Day Trading Is Replete With Risk
An understatement, you can be sure, but day trading is replete with risk. Many day trading professionals have lost everything because they failed to properly gauge risk or they simply dismissed obvious signs due to personal ambition.
How about you? Are you aware of all of the risks of day trading or are you simply oblivious to all that is before you? Read on and we'll examine several risk factors sure to catch your attention.
Buy Low, Sell High - This can seem obvious, but it isn't always that easy. In some cases a day trading professional purchases a stock at let's say $34 per share and it quickly drops to 33 5/8. Already, a loss is evident.
Do you hold onto the stock or dump it before further losses are realized? As a day trading professional you only have a few hours to make your decision. Therefore, taking a small loss now may be better than suffering a big loss later as a further drop in stock price is realized.
Market Blindness - Your gut tells you to avoid purchasing a stock, but your mind says maybe. Regardless, you step out and buy shares at 9 dollars each and quickly watch the price drop to 7 3/8. How did this happen? By ignoring important cues from within. If you ignore instinct, you will lose. Trust your instincts to guide you every time.
Great Greed - The company's earnings reports are expected be better than average, but you sense that they will be historically high. In a quest to make money you purchase shares at 11 ½ and hold onto them as they rise above 12.
The news is favorable and the stock continues to rise to near 13. You begin to think, "If I only hold on for another hour, the stock will top 13 and I will have cleared a $1.50 per share." Suddenly, the stock retreats and you quickly sell. Fortunately, the final price is $12, but your anticipated profits were lost due to your great greed.
Day trading risks are bountiful and can include the mentioned factors as well as laziness, ignorance, pride, selfishness, and ego. Sounds like the 7 deadly sins, doesn't it? You bet: your personal demons can drive how you respond and signal your inability to withstand risk. Don't let day trading consume you; get a real perspective on day trading and you can limit your risk demonstrably.
How about you? Are you aware of all of the risks of day trading or are you simply oblivious to all that is before you? Read on and we'll examine several risk factors sure to catch your attention.
Buy Low, Sell High - This can seem obvious, but it isn't always that easy. In some cases a day trading professional purchases a stock at let's say $34 per share and it quickly drops to 33 5/8. Already, a loss is evident.
Do you hold onto the stock or dump it before further losses are realized? As a day trading professional you only have a few hours to make your decision. Therefore, taking a small loss now may be better than suffering a big loss later as a further drop in stock price is realized.
Market Blindness - Your gut tells you to avoid purchasing a stock, but your mind says maybe. Regardless, you step out and buy shares at 9 dollars each and quickly watch the price drop to 7 3/8. How did this happen? By ignoring important cues from within. If you ignore instinct, you will lose. Trust your instincts to guide you every time.
Great Greed - The company's earnings reports are expected be better than average, but you sense that they will be historically high. In a quest to make money you purchase shares at 11 ½ and hold onto them as they rise above 12.
The news is favorable and the stock continues to rise to near 13. You begin to think, "If I only hold on for another hour, the stock will top 13 and I will have cleared a $1.50 per share." Suddenly, the stock retreats and you quickly sell. Fortunately, the final price is $12, but your anticipated profits were lost due to your great greed.
Day trading risks are bountiful and can include the mentioned factors as well as laziness, ignorance, pride, selfishness, and ego. Sounds like the 7 deadly sins, doesn't it? You bet: your personal demons can drive how you respond and signal your inability to withstand risk. Don't let day trading consume you; get a real perspective on day trading and you can limit your risk demonstrably.