How to Avoid Day Trading Mistakes

Co-authored by Michael R. Lewis

Updated: March 28, 2019

Explore this Article Creating a Trading Plan Buying and Selling Stocks Protecting Your Investment Questions & Answers Related Articles References

Day trading for beginners is like taming a lion, except more expensive. It’s risky and challenging because it involves buying stocks and selling them again in the same day. If you do it right, you can make money off of tiny fluctuations in the price of the stocks. Although anyone with high-speed internet and a little capital can do day trading, it’s easy to make mistakes that can cost you money. Fortunately, you can trade smarter by creating and sticking to a trading plan, as well as by protecting your investments.

Part 1
Creating a Trading Plan

  1. 1
    Choose a trading strategy to increase your chances of success. Fortunately, you don’t have to reinvent the wheel to make money trading. There are 4 common trading strategies that you can use. If one doesn’t work for you, try a different one. Here are the most common trading strategies:[1]
    • Swing/Range trading: With this strategy, you buy and sell stocks that tend to fluctuate often. Buy them when they’re at a low point, then sell them when they reach a high point.
    • Spread trading: This strategy relies on the difference, or spread, between what stocks cost and what buyers are willing to pay for them. A buyer will put in a bid for a stock that’s lower than its value, and you as an investor can swoop in and buy the stocks at a lower price. Then, you can try to sell the stocks for their true value.
    • Fading: To use this strategy, you buy a stock that’s become popular, then sell it when you think it’s reached its peak and buyers are starting to pull back.
    • Momentum/Trend following: With this strategy, you pay attention to a stock’s ebb and flow so you can buy low and sell high.

    Tip: About 99% of day traders lose money on a regular basis, and 90% of day traders will give up within 3 years of starting. It’s a very risky investment strategy, so set a budget for yourself and go slowly.

  2. 2
    Decide what you want to trade. Stocks are the easiest asset to use for day trading, but you can also buy and sell other investments, like bonds, options, futures, or commodities. You might decide to start with stocks and branch out to other investments as you gain experience.[2]
    • Consider what types of investments are attractive to you. For instance, are you looking for stocks under a specific price target? Are you looking for tiny movements in heavily traded stocks? Do you want to stick to stocks you know?
  3. 3
    Plan how you will measure your success. It’s helpful to set some performance metrics for yourself. This might include how much money you’re making or losing, how many sells you’re making in one day, and how much your investments varied in price that day. Determine how you will measure your progress before you get started.[3]
    • Consider how often you want to evaluate your progress. Will you review your data daily or weekly? How will you use your performance metrics to be more successful in the future?
  4. 4
    Set aside money you can afford to lose to use for trading. Although you hope to make money from your trades, don’t risk losing capital you can't afford to replace. Most people lose money when they first get started, and even an experienced investor will lose often.[4]
    • For instance, let’s say you have $2,000 to invest. You might take $1,000 of this money to start day trading. Giving yourself a cap can help you control losses.
  5. 5
    Expect the unexpected and plan and exit strategy. The stock market is unpredictable, so you’ll see wild swings, unforeseen dips, and inexplicable turnarounds in a stock’s price. Don’t be surprised when things go wrong. Instead, have an exit strategy in place to salvage what you can from your investment.[5]
    • For instance, you might decide to stick with a stock until it’s time for your afternoon trades, or you may decide to sell when it reaches a certain point. Either exit strategy can be valid, as long as you’re planning for it in advance.
  6. 6
    Practice trading to gain experience. As with everything else, you should practice day trading before you do it for real. Fortunately, that's easy thanks to modern technology. You can set up a pretend trading account and trade stocks with absolutely no financial risk. TD Ameritrade offers a trading platform called "Think or Swim" that allows you to trade without using real money.[6]
  7. 7
    Remember that "hope" is not a trading strategy. It’s normal to hope your investments will make money. However, this isn’t a sound trading strategy. Be sure to plan out your trades using data and a logical plan, then follow through on the actions you plan to take.[7]
    • The best way to make money playing the stock market is to plan your investments based on data. Avoid the temptation to listen to your gut.
  8. 8
    Develop a business plan if you plan to get serious. Day trading is a business endeavor just like any other income-producing endeavor. As a result, you should develop a business plan that includes the following:
    • A list of the equipment you will need to become a successful day trader. At a minimum, you'll need a fast computer and an Internet connection. You might want to invest in a backup computer just in case there's a problem with your main computer.
    • A list of the training courses you'll take to receive the proper education about day trading. You'll probably want to start with some courses about how to predict trends in stock prices (that's called technical analysis). You might also want to take some courses specific to day trading strategies and how to be manage your money while trading.
    • A projection of minimum profitability over the short- and long-term.
    • A budget that includes expenses associated with day trading.
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Part 1 Quiz

Which of the following is not a necessary element of your business plan?

