There are some major day trading mistakes that just about every new trader will make early on in their career. The ones who survive are those who can recognize these mistakes and take corrective action.
The first mistake many day traders make is to skip the planning phase of the day or a trade. Every day you sit down in front of your monitors you should have a general plan for the day. You should understand the major trends and support/resistance of the major indices, and the stocks you plan on trading. In addition to that, once you see your stock [...]
From the category archives:
Trading Psychology
If you’re short Amazon (AMZN), raise your hand and Tommy will come over and hit you on the head with a tack hammer.
There was no end to the stream of people getting killed trying to short this stock. I’ll admit, this was one of the stocks that I talked about day trading yesterday. I tried to short it Friday morning after earnings and a huge gap up, but I quickly turned it around for a 3 point gain. There was no way I was touching a short today.
There is NO reason to be short this stock right now. It is in uncharted territory [...]
Day Trading Mistakes Happen. Get Over Them and Move On
Have you ever seen the movie Groundhog Day? It stars Bill Murray as a disgruntled weatherman who’s pissed about his assignment to cover the events surrounding Groundhog Day in Punxsutawney. Due to a blizzard after the events he is forced to spend the night in this town that he loathes. He wakes up the next morning to find himself reliving Groundhog Day again. This happens repeatedly until he straightens his priorities and gets his co-star (Andie MacDowell) into bed.
Groundhog Day came in October for Me
Bill Murray spends the first few days [...]
What do you do once you’ve entered a trade? Do you already know where you’ll exit, be it a win or a loss, or do you just meander along until you feel like exiting? Or, even worse, do you sit there and agonize over every single move in your stock; exiting too early or too late and losing loads of money along the way?
Micromanaging Your Trades
You’re bleeding cash. You watch every twitch and wiggle of the price and each move causes you a little more anxiety. You rationalize exiting early or a little too late and each time you either [...]
The market doesn’t care if you’re a bear or a bull. It doesn’t care if you think it’s oversold or undervalued. It doesn’t care about your fundamental analysis or your charting skills. The market will do what the market will do, with or without you. You are not in control.
Accept It
One of the worst things you can do is a trader is to start to feel like you’ve lost control of the market. You should never feel that way because you never had control in the first place. You can have all the indicators in the world telling you to [...]
Contrary to popular belief, day trading is all about losing. Winning is great, but it’s how you deal with the losses that will define you as a trader. If you can learn from every trade, win or lose, I can almost guarantee you will succeed in your trading endevours.
Better Trades
The first thing you should focus on is making better trades. Hold the winners longer, and cut the losers quicker. This approach will ensure that you become profitable long before you get your win/loss ratio positive. Even with a low risk/reward ratio of 1/2, you can lose twice as many times [...]
Day trading requires patience. One of the only things better than really nailing a trade is the satisfying sound of the ball cracking into the back of the plexiglass of an indoor soccer goal. I am not a prolific goal scorer, but I recently scored a goal that was hailed as the “Goal of the Match” in a 5-1 win. What made this goal so perfect is the same thing that is often responsible for my best trades – patience. So picture this; the field is about the size of a hockey rink, complete with wooden sideboards. [...]
Yesterday, AIG was a day trader’s dream. It rocketed up 9 points, and gave multiple entry signals all the way up. And did I make any money on it? No. Not one cent. Why? One thought kept me out of this trade.
It Can’t Keep Going Up
You’re damned right it can. And I know this. I’ve seen this, while day trading, a thousand times. A stock just shoots up out of nowhere. You feel the slight hum of the masses as they start to talk so you decide to take a look at the chart. There it is. The stock is [...]
I have recently taken up poker at the insistence of my friends. My friends range in skill level from beginner to the guy who takes thousands of dollars from the old dogs at the local underground poker ring that may or may not exist depending on who’s asking. Like most traders, they are very generous with their knowledge and willing to teach newcomers. This is probably partially motivated by the fact that they can bleed me dry until I learn…
Anyway, though the learning process I’ve noticed that the poker player and the day trader share some very similar qualities and [...]
You can’t win if you’re just trying to break even.
When day trading, have you ever taken profits sooner than you should because it made up for your losses the previous day? Have you ever increased your position size or the amount of risk you take on “temporarily” just to get back to zero? Yeah? Me too.
What is Break Even Mentality?
Break Even mentality is that itch in the back of your brain that tells you “If you can just break even on this trade, then you’re back at zero. It’s a fresh start.” It could cause you to exit a trade [...]
