Mistakes by Day Traders: Intraday Traders buy/sell frequently compared to other investors. Main characteristics of Intraday trading are short holding periods and too frequent transactions. This sometimes results in mistakes and heavy losses. Many times a trader meets a disastrous loss in a single day.
This post details on the most common trading mistakes of intraday traders. A peek into these worst mistakes will help you avoid them.
Not Following Stop-Loss Orders-
Setting and following a stop-loss is very crucial for success in day trading. Stringent stop loss is to put a cap on the losses before they grow big. Losses below the security gap do not ruin the trader. One of the common mistakes is when any trader crosses a stop order after losing. This mistake generally happens in the anticipation of a reverse course.
Rush to Book Profits-
Many intraday traders make decisions in hurry. A lot of traders rush to book profits before they decide the target and stop loss. The sequence while trading should be first determining the target and stop loss. The trader should decide on buying or short selling after that. Even if it is causing quick exits, do not change the stop loss price.
Averaging in a Losing Position-
Averaging for long in a losing position is good for some seasoned traders. But it might prove dangerous for some. Especially in the case of volatile and highly risky securities. As history shows, the biggest mistakes by day traders have happened when a trader continues to be in the losing position. We advise exiting if the buy or sell is not in your favor. Keep on averaging when there is a gaining position.
Blindly Following Rumors-
Following the rumors spread by brokers and media is yet another worst mistake. Going by market trends is recommended but avoid the rumors. Do not follow intraday trading tips and rumors of media without your own analysis. Going by the advice of TV channels and newspapers without reading charts can bring wrong decisions.
Too Frequent Trading-
Most of the traders end up losing their hard earned money due to over trading. Any seasoned day trader will know that trading to frequently can be harmful to overall returns. Even if you are confident about the positive price trends, do not put all your funds to the trading.
Avoid Homework and Research-
Many traders jump into the buy or sell without any homework. Conducting proper research can save you from wrong trading. Especially when you are a novice, you do not have sufficient knowledge of understanding the trends. Hence, learning the trading patters is important. Getting information on the company and price movement is vital before trading.
Readers may also follow our golden rules for intraday trading.
By avoiding above common intraday trading mistakes, you can make a decent profit. Beginners in the day trading should be more cautious about making these mistakes. As an experienced trader, you can count on taking thoughtful risks. You need to have strong capability of bouncing back in the trading to bear the end-results of the mistakes.