Nope! You obviously can't read the future, but you're also not going into your trades blind. It's important to have an understanding of the minimum projected profitability for the long and short term so you are better prepared to move ahead. Choose another answer!

That's right! Yes, you want to prepare yourself for loss. It's almost inevitable. Still, if you were able to properly predict your losses, you wouldn't make those trades, so you can't accurately project your losses. Read on for another quiz question.

Not exactly! You will need some basic equipment to start your day trading journey. This will include a computer and internet connection, but might also mean a backup computer, calculator, phone or stationary. There’s a better option out there!

Try again! Every business plan, regardless of the industry, requires a budget. It's important for you to know how much money you're planning to spend and the likelihood of your return before you dive right in. There’s a better option out there!

Part 2
Buying and Selling Stocks

  1. 1
    Buy your stocks in the morning between 9:30 a.m. and noon E.T. Stock prices are most volatile just after opening and right before closing. That means you want to make your purchases early in the day, as close to opening as you can. However, you may wait closer to noon if you need more time to select the stocks you want to buy.[8]
    • It’s better to make a well-researched purchase later in the morning than to make an ill-advised purchase right after the market opens.
  2. 2
    Sell your stocks between 3:00 p.m. and 4:00 p.m. E.T. This is the best time to sell most stocks, as the price typically moves in the afternoon. Hopefully, the price will go up, though there's no guarantee this will happen. Check the price of your stock before you sell to determine if it’s best to wait until right before the market closes, which is at 4:00 p.m. ET.[9]

    Variation: As you get more experienced, you may decide to sell during the afternoon if a stock is fading. However, it’s best to get some practice playing the market before you start to do that.

  3. 3
    Start with a small investment to test the waters. Chances are, you’re going to lose money in your first few stock flips. To avoid losing big, keep your investment small. Play the market with just a small percentage of the amount of money you’ve set aside for trading.[10]
    • Think of day trading like gambling when you’re first getting started. Set a budget for yourself and treat it like an entertainment expense.
  4. 4
    Read the news daily to learn which stocks are hot. Stay up-to-date on current events and financial news reports. This will help you recognize which markets are most likely to move soon. Additionally, you can watch for news about companies, which may impact their stock prices.[11]
    • The trading platform you’re using to buy and sell stocks may have financial news available on the site as an added feature.
    • You can also visit numerous websites, like,, and for other news.
  5. 5
    Perform a post-trade analysis to see which stocks were profitable. After the trading day is over, look back on your trades and determine what happened with each of them. Why were the successful trades profitable? Did you take any losses? What resulted in success, and what resulted in failure? Take a lesson from each day’s trading.[12]
    • You might also want to track stocks you’ve considered buying to see how they perform over a week. Write down the selling price of the stocks at the time you make your purchase, as well as the price when you sell. Charting the movement of the stock can help you decide if it might be a good investment for you.
  6. 6
    Keep a trading journal to monitor your successes and failures. You can keep your journal on paper or use software for an easy option. Record all of your trades in your journal, including the amount you paid for each stock, what the stock sold for, and how much you made or lost.[13]
    • For example, you can use Trading Diary Pro or Edgewonk to record your trades.
  7. 7
    Stick to your trading strategy to minimize losses. It's easy to get caught up in emotions and a fear of loss when you start day trading and quickly succumb to impulse selling when it appears that a stock isn't moving in your direction. However, remember that you've put a great deal of effort into crafting a trading strategy that has a demonstrated history of success. Stick to that strategy and leave your emotions out of the process.[14]
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Part 2 Quiz

When should you change your trading strategy?

Not quite! You don't ever have to change your strategy if you don't want to. Changing your strategy simply because a set amount of time has passed is an ineffective approach to day trading and the stock market. Try another answer...

Nope! It may seem counterintuitive, but you don't want to change your strategy just because you lose some money. Every strategy will suffer loss from time to time and you don't want to simply react to that first loss with a big shift. Click on another answer to find the right one...

That's right! You may lose money, you may have a gut feeling, but you don't want to just up and switch your strategy without serious consideration for the market. You should really only consider changing your trading strategy if something happens within the market. Read on for another quiz question.

Try again! Sure, some traders will tell you that they just feel it, but the truth is that you don't want to approach trading emotions-first. You're far more likely to be successful and make good choices if you leave emotions at the door and use logic and rationale instead. Try again...

