facebook banner
logotype
Back to list

The Reasons Your Day Trades Might Fail

4:19 PM Dec 16, 2019
9977
Forex trading

Day trading probably the most spread Forex trading styles. The novice traders may mistakenly think that this method is the easiest and most reliable one. Many newbies think that day trading is simply opening a trade in the morning and closing it at the end of the day with a profit. I wish everything was that simple but this trading style has a lot of pitfalls.

So what makes day trading so challenging and why do most day traders fail? Let’s find out it together and learn how to make your first steps with this trading style.

Main Features of Day Trading

This section is useful for those who are completely new to Forex and hear the term “day trading” for the first time. If you are already familiar with the concept then you can freely proceed to the next section of the article.

There are several basic trading styles on Forex. Their main difference is in the duration of the positions. I will name five main styles:

  1. Scalping
  2. High-Frequency trading
  3. Day trading
  4. Swing trading
  5. Position trading

Among the listed styles, daily trading is approximately in the middle considering the duration of trades. Positions are kept open for several hours and are never carried over to the next trading day.

Day traders usually use fairly short time frames - 1-hour and 4-hour. They analyze the market using the same types of charts. In addition, during day trading they have to set rather tight Stop Loss levels. This is what causes the main challenges for day traders.

Main Reasons Why Day Trades May Fail

Lack of Knowledge

Most traders lose because they come to the stock exchange following hyped bloggers or scammers who give "100% trading signals". It encourages newcomers to jump into trading without studying the technical part.

Poor Discipline

Discipline is one of the most important traits that every serious trader should have. If there is no discipline, it means that the trader will constantly suffer losses because he cannot control his emotions and trading.

Lack of Risk Management

Risk management is a must-have. If a trader trades more than 3% of his capital in one trade, and does not use stop loss or protect his capital, it is evident that he will quickly lose it.

The Desire to Make a Lot of Money Quickly

Everyone wants to earn hundreds of dollars daily, and some may even succeed. The only question is, how long will it last? Remember that realistic and achievable goals increase the chances of success many times over.

Failure to Follow a Trading Strategy

Testing different strategies and creating your system is an essential thing for every trader. If there are several of them, it will allow you to trade on the market under any conditions and economic storms. Accordingly, if you don't have a strategy, you are vulnerable.

There is No Trading Plan

Should I move the stop loss or close the trade right now, wait for a pullback, or close the current trade and roll over? The absence of a trading plan means that in stressful situations, when you need to make quick decisions that will affect the success of your trade, you do not know what to do and will make mistakes more often.

Overtrading

Trading, just like work, should be dosed. None of us works all day long, and we all need to rest, right? Constantly opening new trades increases commission costs as well as the chances that each of these trades will not be successful because it is not a cakewalk to control a dozen longs and a dozen shorts at the same time.

Treating Trading as an Easy Way to Make Money or a Hobby

Trading is a real job, and amateurs fail here. Just like working as a developer, banker, or doctor, you need to learn how to trade and devote a lot of time to it.

Why Day Trading Is So Popular

Unfortunately, most novice traders choose their strategies for the wrong reasons. They come to Forex in search of quick and easy money. With such an approach, day trading seems very attractive:

  • Trading on short timeframes provides a large amount of suitable trading setups. Traders do not need to wait long to open a trade.
  • They also don’t need to wait long for the outcome of their positions and potential profit, since all transactions are closed before the end of a trading day.

I am not saying that these are bad reasons for choosing a trading style. Nevertheless, before you make your final choice you should figure out the potential difficulties of day trading.

What Makes Day Trading So Challenging

The shorter your trades, the less reliable trading signals are. That is why swing trading often shows more positive outcomes than day trading. There are several main reasons for that:

  • Unreliable trading signals
  • Heavy trading noise
  • Stop-Hunting
  • Premature closure of profiting positions
  • High impact of micro fundamentals

Unreliable Trading Signals

Charts with a short timeframe show higher volatility. The price fluctuates up and down, often forming unreliable trading setups. Inexperienced traders who are not familiar with false signals, such as false breakouts, open trades and see how the price suddenly changes its direction. If they didn’t use a Stop Loss for that trade they might quickly lose a significant part of their capital.

