A trader accidentally strapping explosives to his body is stupid.
How can anyone mistake a load of dynamite for a belt?
Yet this is exactly what trader Jihad is.
I should know.
Years ago, I accidentally blew myself up. The pain is still with me today. I've come to accept the fact that the pain will always be with me.
Today I trade with a limp an am but a shadow of my former trading self.
So what exactly is Trader Jihad?
Most rookie traders become blinded by their own success. They can't stop. A rookie trader who has doubled his $5,000 original investment feels that trading is easy and that he is a genius. He feels he can walk on water, but soon submerges and dies.
A novice is better off starting out with a comparatively small account. Someone who has rose to a semi-professional level should start pushing up his account size to grow profits. A good trader with a large trading account has to be careful not to go into thin markets with his trades. He has got to look out for a decrease in performance, common fallout of trading with a bigger account.
The minimal size for a trading account is about $25,000. When you have rose to the level of a serious amateur or a semipro trader, $80,000 will grant you more freedom to branch out and diversify. When you get your account up to $250,000, you might start thinking about moving up to professional trading. These are unequivocal minimums, and whenever you are able to increase them, your life will be easier. Beginning with $50,000, having $120,000 at a semipro level, and rising to professional trading at $500,000 will increase your probabilities of success.
What if you don't have that much? Trading with less raises the risk to a very high level. A person with a small account can't go for the all important do not invest more than 2% to 3% in any one stock. If he has only $5,000, his allowable risk is only $100 per trade, which insures that he will be stopped out by normal market volatility. A desperate novice enters into a trade without a stop. In all probability, he will lose, but what if he wins and finishes up with $7,000, then puts on another trade and climbs up to $10,000? If he is intelligent, he will Precipitously reduce his trading size and start using the 2% to 3% rule now. He was very lucky and should put his profits into a conservative trading program. Most people become drunk by success and can't stop. A novice who has doubled his $5,000 gamble typically feels that the game is easy and he is a genius. He feels he can walk on water, but soon submerges and dies.