Why Is Day Trading So Difficult?

by Bennett McDowell:

There are three main reasons why day trading is so difficult:

1)When day trading, trading time is compressed. Losses and wins come at you faster and more often which requires a mature, developed psychology to properly handle that kind of instantaneous feedback in such a short period of time.

2)You must develop the psychology not to be seduced by the open market. Trading must remain emotionless and objective.

3)Your day trading results can be highly impacted by trading at higher time frames and the shorter your time frame, the greater this effect will have on you.

The psychology of day trading requires you to not let a string of losses or wins that occur in a short period of time affect your mental state. A frail ego or mind will not do well in handling the results of immediate trade feedback in such a compressed amount of time. It will be too over whelming and may cause incredible frustration and a feeling of hopelessness. This is why position trading using daily charts is recommend for new traders because it allows them time to absorb trade feedback in a manner they can handle while they get a grasp of their trading results.

The open market can be quite seductive especially to the new trader. Day trading requires that you make trading decisions based on sound judgment and analysis void of emotion. New traders that day trade have a tendency to become seduced by the excitement of the open markets and therefore often become emotional traders acting on impulse rather than sound analysis and judgment.

When comparing day trading to position trading, it is easy to see that position trading requires using higher time frame charts like the sixty minute, daily, weekly, and even in some cases the monthly chart. If you are position trading using a daily chart you don’t have many time frames above you that could impact your trading. Compare this to day trading where many time frame are above you. If you are day trading using a one minute chart for example, you have the three, five, ten, fifteen, thirty, forty five, sixty, daily, and weekly traders above you. As a one minute trader you have many traders above you that can throw off your trading approach no matter how good it is. As a position trader, you may have only the weekly and monthly traders above you who do not trade that often.

The differences between day trading and position trading can be as distinct as the difference between day and night. Your success will all depend on your psychology, trading abilities, skills, and your aptitude. As a new trader you will more than likely need to walk before you run, and believe me, day trading is running!