The fast trades associated with day trading require very different strategies than the classic “buy & hold”. A day trader does not analyze balance sheets, attend annual general meetings, or study annual reports. This style of trading is technical-oriented. For the most part, traders do not keep their positions overnight, which helps to minimize their risk.
Day trading: Not for the faint of heart
The above sounds great and all, but why do 80-90% of all day traders go broke? There are certainly many reasons, but here are some of the better-known reasons:
- Lack of expertise: In the beginning, day trading looks so simple, a click of the mouse and the share is bought. When it rises, the investor makes money. The disillusion comes quickly, with a falling account, the trader becomes aware of how little he or she knows about the mechanics of the market and about trading strategies. Like every profession, trading requires training and a reasonable amount of learning.
- Lack of capital: Due to the high leverage offered by some brokers, many beginners can be led to the fallacy that one can live comfortably on 10,000 dollars or less of trading capital. That is why they take high risks to create their required monthly income. This is a sure road to ruin.
- Lack of discipline: This is probably the reason number one for the failure of day traders. Many try to recover “their” money after losses by increase their next bet.
No trading plan? Big mistake
Would you invest thousands in a company that does not have a business plan? Why then do many traders assume that this is completely superfluous? A trading plan lists all strategies on the market and defines their risk and management strategy.
Many traders leave their trading plan out, often with catastrophic consequences. Fail to plan and you’ll plan to fail. Now the good news: It is possible to overcome all these points and trade profitably. Do not give up, deal with the basics, the strategies and the current developments.
Do not see trading as a gamble, but as a profession. The first step is to create a reliable trading plan that can be executed. Speak with Markus Heitkoetter for more details.