How to Avoid Day Trading Mistakes

Day trading for beginners is like lion taming, except more expensive. It's a risky and challenging pursuit: buying stocks and selling them again in the same day, making money off tiny fluctuations in the price of a stock over only a 12 hour period. For many years, the tools of day trading were not available to the average investor — real time stock results, analysis tools and access to instant trades (without the help of a broker). Today, with high-speed connections, anybody can try to day trade. For those of stout heart, here are some common pitfalls to avoid.

Steps

1. Learning to day trade. The first step for any day trading beginner is to learn the game with a qualified, actively trading consultant - coach. Learning the game of day trading stock with a coach, like Federer learning to be the best in tennis and Woods in the game of golf, you need to learn the winners game with your own actively trading, stock day trading coach. Success is all about trading a winner's trading game, with your world-class trading coach. The point: to put an end to losing, then learn to consistently and profitably win. Most traders learn to lose - you want to learn to win and this can only be accomplished with outside professional help. Trade otherwise, trade on your own, at your peril.
   
2. You need to realize that day trading is not about holding a stock or any other financial instrument for more than a few minutes, and certainly not beyond market close. In day trading, at the end of the day, you are flat, you hold nothing post market (over night), period.
   
3. Understand the stock markets. Those who do not understand day trading will also not understand how to use the stock indexes to measure the overall performance of the markets that can and frequently do affect the price of the trades you are in. Like all the ships at sea, all stock float to a degree on stock market index movements.
   
   • The Seasonal Stock Market Cycle is that November and December normally rise when manufacturing, trasportation, hiring and utilities all pickup for the Christmas season. Mid January through Mid March the Market pulls back when manufacturing slows down after Christmas sales. Mid March through end of April the Market picks up. May might be a bad month but June and July normally do well when the market rallys when Dividends are paid out in July. August, September and October the market normally falls a little as the first half of the year sales (no christmas sales) news is all digested. If the Economy is contracting down, the bad months could be really bad and if the Economy is expanding, the up months could be really good. November is typically the strongest month and the November/December pair are typically the best 2 months.
     
4. Have adequate risk capital. Working capital is not money that you need to pay bills, or money that you have committed to another investment, like your home or retirement funds. It is money solely dedicated to this endeavor of day trading, otherwise known as liquid funds (cash beyond all living needs). Because Day Trades usually occur in a Margin Account, Broker/Dealers registered with NASD/NYSE require that day traders keep $25,000 in equity in the account on any day that day trading occurs.The $25,000 minimum is the minimum for margin trading. You will likely want to trade double this level to have sufficient buying power for $100 to $200 price range stocks. So if you are comfortable trading 1,000 shares at a time, for example, you can trade one and possible 2 stocks (as the "4 times" rule gives you $200,000 buying power).
   
5. Purchase the right computer equipment and software and information service resources. For on-line trading, you need a high-speed Internet connection. Becoming a day trader is not cheap. In addition to reliable and possibly even redundant high-speed connections, you will require specialized software and a variety of different analysis tools, not to mention your real-time research tools (including daily real time access to stock quotes and ticker feeds). Be prepared to spend a significant amount of money (in addition to your trading capital) before you place your first trade.The key here is to get some expertise as to what you need and configure for optimal efficiency and "latency" - which is a tech word for how long it takes your system to get info from the source (the markets). Your trading coach will guide you here. You want to have the best computer and monitors you can buy, not off the shelf stuff designed to do non trading tasks (video, games, software or Website design). Your computer must be highly reliable allowing you to perform competitively with any other traders in the world, including the billionaire hedge funds. Don't wing it on your own. Get an expert to help you out. Working with a trading coach, you can eliminate the noise (that causes most traders to quickly become losers).
   
6. Create a trading plan and stick to it. Successful traders have a plan. Highly profitable winners have a plan developed with their own trading coach. Without a coach and a plan, both new and seasoned traders can easily lose thousands a day. Not only that, but they need to have financial plan set, with trading goals and limits.
   
