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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
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The New Trading for a Living summary
Dr. Alexander Elder
Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management
16 mins
Topics
Table of Contents
The New Trading for a Living
Summary of 8 key ideas
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Key idea 1 of 8
A new trader can fall into many traps and end up paying more than she’d like.
Have you ever looked at famed stock traders like Warren Buffet and wondered why you can’t live like them? Well, you can! It’s challenging to get there, but if you’re cognizant of some early pitfalls, it’ll be much easier.
As you take the plunge into trading, the first thing to be aware of is the danger of commissions. You pay your broker or bank a commission every time you do a trade – and if you don’t watch out, these commissions will eat up your trading money!
Say you’re an active trader, doing two trades a day, four days per week, paying $10 per trade in commissions. By the end of each week those commissions amount to $80. Working 50 weeks a year, you’ll have paid $4,000 in commissions by year’s end! If you’re trading with $20,000 per year, that’s 20 percent of your budget spent on commissions alone.
To minimize commission costs, make sure you do your research on various brokers and banks. Compare their services and commissions carefully to avoid paying more than necessary.
Another common pitfall is slippage. Slippage means that your order could have been filled for less money than you paid. If you want to avoid this, you’ll need to make your orders the right way.
There are two order types: limit orders and market orders. Using a market order is rather like saying, “give me a stock.” This guarantees you a stock, but you don’t know at which price. If the price has increased from $50 to $53, you are paying $3 more than you intended.
Using a limit order is like saying “give me that stock for $50.” You won’t pay more than $50, but if nobody is selling at this price, you might not get a stock. Limit orders are definitely the way to go, since they prevent you from overpaying for stock.
Paying too much, whether to brokers or for stocks, is one pitfall the new trader faces, but it’s not the only one.
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What is The New Trading for a Living about?
The New Trading for a Living (2014) is your complete guide to getting started in trading. These blinks provide a detailed overview of a range of trading methods that will allow you to approach the market with minimum risk.
Best quote from The New Trading for a Living
Getting into a boiling market is like jumping on a moving train: not a good idea.
—Dr. Alexander Elder
Who should read The New Trading for a Living?
- Those interested in alternative investment opportunities
- People studying finance or working in the financial sector
- Anyone who wants to start trading and earn a living doing it
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