Posted by DebtKid :: October 21, 2008 @ 2:07 pm

Mistakes in day trading can be downright brutal, and no amount of "Hail Mary"s can save a trading account when you commit these sins. How do I know? I committed them all.

With the new Lending Club secondary market open for trading, you're now able to trade your loan notes on a liquid marketplace.

Just make sure you avoid these 7 sins. The eternal future of your financial soul may well depend on it!

1. Over-leveraging

Over-leveraging can happen in multiple ways. First, with a margin account you can double or even 4x your purchasing power for intra-day trading. What really gets you in trouble isn't the leverage, it's when you try to quadruple your entire account on one trade. Use margin wisely, and never bet the farm on one trade, let alone the farm plus 3 other farms you don't even own!

2. No trading plan

Always have a trading plan! Just following "your gut" will lead to emotional trading, the fastest way to becoming another day-trading washout. Test or paper-trade a methodology for a few months before employing it in your live account.

3. Not tracking losses

I always logged my really good trades. My really bad ones? Somehow those ones never seemed to make it into my trading journal.

Always track your gains and losses to the penny! Don't forget commission and/or transaction costs. Most online brokers now offer free or cheap gains/losses tracking. In fact, paste a weekly profit/loss log to your bathroom mirror each week!

4. Not sleeping enough

Would you try and run a marathon on a few hours of sleep? Of course not. Don't try and trade on a few hours of sleep either! Especially for west coast traders, trading on little sleep is common. Get a full night's sleep so that you are alert and ready to make any quick decisions on a trade.

5. Borrowing money to day trade

What's the fastest way to lose money day trading? It's trading scared. When you're borrowing money to trade, you're trading with money you can't afford to lose. If you're going to miss your mortgage payment unless your next trade goes well, it's time to get some help.

6. Watching TV for trade ideas

I would not recommend watching or even having the TV on while you are trading. Once the trading day is over, sure, flip it on. But while you're trading, paying too much attention to a given show, however financially authoritative you might think it is, can seriously alter your trading routine. Stick to your plan, and avoid being influenced by any talking head on the tube.

7. Trading the unknown

If you don't understand it, don't trade it. I jumped into too many high-risk trading vehicles (options, Forex, etc.) because I had some limited success in stocks. Needless to say, I got killed. Avoid trading anything you don't understand, or that makes you lose sleep at night! (see mistake #4!)

What mistakes have you made with your investments?