investing

Easy part of day trading: Making mistakes

6. Refusing to cut losses

It's human nature to hope that a losing stock turns around. But if you're a day trader, refusing to cut losses can damage your account. "Instead of hoping for a stock to go back up, take that money and transfer it into a stock that is really going up," says day trader John Kurisko, host of Day Trading Radio. When a stock is headed south, be disciplined enough to prevent a small loss from turning into a much bigger one.

7. Trading too early or too late in the day

The first and last 15 to 20 minutes of the trading day are usually chaotic, as market orders are filled from anxious investors rushing to make moves near the opening or closing bell. You also are competing with institutional and high-frequency traders. "The first and last 15 minutes are too volatile for new traders," Kurisko says. "It's like the Wild West, and sometimes there is no rhyme or reason to it. Also, the indicators don't have enough data, so they get choppy."

8. Letting your emotions rule

What does it take to become a better trader? Discipline. "You need to develop a set of strict rules that takes the emotion out of a trade," Kurisko says. "Most day traders use technical analysis."

For example, Kurisko uses stochastics, an indicator used by many traders to determine if a stock is overbought or oversold. If the stock is oversold, then he starts to buy. "You must listen to the charts, not the news," he adds.

9. Having unrealistic expectations

Some rookie day traders keep looking for something magical that will bring them easy profits. A few have already calculated how much money they plan to make in the market. Unfortunately, the market has other ideas. "Don't seek a silver bullet," Wagner says, "because there isn't one. Some people will jump around looking for different instruments and strategies without taking an honest assessment of themselves. There is no easy way to play the market." He says traders need a strategy, rules and discipline to become profitable.

10. Going into day trading uneducated

Uninformed day traders think that anyone can make money day trading. But to be successful at it, you'll need training. "If you were laying on the operating table, waiting for your surgeon to take out your appendix, you wouldn't want that surgeon to walk in reading a pamphlet, 'How to Remove an Appendix in 10 Easy Lessons,'" Turner says. She says to be a consistently winning trader, you should start with paper trades, and then study hard so you understand how the market works. "Learning to day trade successfully can take as long as going through college and obtaining a degree," she says.

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