I lost a lot of money making these day trading mistakes

I lost a lot of money making these day trading mistakes

The opinions expressed by Entrepreneur authors are their very own.

Most professions look intimidating to say the least to outsiders. Everyone knows that a profession in medicine and law involves many years of training and skilled practice. If you are interested in sports, you simply need to observe a track competition or a hockey match to come back to the conclusion that even to play professionally, serious training and skills are needed, not to say winning.

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Then comes day trading. Anyone 18 years of age or older can open a U.S. account of at least $25,000 or $500 abroad and be a self-employed person. day trader. But that actually doesn’t suggest they shall be profitable.

No one requires you to read books and study the basics. There are no final exams, internships or certification boards that may finally let you “practice” this career.

That’s only half the excellent news: People work like dogs in a B-school and then spend one other decade working like dogs on Wall Street before they’ll develop into fund managers. In a good 12 months, they’ll give themselves high fives if they generate a 10% return in six months.

With day trading, getting a stock return of 100%, 200%, or even 600% is unlikely, but it is possible. In one day.

Mistake #1: Trading without knowledge and discipline

This crazy contrast between no barriers to entry and the potential for stunning returns is irresistible to recent traders every day. They may even experience newbie happiness like I did. But the reality is this: if you wish to be a successful day trader in the future, you should first acknowledge that the majority recent traders will lose money and end their “career” as a roadkill. Then you have to confess that to avoid this fate, you have to do things in a different way than most individuals.

First of all – although no one demands it – you would like self-discipline to learn the principles of effective day trading. Here is an example. When recent investors buy a stock and the price falls, they lack the discipline to limit their losses. Instead, they often buy more, rationalizing that they are being smart by dollar-cost averaging. Plus, if the price has been high recently, it is going to surely rebound.

Unfortunately, many stocks never returned to the highs that made them social media darlings. We have a name for individuals who buy high, perhaps buy more when it goes down, and now have their money tied up in stocks that are not going anywhere: they are “purse holders” because they only hold the purse with a loss to indicate for it.

Second, you would like the self-discipline to persist with the principles you have learned. If you managed to survive that episode where you ended up with a bag holder in stock, now it’s essential resist the temptation to do it again. When your plan is not working and the company’s stock is heading south, you have to sell based on the parameters you established before executing the trade. It doesn’t matter what emotions are screaming at you to do it.

Mistake #2: Taking the path of least resistance without a strategy

There is no shortage of “experts” in financial channels. They are extremely self-confident, and yet they need to be right, otherwise why do they put on their very own show 12 months after 12 months?

It is a mistake to get day trading stock recommendations from such people. Most of them are not day traders who must close their positions at the end of each day. Even if they were day traders, this is still a mistake. Here’s why. People recurrently ask me, “Ross, I’m quick with a keyboard. Why can’t I just track what you buy, when you buy, and when you sell?” This is called “mirror trading” and it doesn’t work. Not only do the markets move too fast for you to get in and out exactly when I do, but my risk tolerance won’t be the same as yours.

Strategy is not the same as hot tip; is a set of parameters that guide you. This includes things like the type of stock you are watching and the conditions you are looking for. For example, some parameters might include a focus on $1-$10 stocks, a profit-to-loss ratio of 2:1 or higher, and a breaking news catalyst. The method to build a solid foundation of knowledge and experience is to adopt a strategy and then learn it so thoroughly that it becomes second nature, like riding a bike.

Mistake #3: Looking for the Holy Grail

In a way, this is the opposite of the lack of strategy error above. This condition has too many strategies. This is the shiny object syndrome that happens when investors suffer major losses – but not career-ending ones.

I cannot inform you the number of traders I’ve seen taking this route. As soon as they abandon losing stocks, they abandon the strategy and look for something else. They will move from small-cap stocks to large-cap stocks, then futures, then cryptocurrencies, and back to large-cap stocks. They are continually looking for some “perfect” combination of technical indicators that may work 100% of the time.

Believe me, I have searched extensively for the perfect set of gauges and I am convinced they do not exist. I also consider that I don’t need to search out the perfect technique to do well in day trading – I just need a good plan and excellent discipline.

Work in your day trading career. Basic knowledge of day trading is not difficult to amass. It’s really hard to treat it like a career. This means being willing to practice, continually learn and improve your skills, while remaining patient. The Japanese have a great saying: “Fall seven times, get up eight.” This is solid advice for any day trader.

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