Why most of the traders fail in day-trading?
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Day trading is the most difficult mode of trading for those who have experienced it. Throughout the trading period, traders have to keep maximum attention on price volume movements, announcements, news, analysts opinions etc., means every tick of second counts the process. Generally says that 90% of the day traders fail, I do not know this is true or not, but I know many have attempted and failed. Everyone cannot be successful in trading business and many of the failed traders are showing similarities in their trading approach. Here are the most common reasons given below showing why many of them fail:
Trading without trading plan and schedule. This happens with many traders who do not have a proper trading plan; they treat it as a quick-earn-money or a gambling system. Do not start trading without a well-tested trading plan and supportive schedule. Traders who are working from home generally neglects a proper schedule for trading. It is always better to be at your trading terminal or desk at least half-an-hour before the market opens and also one hour after it closes. This gives enough breathing time for the trader to prepare himself for initiating or not to enter a trade.
Trading without professional approach. Consider day trading as a full time job because it requires total attention to the process. Many traders think day trading is an easy way of making money, that is the reason why they invariably become lazy. I feel trading is the most difficult job than any other. If you think this is not a serious one, better avoid trading. Successful traders are spending 8 to 10 hours daily including non-trading days to prepare themselves for active and successful trading.
Trading without required capitals. This is an important point where a day trader fails. Brokerage charges are very low and traders can hold margin positions also for day trading. This is actually a devil trap where the whole capital vanishes in the event of a bad trade. Better you can avoid day trading if you do not have the risk capital.
Trading without trading systems and tools. People who accepted trading for a living concept required to develop their own systems and tools to support their trading decisions. Many of them are emotionally attached with money and that always lead to loss. Trading systems and tools can help them to detach their emotions from money and making the trading process more comfortable and less risky. Trading systems are packed with historical/end-of-the-day (EOD)/ real-time data and statistical tools which can guide you in making trading decisions.
Trading without stop-loss orders. Nobody can predict the stock market movement, but can tell the probability of movement direction. General trend can be traced out from a technical chart and based on that one can take the decision to buy or sell. Markets are more or less volatile always and there is a possibility of movement in either directions. Stop loss technique will always protect the capital from huge losses. Many of the day traders do not believe in placing stop losses immediately upon entering a trade. They always believe that stop losses always trigger and thus it cause loss. Stops always help us to stay safe to enter in to another trade conveniently if you fail once. If you enter into trade, don’t forget to place stop loss.
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