No matter what business you’re in, you will always make mistakes. In fact, making mistakes is usually a good thing, as it’s how you learn so that your business can move forward. However, if you are currently experiencing day trading failure and you don’t know why, then there is a good chance that you are making the same mistakes over and over again.
Sometimes, it can be hard to spot these mistakes yourself, especially when you get emotionally involved in your trades, which is why an extra pair of eyes from somebody who is outside of your day trading business can be beneficial to identify the mistakes you are making.
One way to do this is to find a mentor. Getting a day trading mentor is not actually that hard, as there are many experienced traders who are more than happy to lend their expert knowledge and advice to your business.
Below are some of the most common day trading mistakes that keep people in a vicious cycle of failure:
Not being serious enough
One way to ensure day trading failure is to not treat your business seriously enough. In other words, if you want to make large profits then you should stop treating trading like it’s a hobby.
Many people make this mistake, mainly because day trading is something that is done from home, and therefore it’s all to easy to slip into bad habits and become too lazy.
In order to rectify this situation, you need to set aside a certain amount of hours every day to work on your day trading business, and then stick to this schedule religiously. It might be tempting to just want to lie in bed for half the day or go play a round of golf, but if you do this type of thing too often then it will end up hurting your business.
Also, it is a good idea to set out a day trading plan, which clearly defines your long term and short term goals, and has targets for each day, week and month. Once you do this it’s easy to see if you are on track and constantly moving the business forward.
Being too reactive
Another big day trading mistake is the tendency to move into reactive mode far too often. As any elite day trader will tell you, success in this game comes from being in control at all times. What this means is that you should have a day trading plan and a strategy, and then everything you do should be in relation to those two things.
If you find yourself constantly going away from what you’re supposed to be doing, whether it’s reacting to news stories or trying to find “hot tips,” then you are going into reactive mode where outside influences are constantly controlling what you do.
Instead, make sure that you have a daily to do list, with tasks that are all related to your current day trading strategy. This ensures that you stay firmly on course towards your goals, and don’t get sidetracked by shiny objects.
Being over confiden
One of the main reasons why people experience day trading failure, is because they become too confident in their trading plan, and their own abilities.
Sure, it’s a good thing to have confidence in yourself, and to believe that you have the knowledge and skills necessary to reach your goals, but problems start to arise when that confidence starts to get out of control.
If you currently feel like you can do no wrong and that everything you touch will turn to gold, then you are probably approaching day trading with too much confidence, and it will almost certainly end up being your downfall.
Over confidence leads to bad decisions, mainly due to the fact that the person starts entering trades without weighing up all of the facts first.
In order to be a successful day trader who profits consistently, it’s important to get a complete overview of any trade you are about to enter, and to seriously consider what might happen if things go wrong.
Not having enough capital
Many traders make the big mistake of not having enough capital in their day trading account balance. Worse yet, they then start to trade with a high percentage of the capital on a single trade, which means they are always in a position where they can’t afford to lose.
Unfortunately, this way of trading never works because eventually they do lose, and it’s often crippling.
Ideally, you never want to risk more than a few percentage points of your entire balance on any one trade. This gives you a large margin for error and means that you can afford to have a few bad trades in a row.
As a day trading mentor would tell you, this game is all about the long term strategy, and you need to have the account balance to reflect that. It can take a while for your strategy to gain momentum, and in the meantime you will need the funds to cover any losses.
Lastly, if you are currently experiencing day trading failure, then there is a good chance that you are just not being honest enough with yourself.
You need to honest about every single area of your business: Is my strategy working the way it should be? Am I doing all that I can? What can I learn from my mistakes? Am I putting enough hours into studying the markets and tweaking my day trading plan?
Once you start to become completely honest with yourself, then you are finally in a position to take full responsibility for the state of your business and for any day trading mistakes you have made. Many traders like to blame outside influences for their shortcomings, but ultimately the buck has to stop with you. If you are the captain of the ship, then you are the only person with the power to steer your ship out of rough waters.