light headed!

I have been trading for about one and a half years.I have learn’t a lot about trading in general and I thought it would be a good idea to put into words some of the stuff i had in my head. I know there are quite a bit of trading guides out there and this is not a guide. Its only a few points i have learn’t and really is something i want to maintain as a set of notes for my own personal purpose.

Trade With Money You Will Spend On Un-Necessities

This means, don’t trade with the money you have been shoring up for your next holiday. Do it with the money you plan to spend on you next fancy dinner out. This makes sense for most people unless they are professionals.

Most Traders Don’t Make Loads Of Money

How may traders do you really know? And of these how many do you know who drive a Mercedes?  This answer can vary depending upon your profession, but chances are most of you have never ever known a professional trader unless you count the average Joe who would trader through his broker while working at this day job.

Everyone wants to make a killing at the stock markets. Everyone wants everyone to know how they made that really king size deal. Truth is, these deals are really few and far between. Every trader likes to brag about the killing he made that time. He would have done this atleast once in this trading lifetime. It makes him feel good. I know i have and i did feel good that one time. These guys like to propagate the myth. Ask him how many times these killings have come by him.

Stock markets may or may not give you abnormal returns, but they definitely can wipe out your money quicker than you can make it. Don’t swing for the fences everytime. Because nobody every hit a sixer on every ball. Any good cricketer will tell you, look for the bad deliveries for the fence hit and take a single during the good ones.

Brokerage Costs

Be very very careful about the brokerages you are charged with. I was stupid enough to go on trading happily and ignorantly for months together until i realised that my broker made more money than i did. Between the two rams, the wolf is the broker in sheep’s clothing.  This is not to say that they are the bad guys; but be careful.

Understand The Instruments

Don’t trade in an instrument you do not understand. If your broker wants you to buy because he says so, then its for a reason. He gets his commission whether the trade goes well or not. Do not touch derivatives if you do not understand them.

STOP LOSS / Hedge

This is a great thing. You will always be happy that you did.

There is an excellent resource at Informedtades.com. They even have a great youtube following with some excellent tutorials if you care. Good Luck with your trading …There is a cautionary note from the US government.