Pitfalls of Day Trading

There are a number of things that can go wrong when you day trade stocks over which you may have little or no control. These form part of the risks associated with day trading of which you should be aware. Here are some of the common pitfalls encountered by many day traders relating to the execution of trades:

• Execution of your orders are delayed due to order backlog or technical problems causing you to be filled at a higher price than you intended to pay.

• You enter the wrong stock symbol when placing your order online.

• You lose track of the many orders you have placed during the day.

• Your online broker’s Web site goes down during the day and you cannot complete your trades.

• Crossed or locked prices may occur for a period of time during which orders are not executed at all.

• Failure or delays of real time data feeds can cause you to take an mistaken view of market conditions.

• You misread a price quote and enter an order on the basis of this mistaken quote.

• Your ISP goes down during the day leaving you without an Internet connection.

• You place a market order as the price falls and find your order executed minutes later at a higher price because of the large backlog in unfilled orders for the stock.

• You find that the online order function you wanted is temporarily unavailable.

• You find out that, on a particular day, bid-ask size is not updated as frequently as it should be or is inaccurate.

• You act on a ”hot tip” from a newsletter or Web site that caters to day traders and later learn that this source is paid by third parties to make recommendations.

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