With thousands of premium clients who I communicate with daily through email and the largest stock chat on Wall Street, I have a unique perspective on the most common mistakes beginners make.

Additionally, I too made many of these mistakes early in my trading career  so trust me, I’ve been there. Knowing what to avoid is quite often a quicker path to success. We all want to make money quickly but I assure you, if you lack of discipline in trading you’ll lose money quickly. Here’s how I see beginners get hurt, please read carefully.

1. FAILURE TO INVEST IN PRACTICE

As a tourist and beginner poker player, if you were to sit down next to Johnny Chan in Vegas, who won the 1987 and 1988 World Series of Poker main events, it’s highly likely he’d clean you out in no time at all. Wall Street is the same as poker, if you win somebody else loses so get educated before getting cleaned out.

TD Ameritrade’s paperMoney is a groundbreaking paper trading application available as a downloadable platform. With paperMoney, you have access to a virtual margin account and $100,000 of “play money.” From there I ask they study my 8-hour $497 workshop The Basics of Swing Trading (FREE to clients), my video lessons and read Steve Nison’s The Candlestick Course. Apply my swing trading video lessons and see if you make money. As you do, your confidence will grow. Don’t play poker with Johnny Chan until you’re ready, trust me on this one. A good example of investing in practice was when I went to college to become a teacher. I spent a total of 6-years and about $70,000 getting my undergraduate / masters degrees. There’s also the loss of earning income during those 6-years of education to be factored in. Upon graduation I still had to find a teaching position which is extremely competitive. At the time the best school districts were paying $34,000 / year. I worked hard and was lucky to get hired right after graduation. So again, I invested 6-years, $70,000 and the loss of income during the schooling just so I could interview for teaching jobs. If you want to build wealth on Wall Street, learn how to do it first, I can teach you.

2. DAY TRADING

Last week I read a scary statistic that 95% of people who attempt to be a day trader lose money. Jason Bond Picks was built on a foundation of swing trading. Yes, there are elite day traders in my stock chat, but the majority of my clients are swing traders. Day trading isn’t for everyone as it requires the ability to think fast while handling extreme levels of stress. I have nothing against day trading, in fact it’s very popular at Jason Bond Picks, but if you’re a beginner STAY AWAY!

I put this warning out in my welcome email yet I can’t tell you how many clients email me later saying they wished they’d listened. If you want to become a day trader use the paperMoney account to practice and do NOT skimp on the amount of time you practice this. I’ve seen people flush money down the drain so fast day trading it’d make you sick. If it’s a true dream of yours we’ve got the biggest stock chat on Wall Street full of pros but put your time in first, you’ll know when you’re ready.

3. OPTIONS TRADING

There’s a reason your broker requires and additional application here. There are huge returns in options so it attracts traders with small accounts, when they are in fact the last traders who should be participating in this type of volatile trading. Remember, if there’s huge returns, somebody is on the other side of that return i.e. huge losses too. Trust me when I say trading options before you’re an expert trader is like having a loaded gun laying around, something very bad is going to happen sooner or later.

I firmly believe options should require a degree but Wall Street isn’t setup that way so be careful. I warn against options trading in my welcome email yet this is the #1 way I see beginners blow up there account losing all their money. There’s nothing wrong with trying to learn options, obviously many are successful at it but if you’re a beginner don’t even think about it. You’ll thank me later as you hear the horror stories from guys and gals in chat who’ve either messed up themselves and had to rebuild or knows someone who did. Again, this is the #1 way I see traders blow up and those emails always start with, “Jason, I wish I listened to you.”

4. USING LEVERAGE

I do not trade on leverage, period. Yes, I have a margin account, but I’m almost never over my cash balance. Trading stocks on borrowed money is asking for trouble. I don’t get these emails often but when I do it’s painful to read.

No matter how good the stock looks, it’s never good enough to get a 2nd mortgage. I’ve written about why I don’t believe in borrowing money of any kind to include car loans, credit cards, and even mortgages so you better believe I don’t borrow to trade volatile stocks.

5. HOLDING THROUGH EVENTS

Holding through events is what I’d consider gambling, but unlike Vegas, there’s no free entertainment and booze. No matter how much you think you know about a company’s earnings, FDA ruling, etc… it’s still 50/50. Let’s be honest, the only people who know for sure are insiders and since it’s illegal to trade on that information it’s impossible to have an advantage.

