4 Critical Mistakes that Day Traders Make

If you want to generate an income from day trading, you need to be careful.  Common mistakes can stop you in your tracks very quickly, while making the right decisions can allow you to relish the experience, and provide you with the type of money and lifestyle you’ve always wanted.

Mistake #1 – Not having a plan! If you do not have a plan when you first start out day trading, you will likely find out the hard way that failing to plan is really planning to fail!… And might end up being a very costly experience.  Simply saying I’ll just give it a go is not acceptable.  You need to know which way the trend is heading, what your entry point is, what your stop loss management will be, and when to take profits.  This will help you to work towards your ultimate goals, rather than simply drifting around the market hoping that you actually make some money.

Mistake #2 – Bad cash management.  If you do not know how to handle your money outside of any market, you will find that it is much harder to do so effectively within the market.  Take the high risks of the day trading segment and you have an explosive situation on your hands if you do not know what you are doing.  If you really want to turn profits, you need to take some classes, learn to manage money slowly and then start branching out into other areas.  Small amounts of time spent mastering the basic money concepts will be quite useful as you attempt to truly get a firm grasp of your finances and the stock market.

Mistake #3 – Borrowing to much.  Borrowing to trade is an extremely effective way to multiple your returns, but get it wrong, and you’ve compounded your losses and may even go backwards.  Making wise usage of credit can be a great idea; however, excessive use can be dangerous, as you will simply run your investments into the ground. Remember, just because a bank or lender will offer you a high loan to value for your investment, doesn’t mean you have to use the entire limit.

Mistake #4 – Not having patience.  This is a common problem, but easy to avoid.  If you do not have patience, this is the wrong game for you.   You simply cannot react to movements on the market without a high degree of patience.  Impatient people make rash decisions – very occasionally these decisions may pay off, but the majority will fail as a result.

The wrong mistake can quickly end your career as a day trader.  You must take the time and effort to prepare yourself. Avoid these 4 critical mistakes that day traders make is not always easy, as it can require a great amount of effort, but getting it right will be well worth the reward.  Using these mistakes as a guide will help you self-identify if you’ve fallen into one of these categories, so you can quickly and easily pick yourself up and get back on track towards your success.  Proper care taken in your chosen market market will provide great rewards, which you are going to appreciate for a very long time.