A quick peek at the stock charts makes it seem like it would be easy to make a living from day trading popular stocks with a predictable cycle, but making money this way is not as easy as you think. It’s a fallacy to get caught up in hindsight with how much you could have made if you made the right moves, but there are reasons why beginner day traders struggle to make consistent cash.
Day Trading Isn’t as Easy as you Think
Nobody hops on board the day trading train expecting to lose money, but the reality is most people who give it a go, do end up losing. The main problem here is essentially people gambling with their money without doing due diligence or having a proper trading plan with a good exit strategy. If you’re picking the stocks you plan to day trade at random, you are essentially playing a giant game of roulette based on the economy’s performance. You should always have a solid plan for how you’ll start and exit trades before you make them.
Detouring from a Trading Plan
Once again, hindsight often ends up being a curse for beginners who think they can spot a good place to enter the market based on past performances. There’s no good way to know how the market will perform without doing due diligence about the company and market climate before you enter your starting position. Develop a plan that incorporates your research to help you identify when opportunities should arise and stick with it when you’ve hit your chosen profit margin. Day traders tend to get greedy during the heat of the moment to see how much they can gain. That approach is no different than not knowing when to stop playing poker after you’ve won a few decent hands.
Successful Day Trading Requires a Massive Time Commitment
It’s tempting to think you know how the market will swing after watching it a few times, but you’d be mistaken. Research about which companies to consider day trading and when to do so takes mountains of effort that you don’t see looking at the charts from a hindsight point of view. Most beginner day traders will need to continue working their day job because day trading income will be sporadic and unlikely during your learning period. Serious traders who stick with the market and learn the ins and outs can expect to have better luck as more time passes and successful trading strategies are applied.
The Market is a Tough Place to Make Money
Unless you’re a billionaire investor like Warren Buffet, chances are you have a lot riding on your day trading hopes and dreams. However, the ins and outs of the market are unpredictable, and even the soundest trading strategy can end up with losses down the line. Knowing when to take gains and cut losses is one of the most valuable skills a day trader can learn, but be prepared for unexpected swings in the market to throw a wrench into your careful trading plans.
You Tried to Start Trading Alone
There are thousands of day trading forums, a subreddit, and even a whole Twitter-like community called StockTwits based around day trading. Think of day trading like learning a language, as you interact more with “fluent speakers” you become more knowledgeable about the language yourself. Listen to day traders and make vigorous use of the stop loss trading option to keep yourself from getting too greedy when a good trade does come along.