Stock Market Day Trading

The single best day trading stock tip is to recognize and avoid the pitfalls. Stock market day trading has been described as addicting as any narcotic or tobacco product. The thrill of making huge profits in very short periods of time can make you forget to pay attention to the real market trends. It is very similar to gambling in that it does not take long to forget the limits you place on yourself and get so far into debt that you can ruin your family and finances for a very long time. I will go through a few day trading pitfalls to avoid like the plague.

Selling short can be a great way to make huge profits in the market if you understand exactly how the process works. Selling short is actually borrowing stock and selling it in the hopes that you can buy it back at a lower price later and pocket the difference. To make money at this you need to sell on your margin account to make the most. On margins you can sell twice as much as you have in your account. Keep in mind that if the stock goes up you will lose twice as much as you have. The pitfall is taking your wins and continuing to invest in selling short. You can make positive profits on twenty trades in a row but if you have one trade that the stock goes up you can lose everything you gained – twice your gains if using a margin account.

On of the other day trading pitfalls is not setting limits for short selling or buying stock. If you buy a stock at $1 and it goes up to $1.25 in a few hours you will think that it can continue to rise and you will hold on for a little while longer. If you had put a sell signal at $1.20 you would make a 20% profit for a few hours work. However, if you wait for too long and something happens to make the stock go down and overnight it drops below $1 not only have you lost your sure 20% gain but now are saddled with a potentially b ad loss. Always set limits for losses or gains to make sure that you are not going to blow your entire investment account in a single day.

One of the most important day trading pitfalls is letting your emotions rule any of your trades. Too often traders get into the “I can get out at the right time” when watching a stock rise during the day. The problem with this is just like the gambler at the tables in Las Vegas or Atlantic City wanting just one more hand or one more roll of the dice. That’s all it takes to lose everything you have gained; waiting too long to pull the trigger.

The opposite side of this pitfall is the inability to make a trade when it is readily apparent you can make money. You can become afraid to make a mistake so you do nothing at all to increase your profits.

Keep this day trading stock tip in mind. In the long run, it will be far more valuable than any specific pick or investment!