Major risks of day trading

There are risks of day trading that every day trader should know. And also every daytrader should know how to handle them and how to avoid daytrading mistakes.

Well, it is not possible to trade without mistakes. Even the best traders made some mistakes. We are only humans, not robots.

But what is needed and what differentiates the best traders from losing traders is that these best traders in the world can recognize their errors. And then they learn what is wrong and how to correct them. They prepare new daytrading rules to avoid these errors in the future.

List of typical day trading mistakes

There are several different mistakes made by daytraders. All of them represent different risks of day trading. It is very important to recognize these risks and then prepare rules how to minimize these risks.

Emotional trading without a plan

There are plenty of traders who do not have any trading plan. They often look for some hot stock pick on the Internet. They often react to a spam email that contains guaranteed hot stock pick for big profits.

Stock trader sad emotions

Bad emotions can hurt stock trader

Most of these “traders” open the trade without a proper plan where to place stop loss, where their target is and if their trade has good risk reward ratio.

They have not tested the strategy for daytrading stocks and so sooner or later they lose their money to better
prepared traders.


A very common mistake is doing too many trades during a single day. This situation happens often after several losing trades. The daytrader wants to make money back and starts to trade heavily.

How to minimize such risks of overtrading? One of the major daytrading rules that should be in a good strategy is to stop trading when the trader realizes several losses in row. Something like “three losses and finish for a day”. When three losses happen, that it is clear that day trader is not in sync with the market and it is better to leave computer.

Other risks appear when a day does not offer good opportunities but a daytrader wants to make some trade and make some money. It is much better to stay away from such a market. It is fine to be in cash and concentrate energy for days when conditions offer better profitable opportunities.

Too big risk on a single trade

The main rule for every trader is to define maximum risk for a single trade. This is also one of common mistakes. A trader wants to make a huge amount of money, he/she is convinced with his/her setup and believes that this ticker is the right one for huge gain.

And so he breaks his rules for money management and opens a bigger position than he should open. Such a trade can be profitable sometimes but in most cases it will end up a losing trade with above average loss – loss that should be avoided!

Trading with very small accounts

It is common that a lot of beginners want to do daytrading with small accounts. The saying that “size matters in trading” holds very true.

There is a minimum limit for an account to daytrade US stock exchanges. This limit is 25000 USD. But I recommend starting with little bit higher account like 30000 USD. The best size is 50000 USD or larger to minimize risks.

Your new day trading rules

Can you say that you have solved all risks of day trading ? Do you have day trading rules to avoid these day trading mistakes ? If not, think more about them and try to prepare your new day trading rules in your plan to avoid them.

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