Mistakes happen, but they can be costly. Below, we’re exploring six common trading mistakes and their consequences so you can boost your chances of successful trades. 

Consequences of Trading Mistakes

Sure, day trading is thrilling. But it does have its drawbacks.  

As a day trader, you’re focusing on short-term price swings. Market volatility. If you don’t keep your focus, you could lose money rapidly. This is especially true for novice traders making multiple trades quickly.  

What else happens if you make trading mistakes? You don’t just risk losing money. You could lose confidence in your own abilities. Mistakes in trading can deter individuals from pursuing a promising career.  

You also risk losing enjoyment in the process. Day trading is exhilarating if it suits your personality. Making too many mistakes, especially as a beginner trader, can ruin the experience. 

Finally, mistakes in trading can lead to losing your account (if you’re with a prop firm). For example, breaking prop firm rules or the T&Cs could lead to account termination.  

Day Trading Mistakes to Avoid 

Whether you’re a pro or beginner trader, here are six common mistakes in trading to avoid.  

1. Emotional Trading 

It’s normal to get invested in your own trades. After all, you’re passionate about day trading. That’s why you’re here. However, there’s a line between trading objectively and trading based on volatile emotions.  

There are, generally, three main ways that trades go wrong due to emotions. These trading psychology mistakes are: 

• The “FOMO” effect, or fear of missing out.  
• Holding “losing” trades for too long. This often stems from a fear of selling the asset, or simply hoping that the price swings in your favor.  
• “Revenge” trading, which means the trader tries to recover after a loss. It’s based on trying to prove a point rather than a solid trading strategy. 

Whenever you let emotions – such as anger, pride, or fear – cloud your judgment, you’re taking on unnecessary risk.  

2. Trading Red News Events 

“Red” news events are major announcements. They have a significant impact on financial markets – for better or worse. While this volatility can seem attractive to day traders, there’s a clear downside. 

What if the market doesn’t react as anticipated? What if the news story has a negative rather than positive impact on financial markets? Falling into the trap of red news trading can be a risky rather than profitable trading strategy. 

Sure, you can trade the news. But be strategic about how you do it. Really study your chosen financial markets, that are offered, so you can anticipate the impact of an event on prices.  

3. No Risk Strategy 

Every trade carries risk. There’s always the chance you could lose money. That said, you can mitigate risk by having a clear risk strategy.  

Be clear about your own risk tolerance and don’t exceed it. Start small and learn lessons from your trades. Identify how much risk you’re comfortable with and be strict about your entry and exit points.  

Not sure how much risk you can tolerate? That’s where demo trading accounts are invaluable. You can learn, but you’re not risking your own capital. So long as you play by the prop firm’s rules, you can explore your capabilities – and, potentially, make a profit! 

4. Investing More Than You Can Afford to Lose 

This is a critical mistake any trader can make! When you’re caught up in the thrill of the market, it’s easy to keep buying. But invest more than you can afford to lose, and your journey could be over before it starts.  

Be strict about how much you can afford to invest in any trade. Even a single trade can cause significant losses if you’re not careful. Every trade you take has risks. No profits are guaranteed.  

5. No Trading System 

Think of a trading system, or strategy, as a roadmap. It reflects who you are as a trader, and what you want from your trading journey. 

If you don’t have a trading system, you don’t have a strategy. You don’t have clear goals, objectives, or outcomes. Without a plan, you risk: 

• Making careless trades 
• Relying on someone else’s trading style to guide you 
• Losing trades due to reactive moves 

Before you start trading, set objectives. A trading system is just as important as a risk strategy. And use a trading journal. Otherwise, you risk losing track of your overall goals. 

6. Gambling  

Sure, gambling sometimes pays off. But it’s risky. It’s not based on any strategy or technical analysis. And it’s not a reliable way to build your trading skills or make a profit.  

Gambling usually means you’re caught up in emotional trading as described above. It’s another trading psychology mistake, and one best avoided. 

We strongly discourage gambling – especially gambling to complete a challenge. Learn your market, study trades, and make informed, calculated moves. There are rules in place to prevent Gambling. 

How to Avoid Common Trading Mistakes 

We all make mistakes in trading. It’s part of the learning curve. However, there are steps you can take to refine your trading strategy. Here’s how you might reduce your risk of common trading errors. 

• Don’t let emotions cloud your judgment. This will help you avoid trading psychology mistakes, or knee-jerk reactions.  
• Learn your market. Spend time studying chart patterns and market conditions before you jump in. The more you know, the better your chances of successful trading! 
• Have a clear entry and exit strategy. Stick to your bottom line – don’t lose track of what you’re hoping to achieve from your trades.  
• Take advice from more experienced traders. Read books, listen to podcasts, or join online communities. They can often help you avoid learning lessons the hard way.    
• Although you’re a day trader, think long-term. Manage your risk and consider any investment decisions thoroughly before you make them. 

Start Trading With Maven Trading 

Day trading is challenging, but it can be highly rewarding. Especially if you have the right support on your side.  

At Maven Trading, we’re always searching for talented day traders to work with. In exchange for receiving simulated capital from us, traders give back a percentage of their profits. From indices to Forex, you can buy and sell a wide range of assets. And we’ll give you the support you need to avoid common trading mistakes. 

Ready to start your journey? Make your choice today!