I've enclosed a short essay I wrote for a top financial newsletter publisher a couple of years ago, and its still true today.
Four Deadly Mistakes Amateur Traders Make
There are four simple but deadly mistakes that amateur traders make. Because of them, amateurs are virtually doomed to lose money. Simply by avoiding these mistakes, your chances of making a fortune increase dramatically:
- Amateurs never remove profits: Amateurs never remove profits and start over again small! They keep pyramiding positions over and over again. And they usually end up giving back all of their profits, and often their original investment as well!
- Amateurs almost always trade without an approach or system: Amateurs rarely take the time to learn a system or approach and then follow it with discipline. They become "entangled" in the daily action of the market and lose their perspective.
- Amateurs almost always trade large amounts before they're ready or seasoned: Without guidance, precise recommendations, discipline and experience, amateurs tend to constantly up the ante on their trades, exposing themselves to more and more risk. They also try to make back a loss with a big win — investing much more than they should on any single trade.
- Amateurs almost always trade emotionally — like a gambler in Vegas with a big win: Amateurs trade as if they're gambling in Vegas — playing hunches…getting excited over a few wins…or doubling up their bets. They simply refuse to take a cold, analytical approach to trading — an absolute necessity to make long-term, large gains.
These simple mistakes are enough to virtually assure that amateurs will lose large amounts of money. And they're the reason that people think commodity trading is risky.