5 Most Common Ways Day Traders Lose Money Consistently

Day trading comes with its ups and downs, but the most critical skill a trader can learn is to stick a strategy you’ve developed. Hindsight can make it seem as though we could have earned more gains or taken fewer losses, but not sticking to an approach is the primary reason why day traders tend to lose money consistently. Here are five bad habits you need to break to get into the world of day trading.

Not Prepared for the Day’s Trading

Day trading involves more than just staring at charts all day hoping they move in your favored direction. Understanding the impact of economic data and the schedule of company quarterly earnings reports will help you make better plays on the market. Remove any distractions you may have in your trading area, as every second counts for traders. Set up a routine that you establish to go through your news sources to help you pick the stocks you plan to focus on for the day. Never sit down at your computer with intentions to trade without reading the news or understanding your market first. This preparation is the first step newbies make, but day trading veterans can get caught up in their hubris and make this critical error, too.

Never Trade When You’re Sick or Lacking Focus

Sticking to a day trading strategy is hard enough when you’re in peak condition, you don’t need to complicate that by trying to make money when you’re not at your full potential. It can be tempting to use a sick day as an opportunity to earn a little extra money on the market, but you are more prone to making mistakes when you are sick or under stress. Don’t divide your attention between caring for yourself and your problems or day trading. You need to put your full focus toward your strategy to help you make solid moves, so do yourself a favor and avoid playing the market when you’re not 100% yourself.

Getting Caught Up in the Past

While the main theme of this article is picking your day trading strategy and sticking to it, you shouldn’t be afraid of adjusting this strategy if it doesn’t seem to be working out for you anymore. Making several profitable trades can tint day trader’s perceptions of that stock, making them lean on it like a crutch for sure-fire profits. Never trade out of fear or greed, which can color how well you will perform. Trade according to the strategy you decided on and chalk each trade up differently. Try not to get too focused on the gains you can make and spot opportunities that you might not have otherwise noticed.

Trade Within Your Strategy

The day trading strategy you adopt is limited in scope. Never assume that it is a one size fits all situation and use that strategy outside of the scope it was designed to use. Don’t trade outside of your strategic window or change your position size on a whim, that’s a sign that you’re getting greedy.

Show Confidence

Once your trading strategy is established, execute it even when you feel iffy about the trade. Treat your trading strategy like a winning routine that should be followed to the tee to replicate successful results. Use practice tools like ThinkorSwim to test your new strategies with real-world data and fake dollars, but be prepared to execute it live if you’re confident in your day trading strategy.