Day trading is an exhilarating and rapid approach to earning money in the stock market, however it can be perilous and demanding, particularly for beginners. Many novice traders often make mistakes that can cost them money and lead to frustration. Here, we at Leeloo Trading share our top five day trading beginner mistakes to avoid – hopefully helping you to get started out on the right foot!
Trader mistake #1: Not having a trading plan
What is a trading plan?
A trading plan is a set of guidelines that outlines your entry and exit strategies, risk management rules and trading goals.
One of the most significant mistakes new traders make is not having a trading plan – day trading without a plan is like driving without a map!
You may end up somewhere, but you're unsure where or how you got there.
Without a trading plan, traders may enter trades impulsively, based on emotions or rumors rather than sound analysis.
They may also hold onto losing trades for too long, hoping the market will turn in their favor, resulting in significant losses.
To avoid this mistake, day traders should create a trading plan before they start trading and stick to it.
Trader mistake #2: Overtrading
Another common mistake made by new traders is overtrading.
But what is overtrading?
Overtrading occurs when traders enter too many trades or trade too frequently.
Overtrading can lead to exhaustion, burnout and poor decision-making. It can also result in significant losses due to brokerage fees and commissions.
New traders may feel the urge to overtrade, especially when they experience initial success.
They may think that the more trades they make, the more money they can earn, however, overtrading can quickly wipe out gains and result in significant losses.
To avoid overtrading, traders should stick to their trading plan, including a set number of trades per day or week.
Traders should also focus on quality over quantity and only enter trades that meet their stringent criteria.
Check out our useful overview on day trading psychology for beginner traders!
Trader mistake #3: Not managing risk
Risk management is another critical aspect of day trading that new traders often overlook.
Day trading is inherently risky and traders must manage risk carefully to avoid significant losses.
How can I minimize my risk when day trading?
Traders should set stop-loss orders to limit their losses and exit trades when they reach their predetermined risk limit.
Here are 7 useful tips on how active traders can manage their risk when day trading.
You can also try these helpful strategies to avoid risk when day trading.
Not managing risk can result in significant losses, which can be difficult to recover – traders should never risk more than they can afford to lose and should keep their risk levels consistent across all trades.
Trader mistake #4: Failing to use technical analysis
What is technical analysis in day trading?
Technical analysis in day trading involves studying charts and using indicators to identify patterns and trends in the market. It can give traders valuable insights into the market and help them make informed trading decisions.
Technical analysis is a crucial tool for day traders, but many new traders fail to use it effectively.
New traders may ignore technical analysis, relying instead on rumors or tips from friends or family.
However, technical analysis is a more reliable and objective market analysis tool, and beginner day traders should take the time to learn about technical analysis, and use it to inform their trading decisions.
Here are the 4 fundamentals of technical analysis that every beginner day trader should know, plus the lowdown on the best technical analysis strategies for beginner day traders.
Trader mistake #5: Letting emotions cloud judgment
Finally, one of the new traders' most significant mistakes is letting their emotions cloud their judgment.
Day trading can be stressful and emotional, and new traders may find it challenging to control their emotions.
Fear, greed and hope can all influence trading decisions, and result in poor outcomes.
How can I control my emotions when day trading?
To avoid allowing emotions to take over when day trading, traders should remain calm and disciplined, sticking to their trading plan and risk management rules. They should also avoid trading based on emotions or rumors, and instead rely on objective analysis and data.
Check out Leeloo's stress management advice for day traders and some top tips from successful traders on how to stay healthy and happy every day.
Start your journey to day trading success with Leeloo Trading!
With our top-notch courses, experienced instructors and helpful support team, Leeloo Trading will help you become a profitable trader in no time.
Sign up today to get started and take your trading to the next level!
Leeloo™ is a trading app that allows you to try out investing in the stock market without risking your own money.
It lets you practice and hone your investing skills, so that when you do invest your own money, you will be better prepared and more confident in your decisions. Give our trading app a try today!
Get on day trading at Leeloo Trading! Leeloo™, through our proprietary software platform, provides individual traders an opportunity to test their skills in the market with simulated currency and the potential for contest payouts via periodic performance based contests, well known as Leeloo's Performance Based Trading and Contests™.
Leeloo™ is the leading education platform that champions retail traders.
We at Leeloo Trading apply decades of solid family values to working with traders of all levels, from all over the world.
Find out why you become part of the family with Leeloo Trading and join Leeloo Trading today to discover how our unique approach will help you get started in the market.