Who doesn’t want to make a big profit? Intraday trading can make you rich very quickly. But in the same way, if you make mistakes in intraday trading then you have to suffer heavy losses as well. A number of times intraday traders make such blunders that leads them to substantial losses in a single trade which can impact a lot on account capital.
In this article we are going to share five mistakes that beginner intraday traders normally make. Let’s look into these mistakes so that you can avoid them while doing intraday trading.
Number 5. Rushing to Book Profits
Many traders make quick and bad decisions when they see their position making a small
profit. Most of the traders are in a hurry to get the profit of whatever is available on the table rather deciding logically about the profit target and stop loss and work accordingly.
You should always decide your stop loss first before risking your money on a trade. All
trades are not the same. Many traders make mistake of holding their losing trades for
a long time and rushing to book profit on a good trade, because they are worried that
the trade might go in a loss. Before entering a trade, you should always keep the profit
target and stop loss in mind. Trading is probability game. Not all trade will be a winner. Stop loss will save you from losing on a bad trade. But rushing to book a small profit will result in a loss in the long run. Teach yourself to exit trade at the profit target. The trade will hit your profit targets if you stay patient.
Number 4. Averaging in a Losing Position
For some experienced traders, averaging a losing position is fine. For some however, especially in intraday, it could prove risky. To average down the position is basically an investing strategy who invest for the longer term of time. When an investor sees a price of a stock further fell down, he takes extra number of that stock so that his average cost become low with that of the cost on which he purchased the original shares. History shows, when a trader is holding a losing position, the greatest errors have taken place. Only Start to average when there’s a benefit. Otherwise, you are just adding more money on an already lost battle.
Number 3, Blindly Following Rumors
Another major mistake is to pursue the rumors spread by traders and the newspapers. Market trends are recommended, but rumors should be avoided. Without your own research, do not pursue intraday trading recommendations and media speculation. If you trade on the basis of news you heard on different TV channels or read on newspaper will ultimately prove to be wrong. Because such financial news is being installed to make up the minds of the retail traders to get them buy or sell as the large financial institutions want. If you are a beginner, you should stay away from the sub reddit known as the Wall Street Bets. This sub reddit is fun to be a part of. But don’t blindly follow advice told on here, or anywhere else on the internet.
Number 2. Trading Too Frequently
Most of the intraday trader lose their money because they trade too frequent than required. They wanted to make quick money within a short amount of time that leads them to trade too often. Every day trader should realize that over trading will impair good returns. You don’t have to take trade every single day to make a good living. Not all days are same. Market won’t make big price moves everyday. For an intraday trader to make money, good price movement is necessary. This is not possible every single day. You have to understand that not trading is also making money, because You just saved money that you would have lost in a bad market. Even so, do not place all your assets in investing, even if you are sure about optimistic price trends.
Number 1, Avoiding proper research and Homework
Most of the beginner traders make their decision of buying and selling the stocks without doing proper research on the company and without looking at technical charts and price movements. Proper evaluation of the trading decision and making buying and selling decision based on logics and research can stop you from making the stupid mistakes. You don’t have enough knowledge of patterns, particularly if you’re a beginner. Therefore, it is important to learn trading patterns. It is important before trading to get information about the company and the price movements. If you find a trading strategy that claims to work 70 percent of time, don’t just blindly risk your money on it. Learn to back test. Test it least 100 times on old market data, before risking money in live market. Understand the strategy’s real win rate. Win rate can vary from person to person. Even if the strategy works in the back test, don’t risk a lot of money on it at first. Start slow and slowly increase the amount as you get more confident with that strategy.
You will make a decent profit by preventing these intraday errors. Beginners should be careful to avoid these errors during day trading. You should rely on taking calculated chances as a seasoned investor. You must be able to rebound in the trade in order to endure the end results of your mistakes.