Whether you day trade forex, stocks, commodities or futures indexes, I see these top 5 mistakes being made over and over again. (Keep in mind I’ve been trading since 1990 and coached over 14,000 traders since 2003.)
Day Trading Mistake #1 - Watching too many markets. Even if you have 20 trading monitors, trying to watch too many markets can cause a lot of problems including…
Too many choices which leads to confusion on the best market to trade and this ultimately leads to indecision and no action taken. Ultimately the logic of assuming that watching more markets to have more opportunities ends of producing the exact opposite effect.
Day Trading Mistake #2 - Having too many open positions at one time. If your day trading then your playing a very fast game that can provide costly and painful mistakes if you let your guard down for even one second. For this reason, trying to trade more than 2 different markets at the same time can cause you to lose focus causing unnecessary errors.
Think of it like juggling… One to two balls is no problem, but once you try keeping three balls in the air it becomes a lot harder to keep up. The same goes for trading, so don’t make the mistake of thinking trading more markets at one time will lead to more profits. Just like I mention in mistake #1, the logic is flawed.
Day Trading Mistake #3 - Not putting protective stops in. I know you’ve heard this 100 times but it is amazing how many traders say… “Well if I put a stop in then the floor traders and brokers will just run my stops so… I’ll not put a stop in and just keep an eye on things.”
Well you know what they say about best intentions… Anyway, what often happens is that the trader is so focused on their analysis being right that when the market starts doing the opposite they get a deer in the headlights reaction and become frozen and unable to make a decision or take action. In the end they keep saying, I’ll wait just a bit more, bait more and meanwhile what should have been a 10 pip risk trade has now grown to 20.
Day Trading Mistake #4 - Not letting profits run. This is another Trading 101 rule but… It’s amazing how many traders even after years in the markets bail out of a trade when their up just 5 to 10 pips, but at the same time lose 10 to 20 pips on other trades. The bottom-line is that risk reward model is going to bleed your trading account dry. There are plenty of strategies to help you milk maximum profits from your trade and I’l cover that in another post.
Day Trading Mistake #5 - Waiting for too much confirmation. No where is market timing more crucial than in day trading. There’s a fine balance between being aggressive and getting in too early and being super conservative waiting for too much confirmation. Now, if you lean to the aggressive side and jump the gun, you may find that your catching a falling knife and have the market go against you real fast. And on the other side, some traders wait for 10 indicators to line up and even when everything looks good they keep saying, “I’ll wait just one more bar to see what happens just to be sure.” Well they keep doing this over and over as they don’t trust their system or even themselves. When they finally get the courage to jump in, guess what happens?
Minutes later the market comes crashing against them. This leads to total confusion as the conservative trader made sure all their ducks were in a row. Well the reality is that at that exact moment the professional traders are already exiting their positions as they’ve made their money. The bottom-line is the minute you have an initial signal don’t wait for any additional confirmation because…
I can guarantee that 80% of the time it will cost you dearly. and ironically being overly cautious. is actually more risky!!!
This by all means isn’t the only mistakes that traders make but it is certainly more of the common ones. If the only change you make is to avoid these mistakes, then you should see a big improvement in your account balance.