Don't be a Sucker

It is naturally the semi-sucker who is always quoting the famous trading aphorisms and the various rules of the game. He knows all the don'ts that ever fell from the oracular lips of the old stagers- excepting the principal one which is DON'T BE A SUCKER.

I couldn't have said it better. This is the first and most important rule of trading and investing. No matter what some people might tell you there is no such thing as easy money. Much of the financial services industry makes its money by telling you the opposite so here are some tips and observations to help redress the balance.

  1. Nine out of ten amateur traders lose money.
  2. The majority of the professional traders make their money out of spreads and commissions, not speculation.
  3. Do not borrow money to trade.
  4. Differentiate between trading and investing.
  5. Don't believe anyone's claims of easy money.
  6. Advisers may not be objective. Make sure that they do not receive commission from referrals.
  7. Check that the firm you trade with is regulated, insured and liquid. There is no point having tight spreads if the firm ends up going bust. Believe me I know, I lost £500,000 when a broker I used went bust. Ooops!
  8. Be aware of 'hidden' charges and fees.
  9. Trust no one.
  10. Don't believe tips.
  11. Generally speaking the more complex a financial product the more you want to leave it alone. Financial companies love hiding spreads and commissions within complex products.
  12. Generally if you're reading the story in the newspaper you're too late. The professionals know before the papers come out if an explosive story is on its way.