Many people are drawn to day trading because of its massive potential for earnings. But new traders fail to remember that they’re also entering a space with considerable potential for loss. The majority of active day traders fail in their first year. Why? It’s complex. But there are common threads among those who don’t make it past the twelve-month mark.
Join Trade Sage as we explore why 90 percent of active day traders fail in their first year. Learn from their mistakes and how to proactively position yourself for investing successes.
1. They Don’t Have (or Stick to) a Trading Plan
A trading plan is foundational to any successful investor. No matter what assets they trade, the best thing to do is implement a plan and follow it.
Day traders often lose on their investments because they don’t value a trading plan. They think they can enter this game relying on their intuition and whatever skill they bring to the table. This assumption is not only misguided, but it can cost them everything they have.
Create a trading plan, and stick to it. Outline what you’re willing to risk (and lose). Following a plan helps you maintain consistency and steadfastness in a market that’s anything but.
2. They Don’t Educate Themselves
Many people jump into day trading because it is accessible. Technically, anyone can trade, but many enter the market with too little preparation and overconfidence: a dangerous combination that can result in disaster.
Day trading can be a quick, effective way to make money. But success never comes overnight. One of the biggest reasons active day traders fail is that they don’t educate themselves before trading. They assume they can learn along the way, but this line of thinking will position traders for failure.
Spend time learning the market, understanding the nuances of day trading compared to other investment strategies, and following other traders you want to emulate.
3. They Expect Immediate Results
We all have expectations when we make a trade. Most of the time, we assume our trade will yield profits. That’s why we’re in the market to begin with.
However, a successful investment strategy takes time to cultivate, implement, and succeed. And that success isn’t linear. The very nature of the market is one of ups and downs. Day-to-day market conditions change, affecting trade outcomes.
Seasoned traders know this and temper their expectations accordingly. Traders new to the game often have unrealistic expectations of what their trading journey will look like. And when those expectations go unmet, they start to unravel.
When a trade doesn’t go their way, traders might be tempted to deviate from their strategy or make rash decisions to recoup lost investments. Fear takes over, and things start to go south.
Enter the market with realistic expectations. You won’t come out on top every time. Success isn’t a straight line. If you approach your investment strategy with humility and understand that you won’t profit from every trade, you can better maintain your stability and reap the benefits of a long-term presence in the market.
4. They Make Emotional Trades
Day trading is a high-energy, adrenaline-driving activity. As such, letting your emotions dictate your trading choices is easy. Don’t!
Allowing emotion to drive trading decisions is one of the top reasons most day traders fail. Instead of allowing logic and data to inform their investments, they get caught up in the moment (and chaotic energy) of the market.
In a heightened emotional state, we can become blind to reason. Stick to the script. Take a breath. And think twice before you let excitement, joy, fear—or any other feeling—cause you to make a mistake that you’ll regret at the end of the day.
5. They Don’t Balance Risk and Reward
Risk and reward are at the core of day trading. Many times, the greater the risk, the greater the potential reward. Unfortunately, most new traders don’t understand the delicate balance that must occur for their risk to be worthwhile.
If a stock’s price or the market as a whole moves in the wrong direction, an investment can quickly turn sour. The results are even more devastating if a trader uses a leveraged investment strategy. New traders often approach investments with such enthusiasm that they over-invest, risking more than they have the capital to back up. And when the trade doesn’t go as planned, they’re in the red and can’t get out.
You must understand the risks of your trade decisions and confidently and responsibly live with those risks.
6. They Don’t Take Advantage of the Right Tools
Day trading can quickly become overwhelming. If you jump into trading without a plan to stay organized and on top of your investments, you’ll quickly fall behind. Failure comes to many active day traders because they don’t have a good way to monitor and manage their trades. As a result, they lose track of their investments, can’t effectively evaluate the market, and lose in the process.
At Trade Sage, we know having the right investment management tools can help you thrive in your trades. Our dashboard makes monitoring simple. You can track your investments and measure them against a market that changes daily.
Position Yourself for Trading Success
Day trading has unlimited potential for success. But with that comes real opportunity for failure. When you understand the most common mistakes and oversights that derail day traders, you can plan to not only avoid them but proactively position yourself to win.
Most day traders fail in their first year on the market. Don’t be a statistic. Avoid these common day trading pitfalls and utilize the right tools to empower your investment strategy. TradeSage delivers management and monitoring solutions that work today, tomorrow, and years from now. Take advantage of our investment tools and see what you can accomplish with smart investing strategies starting today.