Heavy Trading Noise

There is a lot of trading noise on 1-hour and 4-hour charts. This is usually caused by the reaction of traders to upcoming and current news releases. It is important for daily traders to learn to differ important price movements from unimportant ones. Usually, this comes with practice.

Stop-Hunting

Many traders, especially beginners, set Stop Losses around major price levels. Knowing this, unreliable brokers influence the exchange rates which ends up in a price spike that knocks out all positions with a set Stop Loss. This tactic is called Stop-Hunting.

Stop-Hunting mainly influences charts with higher timeframes but the mentioned spikes often form false breakouts, forcing daily traders to open losing positions. That’s why it is crucial to choose a reliable broker that never uses the Stop-Hunting strategy.

Premature Closure of Profiting Positions

Since day traders always close all of their positions before the end of a trading day, they often miss the opportunity to earn additional income. Of course, there is a chance that a profitable transaction might become unprofitable while you’re asleep. Still, with the competent use of the Stop Loss and Take Profit levels, holding transactions for more than one day might bring you a higher income. That is why swing trading often shows higher profitability than day trading.

High Impact of Micro Fundamentals

Even small news and rumors can affect low timeframe charts. It happens as it is not the events that influence the market but the reaction of the traders to those events. So make sure to be extremely vigilant while day trading.

How to Reach Success in Day Trading

Unfortunately, there is no magic spell that can help you determine which trading signals will work out. It comes with experience. Here are some tips for becoming a successful day trader:

  • Start with the theory. Learn as much as possible about day trading. Find out what techniques and tools professional day traders use.
  • Even more practice. Start with demo trading. Try out as many trading signals in as many market situations as possible.
  • Keep a trading journal even on demo trading. This way you can analyze which signals are more reliable and what you should look at during day trading, while not risking your money.
  • Set the main price levels at higher timeframes to determine the main trend more accurately. Afterward, set the same levels on the 1-hour and 4-hour charts.

I hope this information helps you get started as a day trader. Remember that over time your skills will improve. Just keep moving towards your goal.

