Summary
- ⚠️ Key Mistakes to Avoid
- Trading markets with high spreads relative to daily ranges—limits profit potential.
- Avoid low-liquidity small-cap stocks and exotic currency pairs with variable spreads.
- Stick to major markets for better liquidity and manageable spreads.
- Avoid markets where spreads are more than 20% of the daily range for sustainable profitability.
Ok, so we have talked about the things that we CAN get involved in, what should we avoid, now, I would just like to say there is no right or wrong way to trade, I know traders who have made a LOT of money becoming specialists in one specific niche, just as I know traders that have made a lot of money becoming traders in something that most people are trading in, the most popular things, so, it is all personal preference, however I would recommend personally, if you are a beginner or intermediate, you stick with the bigger markets and avoid these kind of things here, so the first thing to avoid is, just to watch the spread relative to the daily range of the market, so what do I mean by that?, so, if your spread, and we have talked about, we know what the spread is, is ten points but the market in a day only moves in a fifty point range, so from low to high the average move is fifty points and your spread is ten points, that is going to make your life very difficult as a day trader.
If you have got to pay ten point spread straight away and in the whole day the market only moves fifty, you are really going to struggle to make money as a day trader, so, watch out for that, avoid that, that’s a unique thing but on some of the smaller indices, that can be a problem, so don’t think, “ooh, I’ve found a little country somewhere that has got an indices that I want to trade”, that’s fine but just look at the spread and then compare it to the daily range, we are going to look at charts in a second and how you can read that but that is very important.
Number two, small cap shares or stocks, now, not all brokers offer these but if they do, be very careful because the liquidity can be low at certain times and especially if they are moving actively, you might find the spread goes really, really wide and you can’t get in and out of your position and that makes them very difficult to trade, so, avoid those if you are a beginner or an intermediate.