Part 3
Protecting Your Investment

  1. 1
    Use a stop-loss with every order. A stop-loss order sells your stocks if they reach a certain low point. This can help you minimize your losses if a stock starts to tank. When you buy your stocks, set your stop-loss at the lowest you’re willing to let the stock price go.[15]
    • With a stop-loss, you will lose money. However, it might prevent you from losing big.
  2. 2
    Use limit orders to maximize profits. A limit order lets you set a price limit for how much you’ll pay for a stock or the lowest price you’ll sell your stock for. This lets you get the best price possible for your stocks. Since the stock market can vary, it’s best to always use limit orders.[16]
    • For instance, you can set a limit order that says you’ll only pay $30 for a stock. That means your purchase wouldn’t go through if the stock suddenly went up to $45.
  3. 3
    Avoid "chasing" stocks. You might think that you've stumbled across a great stock that can earn you a lot of money, so you starting bidding on it. After a little while, you find that your order isn't filled because the price went up. So, you increase your bid. That's called "chasing" the stock and should generally be avoided. Remember, the name of the game is to buy stocks at the right price, not chase them around just to get an order filled.[17]
  4. 4
    Adapt your trading strategy if the market changes. Although you will never fully figure out the stock market, you may be able to minimize losses by changing your trading strategy. However, plan these changes in advance. For instance, you might decide to switch from a momentum strategy to a fading strategy if your stocks are losing value unexpectedly. While you don’t want to switch strategies any time your stocks are losing money, you may want to adjust if the market changes.
    • Remember, alter your strategy based on underlying changes in the markets, not because of emotion or fear of loss.
    • If market volatility increases, that's a good reason to adapt your strategy to new market forces. However, if you change your strategy just because you took an unexpected loss, that's a bad reason to change your trading philosophy.
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Part 3 Quiz

You will want to use a stop-loss to:

Almost! You want to use limit orders, which say that you won't pay more than a specific amount for stocks. Given that market prices can swing quite dramatically, limit orders will protect you. Stop-losses serve another purpose. Click on another answer to find the right one...

Not exactly! The best way to avoid chasing stocks, or consistently increasing your bid, is to simply avoid chasing stocks. Plan to buy stocks at the right price or not buy them at all. There’s a better option out there!

Absolutely! A stop-loss removes you from position once you've lost a certain amount of money. This prevents you from losing any more money and taking a serious loss on a bad trade. You'll want to use a stop-loss with every order to protect yourself. Read on for another quiz question.

Community Q&A

Add New Question
  • Question
    Why does Part 2, Section 1 say "Stick to your trading strategy" and Part 2 Section 6 say "Adapt to changing markets. "? Isn't that a contradiction?
    Top Answerer
    Without meaning to sound vague, it is possible to maintain a single trading strategy in the face of a changing market environment. The latter mostly refers to up vs. down markets. Your strategy should allow for all environments without having to change your fundamental approach.
  • Question
    Where would I find a demo account?
    Top Answerer
    Many brokerages offer demo accounts, among them TD Ameritrade, Ally Invest, and TradeStation.
  • Question
    What should I do when I am losing money at good stocks?
    Community Answer
    If you're convinced the stocks are "good," buy more of them as the prices fall. If you're losing confidence in them, you may want to sell your positions, take your losses, and move on. Trading stock is a risky game.
  • Question
    I bought 10 shares each in Reliance and Sun TV. When the value went high I sold it. Now it's showing confirmed, but the transaction is not done. What's going on?
    Community Answer
    Sounds like a software error. "Confirmed" means the trade has taken place.
  • Question
    Do I pay Stamp duty with a day trade?
    Community Answer
    Depends on which 'share' you are buying. UK based companies incur SD @ 0.5%.
Unanswered Questions
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    • You won't be able to keep track of everything on your own. Join an online group of day traders to get ideas from other people.
    • A simple Google search will reveal countless free learning courses on successful day trading that will include an overview of technical analysis and various trading strategies


    • Most people lose money when day trading, so think of it more as a gamble rather than an investment strategy.

    Article Info


    Categories: Investments and Trading

    In other languages:

    Español: evitar equivocarse al operar en intradía, Italiano: Evitare Errori Nel Day Trading, Português: Evitar Erros de Day Trading, Русский: избежать ошибок в дейтрейдинге, Deutsch: Fehler beim Day Trading vermeiden, 한국어: 데이트레이딩 시 실수하지 않는 방법, 日本語: デイトレードで失敗しない, Čeština: Jak se vyhnout chybám v day tradingu, Français: éviter les erreurs de day‐trading, ไทย: หลีกเลี่ยงความผิดพลาดจากการซื้อขายหุ้นรายวัน

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