• Frank Font

Mistakes Made When Starting Out

I began trading stocks when I was still in high school with $2000 borrowed from my dad. When I started, I expected to get returns like the post made in wallstreetbets on Reddit: at one point, I even bought some of their stock suggestions. However, at the end of the year, I realized that most of the advice you see on the internet would likely lose money. Even though I ended the year up 40%, I gave up trading towards the end of the same year as I lost money. I will admit that I likely just got lucky as I made a significant return after I bought Alibaba with 50% of my entire account. Below I will highlight the misconceptions and mistakes that I made when I first started trading and correct them to succeed in the future.

No-Risk Management

When I first started, I concerned myself mainly with swing trading stocks and ignored options. Therefore, I would make use of up to 50% of my account per trade. Even though this would increase profits if transactions were to go my way, I did not make use of stop losses if trades went against me.

Copied Other Peoples Trades

When I first started trading, I believed that if I copied those who had more experience than me, I would be profitable. Therefore, I would go on Reddit or TradingView and copy others would put out without doing my due diligence. Even though it can be helpful to share ideas, if you do not do your research, it becomes useless.

Held On To Losing Trades

Many of my losses were exacerbated due to me holding on to trades that went against me. Most of the time, I would buy more shares as the stock decreased my entry point. The only thing this did was increase my losses.

No Exit Strategy

After having entered a trade, I had no rules for when I would get out. I would pay no attention to chart patterns and exit the trade when I felt that it would no go any higher. I also expected transactions to go my way before the end of the week and would sometimes exit trades that would eventually go my way.

Skipped The Basics

I ignored everyone’s warning to first paper trade to understand how the markets work. I spent no time researching chart patterns, market catalyst or the multitude of indicators like RSI. I have already spent time in the market but moving forward; I will backtest any possible strategies.

Expected To Get Rich Quick

One of the main reasons I continually stopped trading was that I expected to make thousands by the end of the year on a relatively small account. This greatly discouraged me and messed up one of the most crucial things in trading: psychology.

Improper Option Timing

Due to my low capital I would resort to buying short term out of the money options which had a low probability of success. I mainly did this due to my inability to understand options pricing and believing that a cheaper option would result in a higher return.

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