Day trading is a full time job for many people around the world, yet many people also frequently try and fail. It is estimated that between 75-80% of all day traders fail in their goals to generate capital with the strategy. What makes the difference between a successful day trader and a failed attempt?

There are 3 primary mistakes that are made when day trading, including:

1. Using emotions to trade securities

One of the golden rules of investing is not to trade using emotions. It is very common for inexperienced investors to buy securities, wait for them to start to decline and then they sell. This is the exact opposite of the overall goal of buying low and selling high. One of the best strategies to use when day trading is to pre-select criteria to use when you are making investment selections. When a security falls outside of these parameters, it is time to sell.

2. Lack of Research

Similar in principal to trading with emotion, trading without proper research can be detrimental to a portfolio’s performance. Day trading is a full time job and needs the same attention to detail that would be required in a traditional job setting. The best day traders use standards and procedures when they are making investment selections.

3. Risking Too Much Capital

The novelty of day trading appeals to a number of investors and potential investors, often causing them to invest money that is not truly discretionary. When a day trader is using money that is necessary for daily living, they are putting their financial life at risk. Day trading just like any other investing should be done with capital that is intended for long term strategies and not for immediate cash flow needs.

Day trading can be a lucrative business and strategy, but these 3 mistakes should be avoided and careful planning should be used when implementing this investment strategy.

Ray

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