7. Now, one caveat, your trading game or system far outweighs any plan of action you come up with. You want to beat Federer in a world-class match of tennis, don't show up with golf clubs with a great plan to take him out. So, for day trading "it's the game, stupid" that matters most to become a consistent winner. Strategies, plans, tactics, and so on are perfectly appropriate in the business world and for traders to contemplate when the markets are closed - but not so much while trading so much. The stock trading game, unlike any other game on the planet, requires a unique set of qualities for the trader and rules to apply to become a winner in the day trading game. Applying traditional business practices and rules to the art of day trading stock will quickly get you killed - both personally and professionally.
   
8. Keep track of the market. If you want to be successful at day trading, you need to keep an eye on the markets. Another observation about all this pre and post-market research that traders have become addicted in doing. Most if not all is just noise. You would be well advised to be in the present moment trading, not ignoring your past lessons, not letting go the urge to forecast tomorrow's likely moves, but to be in the flow of current price action - markets and stocks. That's where the winners and the winnings are to be found; but you must free yourself of the noise, including rumors and most of the so-called important news our there.
   
9. Manage your Mood, before your Money. If you are ill, cranky, depressed, or sad, those are days when you may want to take a break from trading. Otherwise, you could make costly mistakes. You must learn to manage these limiting/distracting moods before you manage your trades/money. Furthermore, trading while you are stressed out is stupid. Winning in this business of trading stocks is like winning in any other business - you need to relate well. Relate with yourself, with your coach, if you have a trading coach, and relating with what you see on your monitors, peacefully and powerfully. To relate well, you want to be calm. Same for day trading. To win, to perform at you highest level of competence is all about instinct - not much time for emotions, not much time, frankly for a lot of thinking. What makes day trading so unique and exciting is that you trade the action. Like tennis, like racing a car at Indy, or any CEO in business - you gain the competence to consistently win with your coach, to have the intuitive ability to act on instinct - to win, over and over, and over again.
   
10. Keep detailed records. As in any business, keeping detailed records of all your transactions is vital for many reasons including profit and loss analysis, taxes and much more. Performance date is very useful in learning, not so much while trading, as you know. While trading - observing a valid setup, confirming what you need to enter a trade, managing the trade for the best win or the smallest loss - you rely on your confidence, your level of competence, and whatever performance excellence you may have - without thinking much, without your logs, without the news and all the other noise - you just trade, zen-like.
    
11. Save your profits. Whenever possible, leave your profits in your account and do not spend them. Run your day trading like a business. Do not reinvest all your profit back into dangerous trades.
    
12. Cut your losses. Do not let a loser run in hopes of it rising again, unless there is sound evidence it will.
    

Tips

• Day trading is not for amateurs that is, unless you have qualified support - a consultant, coach, mentor.
  
• For those of you looking to regain confidence, competence, learn these critical day trading skills, many companies that offer various trading services. They offer training and education in the field in the form of books, seminars, CDs, and so forth. You may also consider reading an endless variety of books on this topic of trading stocks.
  
• To really learn to day trade stock at a winner's level, which very few achieve by the way, you need, in our view, one-on-one consulting (get on a winning track), coaching (gain confidence, competence, and trading results otherwise known as profits), and mentoring (guidance, support, and straight talk about your achieving your day trading dreams).
  
• It won't come cheap but it's a lot cheaper than the money you can burn through losing, trading on your own.
  
• November is usually the strongest month of the year when Utilities, Manufacturing, Transportation, Materials and Hiring all increase in preparation for Holiday sales.
  

Warnings

• Day trading is the most risky and volatile investment and day trading strategy.
  
• Due to short time lines that prevent any company research or other traditional stock analysis tools, day trading is often regarded more like gambling than a business.
  
• According to some professional money managers, well over 95% of day traders lose money.
  
• Do not averge when you are in loss: that is the biggest fault in trading. This is because a stock that is trending down might trend down to zero and go banktupt.
  
• Watch out for August, September and October a period when stocks normally (2/3rds of the time) fall when first and second quarter earnings are anounced because these quarters have low retail sales and the market can fall.
  
• Watch out for January and February, a period when the market usually falls (2/3rds of the time) when manufacturing slows down after the holidays.
  

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