Popular articles

Stay tuned for the latest FXCL stories

trading mindset beginners novice traders trading strategy losses forex mistakes trading habits trading plan forex trading women in Forex female traders risk management broker profit trading instruments pairs price advantages of forex leverage FXCL investments copy trading advantages of Forex social trading professional traders trading psychology demo trading buy/sell bid/ask spread Metatrader 4 market analysis technical analysis fundamental analysis trade trading platform Forex trading novice trading dealing with losses charts timeframe indicators MetaTrader 4 trading routine support level resistance level trend low-hanging fruit stop loss loss trading history long-term goals open trade close trade daily charts swing trading intraday trading scalping trading setup Forex traders bullish bearish resistance support MA 200 trend trading professional trading EMA EA daily chart weekly chart Forex news highs lows account type cent trading Mini Micro Cent Partnership commission fees trading terms Stop Loss news trading economical calendar major news release currency pair currency rate national currency trading journal trades profit/loss emotions news release positions size Expert Advisors platform trading robot cryptocurrency volatility day trading position size lot account types cent accounts Mini account ECN Copytrade ECN accounts swap-free minimum deposit order execution liquidity providers demo accounts real account low-risk trading EUR/USD economic calendar majors cross-currencies exotic currencies base currency quote currency quotes bid ask Brexit United Kingdom European Union GBP Euro GDP WTO price levels moving average 4-hour chart 1-hour chart bulls bears false breakout cross-currency USD price action pin bar trading inside bar trading hands off breakeven stop loss 50% stop loss pin bar high-frequency trading position trading swings breakout strategy trading style Entry order Take Profit hammer shooting star inside bar pinocchio bar head and shoulders harami risk to reward ratio trading calculator trader’s age emotion control stop-hunting false signal trading session New York session Asian session non-farm payrolls fed rates decision central banks mentor teacher Forex education Forex books candlesticks bonuses tradable bonus no deposit bonus deposit bonus cashback pending orders counter-trend trading risk-to-reward ratio 1-2% rule uptrend downtrend news releases slippage emotional trading stop orders limits orders trailing Stop correlation Correlation Matrix EURUSD EURJPY RSI Overbought/Oversold indicator doji morning start candlestick pattern liquidity London session gap requote US dollar greed excessive trading Expert Advisor trading instrument Twitter Trump euro Canadian dollar Japanese yen Mexican peso currency pairs Fed China economic news currency wars USA interest rates trade agreement H1 H4 D1 sell trade buy trade price level trading system COVID-19 coronavirus lockdown checklist Default mode network Nonfarm Payrolls intraday traders lot size Stop Out margin breakeven pip point entry price chart candles weekly candle daily candle engulfing candle Doji W1 fears money management trading signals Charles Dow Dow theory primary trend Relative Strength Index signals market noise trading volume oversold/overbought corrections candle M30 GBPUSD GBPJPY pending order fundamentals Interbank order Stop order Limit order Standard account Interbank account liquidity provider M5 chart gold XAUUSD Chinese yuan flat US Dollar Fed Interest Rates inflation level XPTUSD platinum XAGUSD silver USDCNY Chinese Yuan instruments swap trading hours Buy Stop Sell Stop Average True Range ATR range sideways range price level trading scripts Excel tables entry point equity balance applications highs and lows RSI Fibonacci terminal server proxy OS Windows XP self-trading Forex advantages gap trading Fibonacci levels USDJPY Buy Limit Cherry Blossom market cycle mark-up mark-down consolidation distribution long positions short positions double bottom triple bottom double top triple top pattern signal presidential cycle Elliott wave Kondratiev wave Forex terminology quote standard lot mini-lot micro-lot cross pairs exotic pairs counter-currency terminology Margin Call long position short position buy sell candlestick chart bar chart line chart range market channel high low ADX OHLC patterns profit level martingale aggressive EAs VPS demo account EA tester trading signal chasing the market clicking the button oil trading lot EUR cent account Forex mentor novice trader emotions control fear psychological level round numbers Key Levels indicator MetaQuotes iOS Android mobile trading mobile terminal VPS server financial portals day trader position closing short timeframe fast trading news site news portal FXStreet Investing.com Forex Factory ForexLive DailyFX CPI PPI economic indicators Non-Farm Payrolls monetary policy FOMC retail sales inflation rates program installation intuition apps ECN brokers market makers financial markets indices commodities stock metals trading robots Forex mentors confidence bias low-frequency trading set and forget end-of-day trading exit trade auto-trading OCO trailing stop auto-management competitive advantage partnership IB referral Introducing Broker Sub-IB EURGBP EURCHF Donald Trump Twitter exotics minors trading patterns wedges pennants triangles breakout trading range trading confident trading trading goals japanese candles stars morning star evening star Japanese candles inverted hammer hanging man abandoned baby spinning top spinning bottom inverted head and shoulders trading figure trading pattern beginner