It is important to know about the common mistakes that intraday traders make and incur heavy losses. Intraday trading is all about frequent buying and selling of stocks and short holding periods. The scope of making mistakes, therefore, is higher. The following HQBroker Review tips deal with various intraday mistakes which will help traders in avoiding them.
Lack of stop loss orders
Trading without setting up a Stop Loss Order can spell disaster for the day trader. Stop Loss put a cap on the losses and does not allow the losses to get bigger. The trader should not cross the stop order after losing. Stop loss order should also never be moved towards the loss of direction .
Overtrading by risking the money the trader cannot afford to lose must be avoided. The risk of losing money must always be kept to less than 2%. The risk to reward ratio must also be more than 1:2. Intraday trading must also not be done using borrowed money.
Day traders should not go for averaging down technique. Averaging down is when the trader buys more shares of a stock if the price of that stock goes down. This is done on the belief that the stock will recover. A day trader must have a stop price and get out of the stock when the price goes below the stop price. The trader can then determine whether it is feasible to buy the stock again in view of various factors. It is important to get out of the stock before a massive loss occurs.
Some other Intraday Trading Tips to avoid mistakes have been listed here.
- Exit points must be determined to avoid taking less profits or not making any profits.
- Waiting for the right trade is important to avoid entering at the wrong price.
- The day trader should not try to trade illiquid stocks.
- Booking profits without deciding the target and stop loss must be avoided.