How do I cut my losses in day trading?

Day trading generally turns out to be a nightmare for most of the traders because of the heavy losses incurred by them. The important thing to know and understand about day trading is that you cannot avoid losses, but you can only minimize your losses. You have asked this question because you are not profitable in day trading, but you still want to do it.

I will tell you some of the important points that have helped day traders to cut losses.

• Always fix your target and stop loss in every trade. Without a target, greed comes into play and people end up losing their profits made. Without a stop loss, you can wipe your entire account. Put a stop loss that you can afford.
• Always keep in mind that you will not trade after you hit your stop loss. The reason is that after hitting your stop loss, your mind first wants to recover the losses, and then only you can make some profits. In this scenario, you must make twice the money as you were planning to earn before, which will eventually drag you to lose more money in the market.
• Stop trading after achieving your target. This happens with a lot of traders that make money but after some time they again enter the market end up giving their profits and some amount from their initial capital.
• You must know everything about your trade, and you must also know the reason why are you entering this particular trade. If you enter the market without knowing why you are entering the market, then there exists no difference between a trader and a gambler.
• One must trade with small quantities until they are consistently profitable. One of the mistakes committed by new traders is that they start trading with large quantities without gaining experience in trading and this makes them lose their entire capital.
• Believe in your strategy as it is the only weapon that will help you survive the brutal world of trading. If you have no belief in your trading strategy, then you will be switching strategies, and this will slowly blow entire capital in your trading account. If your strategy does not work, then do not lose your heart.
• The risk and reward ratio is the key factor for day traders because successful traders know that they are going to make losses on their trade and the right risk to reward ratio will let them win in the market. If you trade with a 1:3 Risk to reward ratio and you are correct only 3 out of 10 times then also you can be profitable because of your risk to reward ratio but a bad risk to reward ratio can kill your profits.
• Do not focus on everything in the market instead select what to trade and be master of your stocks. Keep an eye on the movements of stocks and make your trade only when the right opportunity arrives.
• You must avoid Margin Trading. In Margin Trading the people only see the profits but they do not focus on losses that they can make and due to margin trading, most traders have blown up their entire account.