Almost exactly a decade ago (wow!) I wrote the article Ten New Trader Pitfalls. Over the years it has been borrowed, cited, and otherwise used in a number of ways by several different trading publishers (bloggers, forums, magazines, etc.). An article along a similar line at Trade2Win got me thinking about it once more. The 10 recommendations to of that article are:
1) Do Your Homework – Learn Before You Burn
2) Take the Time to Find a Reputable Broker
3) Use a Practice Account
4) Keep Charts Clean
5) Protect Your Trading Account
6) Start Small When Going Live
7) Use Reasonable Leverage
8) Keep Good Records
9) Understand Tax Implications and Treatment
10) Treat Trading As a Business
Actually, now that I think about it, this Trade2Win piece probably has a bit more in common with the 8 Ways to Limit Your Trading Education Tuition article I wrote (only) about 5 years ago. Regardless, all three have the same idea in mind – find ways to limit the losses you take as you’re going through the early stages of your trading career.
Personally, I would argue that #6 and #7 above are essentially the same. All the rest are very reasonable, though mainly focused on things outside of one’s actual trading. The only one I would make a real comment about is #3. As I noted in Trade real money, not paper money, practice accounts have a use, but you will learn the most from actually having your capital at risk.
It should say a lot that stuff I wrote 10 years ago is still relevant today. Trading remains trading. Yes, the markets change over time. Certainly the tools we use have evolved. The process of trading, though, really isn’t any different. It requires the same basic elements. As a result, it has the same pitfalls.
There is a tendency among traders to think that anything more than a couple years old is dated and now irrelevant. This may be true of trading systems and methods. It is simply not the case when talking the foundational elements of good trading, though.