Day trading stocks, commodities or Forex can be profitable. And there are three big day trading mistakes to avoid along the way. First of all day trading is a business and not gambling. Second, there are rational limits to how much money you can make and when you can make it. And third details like setting your stop losses are the most important part of successful day trading. Here are more thoughts about the three big day trading mistakes to avoid.
Going to Work Every Day
Day trading is about making money. To make money in a business you need a plan. You need to stick to the plan and you need to continually modify the plan to fix problems and make your business more profitable. Despite the excitement that day trading can generate it is not a trip to the casino. So the first of our three big day trading mistakes to avoid is treating your business like sequential trips to the casino. Unlike the casino the stock market, Forex market and commodities market are not stacked against you. Learn the fundamentals that drive prices and learn to do technical analysis of stocks in order to successfully predict short term price movement. Do not stay in a trade when you do not understand what is going on. And, most importantly, go to work every day. Attend seminars about trading. Pay a coach for help if you need it. And keep track of profit and loss as it relates to the time you spend trading. After all the point is to make money than at your day job!
Realism versus Fantasy
There are times when it is possible to make an absolute killing in a single trade on a single day. But the second of three big day trading mistakes to avoid is to believe that a single big win in the market is what it is all about. A long time ago we wrote an article entitled Trading a Disaster about trading in regards to the BP oil spill. If you are at the trade station when this sort of news hits it might be possible to make a lot of money. But, you need to understand the range in which the stock in question usually trades and you need to know or find out in a hurry how badly such an event will hurt the stock. Chance events favor the well prepared in day trading as in all aspects of life. The vast majority of profits in day trading come from spotting and taking advantage of the continual stream of small to moderate inefficiencies in the market that occur every day. If you do that and your homework too you may, on occasion, be prepared for a huge trade when the opportunity arises.
Life and Day Trading Success Are in the Details
Successful day traders always set their trading stops. A smart trader will always let a winner run, continually resetting upper and lower sell orders. But, a smart trader has a set of rules for getting out of a trade. Obviously setting stops to close to the current price ensures that normal static of trading will take you out of the trade almost instantly. And setting the lower stop too far down may allow you to lose an unnecessary amount before exiting the trade. This is a skill set that develops with time and not learning it is the third of our three big day trading mistakes to avoid.
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