Day trading can be an exciting way to grow wealth. However, as with most investment options with substantial money-making potential, day trading also comes with a significant amount of risk. Dan Blystone of Investopedia cited research from University of California Berkeley professors that found individual traders who invested actively and speculatively, without diversified portfolios, usually lost money trading. Blystone also noted that high fees from trading transactions can eat into day trading profits. While the potential for loss is very real, you shouldn’t let that deter you from entering the trading market. Instead, consider smart strategies to reduce the risk.
The infographic below details five key methods for minimizing losses while day trading. These smart strategies encourage day traders to analyze their investment expectations, then take steps to ensure they’re meeting them. These might be informal steps, like managing risk on individual trades, or more formal steps, like enacting stop-loss orders and using limit orders. You might implement all five steps or adopt just a few or even a single strategy to minimize your losses. Try out these strategies and seeing how they work for you and your day trading style.
While there are proven loss management strategies, they may not all work well for you. Experiment with the loss prevention methods outlined in this infographic and see what feels the most natural for you personally. While it’s important to think carefully about the trades you’re making, investing energy into minimizing your losses is just as crucial for day trading success.