The following is a guest blog post:
Nobody wants to be labeled an amateur, especially in the world of trading.
Unfortunately, it’s rather common for newbie traders to make a slew of mistakes before they truly find their footing. While there’s nothing wrong with a few slip-ups here and there, by knowing what not to do as a beginner you ultimately set yourself up to save money and make the most of your cash early on.
So, what are the biggest trading and investing snafus that newcomers to the space make and what can you do to avoid them?
Failing To Do Your Homework
Simply put, blindly jumping into the world of trading represents a major mistake if you haven’t thoroughly done your research. Although there’s certainly plenty of noise out there in terms of “who” you should listen to, there’s a lot of education to glean from proven investors. For example, from understanding call option strategies to in-depth market analysis, the web represents a wealth of information for newbies looking to get their start.
Following False Prophets (and Profits)
That being said, be careful who you listen to in terms of trading advice. Sure, you obviously shouldn’t blindly follow the advice of anonymous strangers on the web; however, you should also be wary of “gurus” looking to sell you their “system” versus legitimate advice. If someone’s willing to share their free resources first, chances are they’re worth your time.
Suffering from Analysis Paralysis
In the world of trading, sometimes you just have to get your hands dirty. There’s certainly merit in doing your research and wanting to avoid potential risk, but you can’t truly see returns on your investments if you sit on your hands all day. When in doubt, start working with small amounts of your disposable income to get your feet wet with trading.
Expecting Results Overnight
Success in trading takes time. If you think that you can sink money into day trading in return for overnight results, you’ve got another thing coming. There’s nothing wrong with being enthusiastic, but keeping your trading approach rooted in realistic results is much more proactive than assuming you’re on track to become a millionaire within the net five years.
Thinking That “Cheaper” is “Better”
Just because you’ve found a low-cost option doesn’t mean that you’re guaranteed a positive ROI. While gobbling up cheap investments might seem enticing, you need to make sure that you have some sort of indication that positive returns are there versus assuming they’ll come.
Not Paying Attention to Fees
Remember that fees for trading and brokerage, in addition to hidden investment taxes, can quickly add up if you’re trading at breakneck speed. Assuming that “you’ve got to spend money to make money” can quickly land you in the red if you aren’t careful.
On a similar note, anyone new to the world of investments needs to make sure that they’ve set aside a specific stash of cash for investment or trading purposes. Failing to use your disposable income for such activities is a gamble that’s never worth it.
Some of these tips may seem like no-brainers, but they’re the cause of crash and burn for so many newbies. Knowing what to avoid will ultimately save you money and major headaches on your road to becoming a better trader.