Remember, I’m referring to swing trading, not long term trading. I can’t tell you how many emails I get from clients that start out, “I wish I didn’t hold through earnings.” Event trading just isn’t a part of my strategy. I do not hold through earnings, FDA rulings, court rulings or anything of that nature, it’s simply too risky and I see more people get hurt than win here.

6. FAILURE TO CUT LOSSES QUICKLY

This is my #1 rule at Jason Bond Picks… CUT LOSSES QUICKLY. To cut losses quickly you must enter the trade with a game plan. Entering a day trade and turning into a swing trade because it went against you can be extremely risky. Entering a day trade, turning it into a swing trade and then turning into a long term trade is even worse. You might be laughing right now but I see it happen all of the time. When I take a swing trade, defined by Investopedia as a 1 – 4 day hold, I’m looking for my profit during that time. Very rarely do I stretch it unless there’s a good reason. Failure to have discipline in this area will cause more problems than you can imagine. First, you’re trading without a plan – that’s dangerous and undisciplined. Second, while your money is tied up in a loser you’re missing out on winners. Let me give you an example. Last week I woke up to bad news on one of my stocks. Since I didn’t expect this news and my stop loss was hit, it was time to move on. It’s painful losing money on trades but losing is part of the strategy I teach because nobody can escape it and be right 100% of the time, so you better have a plan on how to handle it, which I do and teach. That same stock opened lower the day after I sold it, so had I not taken the losses, even more losses and stress would have piled up.

Even more important, since I wasn’t distracted with the losing trade I was able to hit 3 winners to finish the week which recouped all of the losses and then some. Had I sat on the loser, I’d have missed the winners and still be at a loss hoping the loser comes back. Bottom line is this. You don’t have to agree with me here but you better have a plan because if you don’t you won’t know what to do when the unexpected happens. I can’t tell you how many, “I’m stuck in XYZ” emails I get and each time I gently remind my client, “You are not stuck in anything, you have choices.” Be disciplined, you’ll thank me later. By the way, I learned this the hard way because much of what’s written above, I’ve done myself in the past but not anymore.

7. NOT TAKING PROFITS

In Kindergarten Cop Arnold Schwarzeneggar was establishing classroom rules when he bursted out, “YOU LACK DISCIPLINE” to the students. My wife loves that movie, she teaches first grade. I think we can all agree it’s normal for  a kid to lack discipline but there’s no room for it with adults on Wall Street.

There’s no 20 / 20 trading at Jason Bond Picks. Stocks go up and down daily, they are dynamic. If you enter a trade and you don’t know what your exit is, how on earth will you determine when it’s time to get out?! I have a video lesson that teaches clients the psychology behind paying themselves and it’s quite popular. How many times have you been up nicely on a trade only to give back all of your profits and sometimes worse, take a loss. That’s sickening! I say this over and over in my daily watch lists and alerts. GREEN is better than EVEN, EVEN is better than RED. This means if you get GREEN on a trade, in most cases do not let the money slip away, however small it is. And if you get back to even by not taking profit, by all means do not take a loss. Hoping it comes back is not a solution either, all that matters is what you think the trade will do next. Like many of the DO NOTs listed in this blog post, I’ve learned the hard way here. Bottom line is this, establish a consistent method for how you plan to exit trades. For me it’s simple, I look for trading ranges of 20% and inside those ranges I try to capture 5-10% knowing I’ll never get a perfect entry or exit. And I never want to hear, “Darn Jason, I sold too soon” come out of a clients mouth. Goodness, if the stock continues to advance you should be happy you’re picking the right trades. You’re NEVER going to catch the top consistently but you can capture consistent 5-10% returns. I’m like a robot in this regard, I set my sell for half my position at 5% profit and let the rest ride for 10% profit. Therefore, a winning trade for me is about 7% profit. Do that consistently and you’d be shocked how fast profits add up. I nearly tripled the S&P 500 in 2013 applying this and the S&P 500 had a monster year. Failure to have a profit plan within your trading strategy is asking to fail. Be disciplined, know what you’re looking for on your swing trades and stick to it. Once you take this initiative you’ll find you are in fact in control and that’s the only way to stay alive on Wall Street.