Top 10 Mistakes Traders Make When Filing Their Taxes

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Are you Really Diversified

Dear Colleague, Most investors have been told to diversify their portfolio. They think if they buy companies that are in different industries that they will be covered if there is some adversity in the markets. The problem is that they do not fully understand the risks in the markets and how to offset those risks. To trade properly, you need to understand the degree of risk you are taking on by involving yourself in the markets. There are several risks that any trader or investor will face. Depending on the type of investment or trading vehicle we select, we will be exposed to one or many of these types of risk. Learn more by signing up for a free workshop. Systemic Risk – These are shocks to the entire financial system where there are few to no safe havens left. We have experienced this with the collapse in 2008 in the markets, and perhaps even now with the European woes. Asset Class Risk – Stocks, Bonds, Commodities, and Currency markets all go through cycles where they are bullish or bearish. You face risk of entering at the wrong part of the cycle for that asset class. Country Specific Risk – Countries grow at different paces and can offer distinct opportunities and risks based on economic projections, political stability and other factors. We can trade ETFs and ADRs for companies based in other countries. We can even trade ETFs for the Indexes in the US like SPY, QQQ, and DIA. Sector Risk – There are nine sectors that companies fall into. The sectors also follow cycles where they are more preferred by investors and are bullish and also bearish. The sectors are: Consumer Discretionary, Technology, Basic Materials, Industrials, Energy, Consumer Staples, Services, Utilities and Financials. We discuss this rotation of sectors in our courses. There are several ETFs that we can use to trade the sectors. Industry Risk – Within the nine sectors there are over 200 industries that are more specific to what the company does/produces. They also fall into cycles. We have additional ETFs that allow us to trade specific industries. Company Risk – Individual stocks have risks from the company's operations. Missing earnings, accounting irregularities, and corporate member changes are all issues we face. Read more... To really be diversified, you should invest or trade in multiple asset classes such as Futures or Forex to spread your exposure out over different asset classes. Success comes from protecting your capital as much as it comes from making winning trades. To find out about managing risk at Online Trading Academy, sign up for a free workshop. Brandn Wendell Instructor Online Trading Academy

Top 10 Mistakes Traders Make When Filing Their Taxes Click for infographic

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