The Costly Dangers New Traders Face:
- The bid/ask spread on some illiquid options and penny stocks can be very expensive. Never let it be too expensive to get in and out of a trade because of the slippage in the trading vehicle.
- Penny stocks: they’re dangerous. Period.
- High commission fees can eat away at your trading account. Always find the best commissions that come with great execution of trades. There is no reason to spend a lot on brokers in 2015.
- Trying to trade an account that is too small is just not viable for long term success. Small accounts lead most traders to make bad decisions around risk and position sizing. You need at least five figures to trade seriously.
- Trading before learning how to trade. Too many start to trade, then try to learn how to. Learn first. trade second. It is better to spend your tuition money on homework, than losing your whole account as tuition.
- New traders focus on trying to pick tops and bottoms instead of simply trading the trend. The big money is in the move, not the turn.
- They simply trade too big of a position size, which leads to big losses.
- They cut winners fast, but let losing trades run. This leads to small wins, big losses, and being unprofitable.
- They go looking for rumors. ‘picks’, and ‘tips’ instead of developing a winning system.
- New traders don’t understand that it is not about prediction, it is about following the price action.