mistakes unrealized profit/loss Forex scammers money managers overtrading Trader’s Cabinet MT4 trading styles exit point Forex myths currency bitcoin ethereum tether litecoin tick chart education European session cross currency GBP/USD GBP/JPY M15 intraday strategy American session USD/CAD M5 Bollinger Bands MAM investing high water mark currency market stock market cryptocurrency market figures diamond divergent triangle symmetrical triangle reversal signal financial intelligence financial education long-term investing triangle ascending triangle descending triangle risk control stocks Forex mutual fund EUR/AUD AUD Australian Dollar Australia ECB RBA demo live live account spike bearish spike bullish spike breathing techniques meditation unusual trading tips useful habits nutrition intermittent fasting Three indians pamm mam expert advisors start-up capital business Forex business oversold overbought reverse signals 15-minute chart full-time trading discipline drawdown inflation devaluation IDR LAK export Russia regulations regulators Central Bank quantitative easing quantitative tightening Donald Trump Joe Biden coins indexes DXY ICO Mrs. Watanabe beginner trader carry trading young traders women traders productivity self-discipline rectangle sideways channel trend figure Alexander Elder John Murphy Jack Schwager limit order leaving Forex useful tips motivation on Forex expanding triangle 5 candlesticks signal confirmation loss control currencies Germany market execution instant execution taxes laws remote trading withdrawals time management British pound BoE unemployment rate interest rate breakout Sydney session Tokyo session disposition effect continuation pattern golden rule enter trade high volatility risk trading trading discipline trading strategies Forex risks trading risks systemic risks technical risks force majeure criminal risks self-education self-study professional education Forex forecasts partnership program Forex bonuses Forex contests self-employed trader bars harami cross engulfing belt hold sandwich piercing line dark cloud cover marubozu three black crows upside gap two crows multitasking wedge figure trading sessions major trend million financial literacy budget goal setting Forex resources Myfxbook useful tools account analysis account monitoring trading analysis economic sentiment consumer price losing streak perfectionism consistent profits starting capital initial investment market psychology japanese candlesticks PAMM trust management money manager holidays market sentiment CHF CAD Great Britain pound Swiss Frank reserve currency averaging morning routine initial capital potential profit reverse pattern rounded bottom rounded top saucer inverse saucer IB Program IB Commission Sharing reversal patterns deposits payment methods payment systems local transactions trader’s block market balance
trading mindset beginners novice traders trading strategy losses forex mistakes trading habits trading plan forex trading women in Forex female traders risk management broker profit trading instruments pairs price advantages of forex leverage FXCL investments copy trading advantages of Forex social trading professional traders trading psychology demo trading buy/sell bid/ask spread Metatrader 4 market analysis technical analysis fundamental analysis trade trading platform Forex trading novice trading dealing with losses charts timeframe indicators MetaTrader 4 trading routine support level resistance level trend low-hanging fruit stop loss loss trading history long-term goals open trade close trade daily charts swing trading intraday trading scalping trading setup Forex traders bullish bearish resistance support MA 200 trend trading professional trading EMA EA daily chart weekly chart Forex news highs lows account type cent trading Mini Micro Cent Partnership commission fees trading terms Stop Loss news trading economical calendar major news release currency pair currency rate national currency trading journal trades profit/loss emotions news release positions size Expert Advisors platform trading robot cryptocurrency volatility day trading position size lot account types cent accounts Mini account ECN Copytrade ECN accounts swap-free minimum deposit order execution liquidity providers demo accounts real account low-risk trading EUR/USD economic calendar majors cross-currencies exotic currencies base currency quote currency quotes bid ask Brexit United Kingdom European Union GBP Euro GDP WTO price levels moving average 4-hour chart 1-hour chart bulls bears false breakout cross-currency USD price action pin bar trading inside bar trading hands off breakeven stop loss 50% stop loss pin bar high-frequency trading position trading swings breakout strategy trading style Entry order Take Profit hammer shooting star inside bar pinocchio bar head and shoulders harami risk to reward ratio trading calculator trader’s age emotion control stop-hunting false signal trading session New York session Asian session non-farm payrolls fed rates decision central banks mentor teacher Forex education Forex books candlesticks bonuses tradable bonus no deposit bonus deposit bonus cashback pending orders counter-trend trading risk-to-reward ratio 1-2% rule uptrend downtrend news releases slippage emotional trading stop orders limits orders trailing Stop correlation Correlation Matrix EURUSD EURJPY RSI Overbought/Oversold indicator doji morning start candlestick pattern liquidity London session gap requote US dollar greed excessive trading Expert Advisor trading instrument Twitter Trump euro Canadian dollar Japanese yen Mexican peso currency pairs Fed China economic news currency wars