If you are a trader who is looking to making a fast buck in day trading, let us remind you that there is no shortcut to successful trading. You may earn the first few times but once you are trapped in cycle of losses, there will be no looking back. So, to start with, it is a wise idea to tread carefully and take calculated decisions while day trading. It might look simple but there are a few common mistakes that can take away everything from you. Learn about these mistakes, here.
Averaging down too often
It is not at all a good idea to average down in day trading sessions. Holding on to a losing position not only requires money but also a lot of time and energy. For every minute loss, the returns are way too large to recover the losses. Moreover, day trading is very sensitive to movements in the market. Holding on to a position for a long time only exposes you to risks that you might not be prepared to take. So, having a time frame that lets you exit the trade as quickly as possible, is what you should be looking at.
Trading right after an announcement
Trading is like gambling in a casino and there are a thousand ways in which you can lose your money if you are not too careful. A lot of day traders make the mistake of trading right after a piece of news hits the market. This could be catastrophic because you could be influenced by emotions and if you do not have a solid plan to back you up, you might end up losing money.
It never helps if you are rushing through the process of trading. When it comes to day trading, slow and steady wins the race. It is advisable that you wait till market conditions settle down and then start trading. You should have a stable direction of price in order to be able to trade efficiently.
The market can be totally illogical and you will have to accept it. On some days, the market might be a bed of roses to you and on the other days, it might make no sense to you. Expect the unexpected and have a trading plan ready to face all consequences.
Risking more than you can afford to
You should have an amount of money set aside that you can afford to lose because trading is unpredictable. Doing this will help you save your precious pennies when market conditions are not in your favour.