Day trading can be very risky. Not being able to manage losses, or letting them run, is biggest reason why day traders lose money. Day traders should not risk the money that they cannot afford to lose. It is essential that you have the discipline and proper knowledge to succeed in day trading. You need to have an internal system of checks and balance to make sure you don’t take too many risks or begin to overtrade. You need to learn how to take a loss, because losses will occur, especially at the beginning stages. The rewards of day trading are high, but so are the risks.

Possibility of large losses

Depending on the decisions made during the day, a trader could either make or lose huge amount of money. You should be prepared to suffer severe financial losses; this is part of the process. Losses are inevitable. Nobody makes money everyday. Many novice day traders suffer severe monetary losses in their first months of trading, and couldn’t stay in the game long enough to see a profit.

Demands of day trading

Day trading requires a lot of time and attention paid to the markets, trends, technical indicators 122 and national and international news regarding capital markets. A lot of time has to be put to focus the market hours. In addition to the time commitment, day trading requires a lot of study outside of your trading hours. An intensive amount of knowledge is needed in order to be successful at this highly demanding profession.

Stress

Stress is a routine part of every day trading job. Stress and anxiety arises while tracking various movements within few minutes. In addition to this, the job requires that you make quick decisions concerning the acquisition or selling of securities, with intensive time constraints.

Overtrading

Overtrading means taking highly risky trades or/and trading too large shares. Novice day traders generally get overwhelmed with the fast pace of day trading and let their emotions, instead of their knowledge and analysis, make the decisions for them.

Borrowed money

Day traders rely heavily on exposure provided by broker or buying stocks on margin. Borrowing money to trade stocks always holds some risks. Day traders utilize the leveraged money to increase returns. If not successful, this could lead to the trader losing large sums of money, and possibly an accruement of debt. This is why it is very important to have knowledge of the basics of day trading before venturing into the field.

Understanding market trends

The focus of a day trader is on watching the stocks movement on regular basis. They tend to follow a stock’s momentum and make a quick transaction before it changes course. Since day traders intend to make profits on all major and minor stock movements, it is very important that they have knowledge of market trends, technical analysis and investment charts. If this knowledge is absent form a day trader’s skill base, then in spite of making profits, he may run into huge losses.

Out-of-pocket expenses

Starting out as a day trader can cost a lot of money out of pocket. These expenses can include: software (and hardware), commissions, manuals, and other resources. It is very important to develop a budget for these out-o-pocket expenses before entering the arena of day trading.

Technology Operational

problems like power outages, software/hardware issues, disrupted internet connections etc. could hamper your day trading.