USA interest rates trade agreement H1 H4 D1 sell trade buy trade price level trading system COVID-19 coronavirus lockdown checklist Default mode network Nonfarm Payrolls intraday traders lot size Stop Out margin breakeven pip point entry price chart candles weekly candle daily candle engulfing candle Doji W1 fears money management trading signals Charles Dow Dow theory primary trend Relative Strength Index signals market noise trading volume oversold/overbought corrections candle M30 GBPUSD GBPJPY pending order fundamentals Interbank order Stop order Limit order Standard account Interbank account liquidity provider M5 chart gold XAUUSD Chinese yuan flat US Dollar Fed Interest Rates inflation level XPTUSD platinum XAGUSD silver USDCNY Chinese Yuan instruments swap trading hours Buy Stop Sell Stop Average True Range ATR range sideways range price level trading scripts Excel tables entry point equity balance applications highs and lows RSI Fibonacci terminal server proxy OS Windows XP self-trading Forex advantages gap trading Fibonacci levels USDJPY Buy Limit Cherry Blossom market cycle mark-up mark-down consolidation distribution long positions short positions double bottom triple bottom double top triple top pattern signal presidential cycle Elliott wave Kondratiev wave Forex terminology quote standard lot mini-lot micro-lot cross pairs exotic pairs counter-currency terminology Margin Call long position short position buy sell candlestick chart bar chart line chart range market channel high low ADX OHLC patterns profit level martingale aggressive EAs VPS demo account EA tester trading signal chasing the market clicking the button oil trading lot EUR cent account Forex mentor novice trader emotions control fear psychological level round numbers Key Levels indicator MetaQuotes iOS Android mobile trading mobile terminal VPS server financial portals day trader position closing short timeframe fast trading news site news portal FXStreet Investing.com Forex Factory ForexLive DailyFX CPI PPI economic indicators Non-Farm Payrolls monetary policy FOMC retail sales inflation rates program installation intuition apps ECN brokers market makers financial markets indices commodities stock metals trading robots Forex mentors confidence bias low-frequency trading set and forget end-of-day trading exit trade auto-trading OCO trailing stop auto-management competitive advantage partnership IB referral Introducing Broker Sub-IB EURGBP EURCHF Donald Trump Twitter exotics minors trading patterns wedges pennants triangles breakout trading range trading confident trading trading goals japanese candles stars morning star evening star Japanese candles inverted hammer hanging man abandoned baby spinning top spinning bottom inverted head and shoulders trading figure trading pattern beginner mistakes unrealized profit/loss Forex scammers money managers overtrading Trader’s Cabinet MT4 trading styles exit point Forex myths currency bitcoin ethereum tether litecoin tick chart education European session cross currency GBP/USD GBP/JPY M15 intraday strategy American session USD/CAD M5 Bollinger Bands MAM investing high water mark currency market stock market cryptocurrency market figures diamond divergent triangle symmetrical triangle reversal signal financial intelligence financial education long-term investing triangle ascending triangle descending triangle risk control stocks Forex mutual fund EUR/AUD AUD Australian Dollar Australia ECB RBA demo live live account spike bearish spike bullish spike breathing techniques meditation unusual trading tips useful habits nutrition intermittent fasting Three indians pamm mam expert advisors start-up capital business Forex business oversold overbought reverse signals 15-minute chart full-time trading discipline drawdown inflation devaluation IDR LAK export Russia regulations regulators Central Bank quantitative easing quantitative tightening Donald Trump Joe Biden coins indexes DXY ICO Mrs. Watanabe beginner trader carry trading young traders women traders productivity self-discipline rectangle sideways channel trend figure Alexander Elder John Murphy Jack Schwager limit order leaving Forex useful tips motivation on Forex expanding triangle 5 candlesticks signal confirmation loss control currencies Germany market execution instant execution taxes laws remote trading withdrawals time management British pound BoE unemployment rate interest rate breakout Sydney session Tokyo session disposition effect continuation pattern golden rule enter trade high volatility risk trading trading discipline trading strategies Forex risks trading risks systemic risks technical risks force majeure criminal risks self-education self-study professional education Forex forecasts partnership program Forex bonuses Forex contests self-employed trader bars harami cross engulfing belt hold sandwich piercing line dark cloud cover marubozu three black crows upside gap two crows multitasking wedge figure trading sessions major trend million financial literacy budget goal setting Forex resources Myfxbook useful tools account analysis account monitoring trading analysis economic sentiment consumer price losing streak perfectionism consistent profits starting capital initial investment market psychology japanese candlesticks PAMM trust management money manager holidays market sentiment CHF CAD Great Britain pound Swiss Frank reserve currency averaging morning routine initial capital potential profit reverse pattern rounded bottom rounded top saucer inverse saucer IB Program IB Commission Sharing reversal patterns deposits payment methods payment systems local transactions trader’s block market balance