As more and more people are turning towards investing for supplementing their income, there is a strong chance that a number of investors are experimenting with day trading even though they don’t have any experience in the financial markets. There isn’t a lack of products to invest in, but achieving success in day trading is easier said than done. Ido Fishman states that there are ways to improve your chances of succeeding if you learn to avoid some common day trading mistakes. What are they? Check them out below:
Buying into the hype
A major reason that causes amateur day traders to lose their money is because they make their decisions made on media hype. This often means that you are checking out your social media news feed to see if someone is promoting a stock. Fishman suggests that it is better for you to work on improving your basic investment principles before you start throwing your money around.
Throwing good money after a bad trade
Everyone makes a bad trade and you have to cut your losses eventually. The problem is that some people continue to invest in a failing instrument at a lower price because they hope to average down. Ido Fishman says that even though it can be a decent strategy sometimes, it is not wise to throw good money after you have had a bad trade. There is a possibility another instrument could be making you money, while you are thinking about a previous trade.
Depending on old information
Looking at past performance is something that all experts like Ido Fishman will tell you to avoid. Every investor should learn to depend on a number of news sources, which include stock market analyses, traditional investment newsletters, as well as company’s financial statements, in order to make smart and well-informed decisions.
Forgetting other investment options
Just because you are focused on one market doesn’t mean that you should forget about other investment products completely. Fishman recommends that you put your money into something insured by a bank or a money market account. Likewise, you can also dip your toes in the cryptocurrency market, which has become a household name these days and can give you some good returns.
Day trading mutual funds
You should bear in mind that it takes time for mutual funds to appreciate in value. Therefore, Fishman believes that day trading is better in case of conventional brokerage accounts and cryptocurrencies, rather than top-heavy funds. In fact, mutual funds have been marketed as a good option for people who are looking to save money up for retirement. In that case, you definitely don’t want to invest in something risky.
Confusing opportunity and risk
We have all heard the phrase ‘no risk, no reward’, but this isn’t always right. You don’t have to risk a substantial amount of money in a crypto exchange or the stock market for making money. Instead, experts like Ido Fishman suggest that you should set a limit and not invest more cash than you can afford to lose. Gambling and day trading may have a lot of similarities, but you don’t want to treat your investment as if you are playing casino games. Investment is not poker; it is how you grow the value of securities.
Believing in systems exclusively
A number of financial experts have come up with complex trading systems that are aimed at making execution of day trading strategies easier. Fishman states that even though these do work at times, it is possible that they are based on bad data. Market forces tend to change, which means that predicting the performance of any specific strategy is more than difficult. You need to be flexible and study a number of strategies to use for reducing the risk that you would end up doing business in just one way.