for you.
Paper trading gives beginners a chance to practice their technical analysis and learn how each stock reacts to various market conditions. It can also help them develop confidence in their abilities as traders by providing them with helpful feedback from real world situations.
Paper trading is not risk-free and can be an extremely effective way of practicing with real money while learning what it takes to succeed as a trader by doing so.
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We’re now on mistake number three: Over Trading, which leads to Revenge Trading. Instead of trading according to their plans and the chart in front of them, many traders are trading their PnL, which means profit and loss.
This will lead to over trading, then emotional trading, and finally revenge trading. I have friends who have blown up their trading accounts this way before due to emotional trading. If you want to avoid this whole process, there are a few things you can do: First is to always keep your trades small.
If you’re always taking lots of trades, you won’t be able to focus on one or two trades at a time and will end up being too emotionally involved with each trade. Second is don’t trade based on your emotions alone – make sure that the reason you’re taking a trade is because there’s a good reason for it based on your analysis of the market.
Lastly, make sure that when entering a trade it’s not just because you want revenge; take some time to think about what caused the situation in which it happened so that when it happens again in the future because we all have bad days, you’ll know what happened previously and can avoid making those same mistakes again!
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The fourth mistake is Scaling up share size too quickly. When we start making a lot of money, it can be tempting to scale up our share size too quickly. But when you do that, you increase the stress and emotions that come with it.
The best way to avoid this is by taking your time. When you first start making $100 a day, it’s exciting—you feel like you’re on top of the world. But as you get more experienced and make more money, you’ll learn that scaling up x10 means escalating the emotions as well.
Psychologically, most of us aren’t ready for a 10 X multiple on our stress. So take your time when sizing and scaling up your investments.
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Following Chat Rooms
The last day trading mistakes that you should avoid is following chat room alerts! You want to become a profitable day trader? Stop following others. This is perhaps the DEADLIEST trading mistake I see beginners do.
Many of these trading chat rooms pump the stock up and dump the shares on unsuspecting beginner traders. If you want to make money in the stock market, you need to be ready to take responsibility for your own actions and learn from them.
If you’re not, then you’re just going to end up making more mistakes and losing more money than you will ever gain from following someone else’s advice. I know, I know. You’ve been trading for a while and you’re tired of losing money.
You feel like you can’t do it anymore. But here’s the thing: just because you’ve realized that you are doing all these mistakes, doesn’t mean that day trading is not for you. We all made mistakes and remember that it’s part of the learning process.
If you can take a moment to reflect on what went wrong, then think about how to fix it so that it doesn’t happen again and then keep going on your journey.
The key is to not get discouraged by losing money because in my experience, the more times you start over and learn from your mistakes, the more successful you become at making money trading stocks! Because, the reality is, mistakes are a part of life, and definitely a part of being a successful investor.
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