TOP 5 Day Trading Beginner Mistakes to AVOID

In this video and article. Are you learning to trade and you just seem to be taking 1 step forward but 2 steps back each day. Well, you might be making these 5 deadly trading mistakes. Learning to day trade was probably one of the hardest things I’ve ever learned. And there is a huge learning curve involved. 

Waking up early at 4am, hundreds of hours of screen time just observing the market and reading through news and SEC filings. So this might be an unpopular opinion, but learning to trade definitely takes a little bit more than some winning text alerts, DVDs, and some Lamborghini motivational posts on Instagram.

I've been trading for about 6 years now, and I’ve literally made every single mistake in the book. Because the stock market is ruthless, the moment you start thinking you know it all is the moment you will be humbled. Hence the name of this channel, humbled trader. So in this video, we’ll be talking about the top five-day trading mistakes beginners make, my experience with them, and how you can identify and fix them to avoid blowing up your small trading account. 

AS long as you remember to tap the like button, for a profitable 2020. The number 1 biggest mistake new traders make, is not having a trading plan. There a saying that goes something like this, when you fail to plan, you plan to fail. And that cannot be any more true when it comes to day trading.

I was certainly guilty of this when I first started. I remember seeing a low float stock running from four dollars to six dollars within minutes and you feel all excited. My heart's beating fast, your forehead is sweating up and your brain’s screaming, “I must buy now or else I’ll miss this!”. RIght? Buy now and ask questions later. 

And without thinking, you just click buy. Well once a while you get lucky and you manage to make a few bucks here and there, but all it takes is one instance where you got in at the VERY TOP. And the stock completely plunges after you bought it and you lose 10%, 50% of your account. Does that sound familiar? I have done it, most of us have. This is what we call, FOMO, fear of missing out.

Trading Plan

Before getting in a trade, you must create a trading plan. I spend 1.5 to 2 hours before the open each day planned out for my trades. No, you cannot just jump outta bed 10 minutes before the open and expect it to rain Lamborghinis. Yes, it takes time, but that’s exactly the point. Creating a trading plan will help you avoid FOMO. 

By taking the time to write down your thesis, risk-reward, and exit plan, you are already setting yourself up for a higher probability of success. Your trading plan should at least include your bias long or short, all the important price levels over and under, potential entries, exits, and stop losses if you are proven wrong.

Yes, that’s right, part of a trading plan especially in this volatile market is planning for your loss. And keeping that loss under control. Again, planning your trades is 90% of the work in day trading. And once the plans are done premarket, I just spend the rest 10% of the work executing my plans. And there is the simplest trading plan you can make as a beginner. It’s just as important to follow your plan as it is to make one.

Trading Mistake

Because if you don’t follow your exit plan, it can easily lead to the next trading mistake. Mistake number 2 that beginner traders make. Overtrading. Most beginner traders focus on trading to make PROFIT instead of trading the chart and their plans. Imagine this, you’ve made a few good trades on the day, $100 here, and $400 there. Your PnL on the screen corner says you’ve made $890 on the day so far. You’re feeling good but you really want to hit that nice round number of $1000. 

So instead of taking a break during the middle of the day, you keep on trading. And entering positions that perhaps are not your A setup. You start losing, that $890 went down to $750, then $400. You are getting emotional and extremely frustrated. But you won't stop because not only are you not hitting your $1000 goal, you just went down from the nice $890 you had half an hour ago.

Overtrading leads to emotional trading, and eventually to revenge trading. Where you are just going back to the stock you’ve just lost on and attempting to make that money back. Well, we all know how this story ends, when the closing bell rings at 4:00 EST. You’ve gone from $890 profit on the day to down -$300 red on the day.

And that is the story of the first few months of my trading journey. I knew how to make money in the market, but I couldn't keep it. because I let GREED get in the way by overtrading. Here's how you can prevent over-trading. Follow your stop loss. No excuses, if you planned on getting out of that that trade at $8, do it. Yes, you are taking a loss, but it’s a planned loss within your risk profile from your trading plan.

Next, walk away from your computer during the lunch hours 11:30 to 2:30pm EST. Generally, those are the hours where stocks are consolidating and not much action happens. Trading only the open and close hours will allow you to get the meat of the move and not waste time and money on setups that won’t be profitable due to lower volume. And most importantly, when you feel distressed and getting emotional, shut down and walk away from your trading station.

 Most emotional trading leads to even bigger losses. I know because I’ve done it. Many times. See, most traders know what NOT to do, but when your adrenaline is kicking and your heart beats up your emotional side takes over and you stop following your own rules. This is detrimental and WILL blow up several of your accounts.

 So take the break, walk away, the market will still, be here when you are back tomorrow with a clear head and present to you endless opportunities. Now let's move on to the THIRD beginner day trading mistake, which is not smashing the like button at the bottom of this video. Not only do you get no bs day trading content here, but you also get a free subscription to bad jokes.

