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.

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 Roger Federer learning to be the best in tennis, and Tiger Woods in the game of golf, you need to learn the winners game by actively trading, not on your own, but with your 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 big money losing, then learn to consistently and profitably win, big money winning - eventually, wealth building winning. Most traders learn to lose, then learn to lose masterfully - obviously, you want to learn to win and this can only be accomplished with outside professional help - a consultant / coach. Knowing when earnings dates are or product launches are really helps you access the risk of an investment. Trade otherwise, on your own, at your peril. One thing I learned years back the hard way, after squandering hundreds of thousands of dollars day trading stocks - the brain does not like ongoing losing. The brain will eventually quit - think depression. Serious here - if you keep on with your losing ways it won't be the money that will take you out; it will be your brain that takes you out.

Learning to day trade.

In day trading, at the end of the day, you are flat, you hold nothing post market (for sure,over night), period.

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.

•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 thinking about or are all ready in. Like all the ships at sea, all stocks tend to float, to whatever degree, on stock market index movements. The Seasonal Stock Market Cycle is that November and December normally rise when manufacturing, transportation, 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 rallies 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.

Understand the stock markets.

Your trading capital is not money that you need to pay bills, or money that you have committed to investments, like your home or retirement funds. Think of your trading capital as money dedicated to this endeavor of day trading, otherwise known as liquid funds (cash beyond all living needs) - and you know it's possible to lose it all. 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 $25K minimum is the minimum for margin trading. You will likely want to trade double this level to $50K, then $100K or better to have sufficient buying power for $100 to $500 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 $200K to $400K buying power).

Have adequate risk capital.

For on-line trading, you need a high-speed Internet connection to minimize latency. Nobody said becoming a day trader is 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 and you must have the best technical support - allowing you to perform competitively with any other traders in the world, including hedge funds, market makers, and the big money traders with very fancy software. 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 big money losers).

Purchase the right computer equipment and software and information service resources.

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, thousands a trade. Not only that, but they need to have financial plan set, with trading goals and limits.

Create a trading plan and stick to it.

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 appropriate while day trading stocks, OLD School. 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. This is what I want you to know above all else: the day trading game has changed, and continuously changes, so have we, and so can you - but only with a consultant / coach to get the NEW School game, the trade execution guidance, real time, and the support to bridge your poor performance gaps that must be bridged as rapidly as possible for long term success, wealth building success - or guess what? You will be forced to leave the game all-together - as a big money loser, a brain broken loser. Now you don't want that; we don't want that.

Now, another caveat, your trading game or system far outweighs any plan of action you come up with.

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 to is a just a waste of your time. Most, if not all is, interesting, nice for a hobby, but it's just noise when it comes to winning trades. 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. Arrogance and forecasting kills. Real time trading - now 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 you can get from endless sources.

Keep track of the market.

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. Same for any sport. Winning in this business of trading stocks is like winning in any other sport/business - you need to relate well. Relate with yourself, relate well with your coach, if you have a trading coach, and relating with what you see on your monitors, peacefully and powerfully - with 80% of what I call the noise designed out or missing. To relate well, you want to be calm and energized. Same for day trading. To win, to perform at you optimal level of competence is eventually going to be all about trading on instinct - not much time for emotions, not much time, frankly, for all the thinking you've become accustomed to that drains both your energy and your mood of calm. What makes day trading so unique and exciting is that you trade the action, in the now. 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 effectively, profitably - to win, over and over, and over again.

Manage your Mood, before your Money.

Go back and read them for insights and share the important aspects with your coach. 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 data is very useful for your learning, but not so much while trading, as you know, as that reading can be distracting in the present moment of trading. While trading - observing a valid setup, confirming what you need to be present as conditions or rules before you enter a trade, managing the trade for the best winning results or the smallest losing outcome - you rely on your confidence, your level of competence, and whatever performance excellence you may have accumulated with your coach - without thinking much, without your logs, without the news and all the other noise - you just trade, zen-like.

Keep detailed records - a trading log with self assessments of your trading performance.

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, big money losing trades.

Save your profits.

Do not let a loser run in hopes of it rising again, unless there is sound evidence right before your eyes that it will. When you sense your trade is not working or no longer working simply get out with a small loss, break even, or a nice fat win.

Cut your losses.

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