Before I knew how to make money trading I was pretty much at the mercy of whatever company I worked at doing whatever job I could get. It's nice to be able to have the freedom to splurge once in a while or to not fear medical bills. Now that I know how to make money trading I have a great deal more flexibility as to how I spend my time and what I spend my money on. Although I do not trade that often, I only have to do so occasionally in order to earn the few extra dollars I need to make my life less stressful. Here's some tips on how I do it.

Only Risk Money You Can Afford to Lose

This is the number one lesson of investing. Do not trade with money you can not afford to lose. If you are playing with your cash for rent or mortgage funds, do not come crying to me when you lose your house or your apartment. If your girlfriend dumps you because you lost the spare cash set aside for groceries... don't look at me pal. You're the one who has to listen to the tirade.

Invest Efficiently and Sparingly: Don't Let Transaction Costs Kill You

The second most important lesson in how to make money trading involves knowing how much to invest at any one time. The television is filled with talking heads who insist that you spread your investments around so that you're properly diversified. What that ends up doing though is it spreads your funds too thin such that you never prop money for sale actually start making enough profits to get out of the rat race. In fact in most cases it almost ensures failure. The better strategy is to be very selective in where you take risks and then concentrate funds enough so that if your ship does in fact come in your profits will actually amount to something worth having. If you spread your cash too thin all your profits end up getting eaten by transaction costs - if you can even show a profit at all!

Use and Manage Leverage to Maximize Your Risk/Return Profile

The last lesson in how to make money trading involves using and understanding leverage. Leverage is basically the ability to buy $10,000 worth of securities (or more) with only $1,000 cash. Managing these kinds of trades and the risks they entail is not easy and requires at a minimum a basic understanding of options trades