 Beat that, Netflix, and Disney plus. So the third mistake beginner traders make is not spending enough time paper trading before going LIVE. I get it, people want t make money, fast. I was guilty of that myself. Instead of spending 1 or 2 months learning the mechanics and learning the proper setups, I jumped right in with real money after like a week. I really wish I hadn't done that.

Paper trading

Paper trading, which is trading with simulated money but on Live charts, allows you to learn to plan out your trade as I had mentioned earlier in this video, and also getting familiar with the technicalities of your broker interface. There is nothing more frustrating than accidentally selling a full position when you mean to scale out, or not knowing how to change your long orders to a short. But hey! I’ve done all of that costly mistakes.

So that's why I’m advocating everyone starting out to PAPER TRADE. And you’ve gotta be real and disciplined and treat your paper trading account like real money. That means, if you will only be funding your Live account with $5000, then paper trade with $5000, and not the default $1M many brokerages let you have.

Not only will paper trading allow you to get used to your broker interface, but it’ll also allow you to get screen time in the market and learn your technical analysis skills. We have all seen these chart templates with these clearly labeled candle patterns that make trading seem so simple. But in all honesty, patterns are all hindsight, price action is the real-time indicator.

Watching how candle charts develop into patterns with the volume and observing how each stock trades differently in reaction to various news, these are the kind of experience that takes time in front of the screen each trader must go through at their own pace. Take your time with paper trading, practice your discipline and strategies this way. And the market will still be there when you’re ready to go LIVE with real money.

Beginner trader mistake

Beginner trader mistake Number Four, scaling up too much size too quickly. I remember how happy I was after I’ve started making $100 each day. I was excited and feeling pumped. Hey, $100 a day is $500 a week. Not bad for trading about only three hours a day and heading to work. These small gains add up. And remember I was still making a good income from my full-time job.

Then I started thinking, hey if I just size up to my shares by adding a 0 to my share sizes, basically using 10 times my normal size, then I’d be making $1000 a day, which is $5000 a week. Well, let’s just say this overconfidence with sizing didn't end up too well for me.

Not only did I lose all the small 100 dollar wins from the last few weeks, I completely blew my account. Because see, I did not take into account the emotional stress scaling up would create. If my risk was $30 loss to make $100 a day, suddenly the risk is now $300 to make $1000.

And while I wanted that nice number of $5000 total in one week in my bank account, I was not ready for the $1500 losses. And those position sizes, when scaled up too quickly, will lead to emotional trading. So traders, please take your time with sizing, give it months before even adding a quarter size, then two times. Take it slow, this will allow you to mentally prepare for the possible bigger proportional losses.

Now Last but not least, the biggest beginner trader mistake I see is Following Chat room alerts. Yes, I did save the best for last. While I do agree it’s better to learn with an online community of traders with who you can share ideas, ask for feedback, I think following ALERTs given by chat rooms telling you to buy or sell a stock will put you months if not years behind your journey to becoming a profitable trader.

And here's why. First of all, most of these rooms give you alerts to buy or sell without breaking down why you should do so. This creates followers, also known as sheep, who blindly buys in without any plan, which was our mistake number 1, and guess what, most of these sheep lose money because they don’t even know why they were in the stock in the first place, and when the stock goes down soon after, they panic and they market order out for a huge loss.

You could be lucky and make money from these alerts, once in a while. If you are fast enough and have no internet latency. But in the long run, being a follower will drain your account, especially if you are in penny stock chat rooms with thousands of followers. These are what we call, chat room pumps. Picture this in your head, the moderator buys ten thousand shares on a low volume penny stock first. Then he alerts his followers to buy. 

Guess what, especially with these low floats the price e surges, 20% within 30 seconds because all of his followers bought with him. Seeing the price hiked, the moderator sells. Then he alerts everyone to sell AFTER he had closed out for a fat profit. Guess what, all his followers listen to his alert and sell at the same time. If you were a lucky sheep and fast, you’ve made some money, but most of those followers will be left holding the bag after the mod has exited the trade and the stock price plunges.

I’m sad to say, In my first year of trading, I have perhaps tried out five or six different chat rooms and have seen instances like these first hand. chat room alerts baby. Takes only 2 minutes to make millions. Works well 100%, 1% of the time. I was a sheep as well and I was left holding so many bags.

But looking back, I felt like I deserved it. I wanted that fast cash, without the work. I bought into the dream of hey I can make millions just from following what these people are buying and selling… and make that easy cash. Trading is not easy, but it could be learned slowly if you put in the time and work. 

Like I mentioned in so many of my videos, It all comes down to sacrifices. Do you want this bad enough? Maybe it means partying a little less on weekends. Eating out only once or twice a week, and sleeping only six hours a day, and just not have a life. Let me know what you think about these top 5 mistakes I talked about in the video.