Of trading with small accounts, commissions, a lot of mistakes and a few lessons....Part 1

So dear readers, I have spent most of the day so far working on my taxes. The gloomy weather outside inspired me to tackle this morbid task. Anyway, while laboring over my Schedule D, I came to know the exact amount I paid in commissions and fees last year. So, I thought I would blog about the effect of commissions on small accounts. While working on the Schedule D, I also came across some quite a few trades, more than I had expected to actually, that I remembered quite distinctly. A few I have fond memories of and actually am quite proud of, especially if they came during struggling days. But more than those winners, its the big losers that I remember quite distinctly. Some of those rookie mistakes still make me cringe. So, pardon me dear readers if I just can't help but reminisce a little.

If you are a regular reader of this blog or have read my introduction, you know I trade with a very small account. Well, it started as very small and has now progressed to small. The short answer to why I  started trading with such a small account is because I basically started short term trading over one and a half ago after a "decent" bit of losses investing naively with buy-and-hold strategy when the DOW touched 13000. So, (a) Being a grad student then, I couldn't afford to lose any more money (b) I thought I had learned a lot from the follies of my buy-and-hold approach, read about TA and was anxious to implement what I had learned, or at least thought I had learned, from my mistakes. I admit there was a little bit of another reason involved too - I wanted to trade because I wanted my hard earned, though foolishly squandered, money back from the markets. Now, I do realize and accept, the last reason is the perfectly wrong reason to trade and I would advise any of you newbie traders to try and get this emotion out of your head. It will do your trading more harm than good.

It didn't take me long to realize, that you can read all you can about trading, but you are still on your own when it comes to trading with real money. During the first three-four months, I had good days and bad, struggled to stick to my stop losses and did have crazy swings in my account. I consider it no small achievement that I was able to end 2008 with pretty much the same amount of money in my account that I had started with three months back.

And then came 2009. 2009 was different....very different. It seems I haven't written anything in this post about the effect of commissions on small accounts, the reason why I had actually started writing this post. Oh well....As I get older and older and age begins to catch up with me (I am on the wrong side of 20s), I find myself thinking and talking about the good ol' days more and more. Sigh! Anyway, I will continue with this post very soon. I go into how I started and what mistakes I made in my early days of "investing" (I would call it gambling now) in my introduction. I am sure a lot of you experienced readers will be able to relate to some of the mistakes there (because I have made them all!) and hopefully, the newer traders will be able to learn something from my mistakes.

Take care.