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Boost Your Stock Market Returns by 20% Annually

By on July 20, 2014

Have you ever heard of the saying “Death by a thousand cuts”?

It’s where you have a number of very small wounds, none of which taken by themselves would probably even hurt you – but taken all together, it kills you.

A thousand cuts is how most traders end up getting thrown out of the business – a little bit at a time.

And by the time they realize they are in trouble, it’s often far too late.

One of the most common of the thousand cut deaths is simply over trading. It’s very easy to take 3 or 4 trades a day. There are 5000+ stocks in the market, there is “always something moving” – so you convince yourself you should be in all of it. Believe me, I have been there.

But what four trades a day is 20 per week. Lets just for the sake of making this easy assume you trade 1000 shares on each of those trades and you pay $10 in commissions.

You are looking at $200 per week, just in commissions to your broker. If you have a $100,000 trading account, that is more than 10% per year. There are pro’s would kill to make 10% a year over the long term. This doesn’t even take into account the slippage you are going to experience. Lets be incredibly generous and figuring you experience 1 cent of slippage per trade (If you only experience 1 cent on average please call me, I want you to execute my trades for me) 20,000 shares at 1 cent is another $200.

You have to make 20% per year just to cover your transation costs!

People don’t think about this, but right in front of you I have laid out for you probably the biggest thing killing peoples accounts. It’s just very easy to assume “There are a lot of trades I can take” – because there are.

But there are very few you should be taking.

Today I am going to be watching the QQQ. This is for my trading account, not for the investing account which is 100% in cash right now.

I’ll be a buyer of the QQQ above $95.30 with my stop placed under $94.00

 

– Brandon

About Brandon Fredrickson

Brandon Fredrickson started trading in the mid 1990's. He has has helped thousands of traders reach their dream of profitable trading since 1998.

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