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10 Trading Mistakes

  
  Education
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1. Under capitalization – One of the first mistake I made when beginning to trade was being under capitalized. I started with a $10K account without any idea on how to trade. You need enough capital to learn and gain the experience. Some like to call the initial stake “market tuition.” If you can avoid paying your dues, great for you. But most new traders will lose their money. Just make sure you learn from every loss.

2. Having the approach to trading as a “learn as you trade” – Big mistake. “Learn as you trade” = losing money. Losing money can lead to emotional and financial stress and may even create enough fear in you making it hard to trade. Make sure you come prepared to the battlefield. Be a strategist. Sun Tzu said, “The battle is won before it is fought.” Think about it.

3. Trading as a hobby – Take a look at your hobbies. Do they make money? Hobbies in general are entertainment that cost money. Do not approach trading as a hobby. Treat it like a business. Develop a business plan, have goals, and understand what you want out of trading.

4. Thinking that you know it all – The moment one thinks he knows it all is the moment he has become a fool. Its impossible to know everything about the markets. This is a lifetime learning process. Find your niche…. find your speciality and be an expert in it. In other words, find your edge. One thing I learned in trading is that niche = money.

5. Trading without a plan – One of the worst things you can do as a trader is to trade without a plan. Trading without a plan is like driving in a new area without a map or a navigation system. You are lost. (more…)

McGuire, Hard Money

  
  Education
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As the number of books on investing in gold continues to proliferate, Shayne McGuire’s Hard Money: Taking Gold to a Higher Investment Level (Wiley, 2010) stands out in several ways. Most importantly, the author methodically builds a case for gold by analyzing five drivers of potential price appreciation. They are: the increasing likelihood of fiscal crises in major economies of the world, the return of inflation, a small allocation shift into gold by institutional funds, the rise of China, and gold’s potential return to being the dominant financial asset in the global monetary system.

In the second part of the book McGuire describes in some detail the kinds of elements that might be included in a precious metals portfolio as a subset of an overall portfolio—stocks, ETFs, physical metals. He explains how to buy coins, including rare coins. All in all, a good practical guide for the investor.

Here are a couple of points that struck me as worth sharing.

McGuire argues that gold can be viewed as the “youngest major investment asset class” because “it is only since the early 1970s that it started being broadly perceived as an investment.” Before the collapse of the Bretton Woods monetary system in 1971, gold was money; currencies were “receipts that represented and were exchangeable for hard money.” Therefore it makes no sense to evaluate gold as an investment prior to the 1970s. As McGuire writes, (more…)

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