Many people shy away from day trading because they don’t think they are experienced enough or consider it too risky.
And while it certainly can be risky, it doesn’t have to be if you have the right system and guidance. I even know newbies who are excelling at it (more on that in a bit).
One of the biggest keys to being a successful day trader is avoiding a few of the common mistakes that cause many to stumble. Today, I’m going to review three of the biggest ones and tell you how to avoid them so you can start down this profitable path on the right foot.
Day Trading Mistake #1: Overtrading
There are a lot of people who wrongly equate day trading with making multiple trades every single day. That’s certainly one way to do it, but it’s typically not the best way.
These people might trade a bunch of different stocks, or perhaps they only trade one stock but they try to move in and out of it multiple times a day.
Trading multiple stocks can be problematic because the more stocks there are to focus on, the less familiar you are with the way any given stock moves.
My trading system revolves around trading a single security — SPY, the ETF that tracks the S&P 500 — every morning.
Well, for starters, I trade options, and SPY’s options are highly liquid. This allows me to move in and out of positions and reduces the chances of getting stuck in a trade if the market moves against me.
Second, trading the same security day in and day out gives me a huge edge. I am intimately familiar with SPY’s chart, key support and resistance levels and the technical patterns that work best for it.
Finally, SPY options have expiration dates on Mondays, Wednesdays and Fridays, and each day has dozens of strike prices to choose from. That’s a luxury most individual stocks don’t offer.
This gives me a chance to cherry-pick what I consider to be the best trade in the marketplace on a daily basis. I then send an alert to my members 30 minutes prior to the market open each day with that trade.
As I mentioned above, some traders attempt to move in and out of a stock multiple times a day. But not with my Trade Of The Day. The idea is to enter a simple “buy to open” order in the morning and then “sell to close” soon after for a profit.
I’ve written before about why mornings are the best time to trade. But, in short, the first hour of trading generally sees the largest moves in the shortest amount of time, which means it also offers the greatest profit opportunities for traders — especially options traders who can take advantage of the incredible leverage options provide.
Now, while I ideally like to enter trades within a few minutes of the market opening, I always preach patience. To be successful at day trading, you must respect the charts and wait for the appropriate pattern to trigger or you risk losses piling up.
This is why I typically issue a follow-up to my Trade Of The Day alert, letting traders know whether the pattern I was looking for formed and what my entry and profit targets are.
If you are going to wade into the day trading waters, I highly recommend you stick to a disciplined system that will help keep you from overtrading.
Day Trading Mistake #2: Getting Greedy
The next mistake I see inexperienced day traders (and experienced ones for that matter) making is getting greedy.
Many people hold on to positions too long only to see gains evaporate. And while a foregone profit is not a loss, it still stings. And if you’re not making profits, then you’re not a successful day trader!
When day trading, it is often best to aim for quick base hits rather than home runs. And the best way to do this is by using support and resistance levels to guide your entries and exits.
For instance, when a stock finds support at a certain level, that is a signal that there is demand for shares at that price point. So, support areas often make good entry points for call options.
Resistance areas, on the other hand, are price points where the stock has stalled and the bears have been able to push shares back down. That means these levels are often ideal spots to take profits.
Of course, if you are buying put options, this is reversed. Resistance areas are often good entry points and support levels are where you should look to take your profits off the table.
I always tell my Trade Of The Day members, “Your exits are your exits.” By this, I mean that each trader must decide for himself or herself how much risk they can tolerate and where they want to get out.
But I’d say that the majority of members have heeded my lesson and look to cash out with fast profits while the getting is good!
As you can see, members are racking up gains by following my Trade Of The Day strategy.
This brings me to the final mistake I see many traders making…
Day Trading Mistake #3: Going It Alone
If you have never traded options before (or have and have not been successful at it), I highly recommend that you don’t try going it alone.
There is no shame in turning to more experienced traders for help. I am eternally grateful to the mentors who help shaped my trading and contributed to my immense success.
I, in turn, have made it my mission to help coach other traders, and I love what I do.
I love helping people just like you make money, and I love helping other people make the kind of money trading that can truly make a difference in their lives. And that is true whether they are an experienced options trading machine or relatively new to the game.
If you’re considering day trading, I encourage you to start with my Trade Of The Day.
One simple trade… every day… that you can use to book fast profits. And if you act now, there’s still time to get in on today’s trade.