About the author: This guest article is presented by Debtkid, who recently begun working part-time for LendingClub. He regularly writes at Debtkid about his journey to become debt free.

A few years back, I was playing poker at a bachelor party. There were about 12 guys there, and the pot was around $100. During the course of the game, I had a few large open positions in the foreign exchange market. I kept a laptop next to me during the poker game so I could watch my open trades. While I lost at poker that day, I made over $15,000 in a few hours with my laptop. I was 22 years old.

Too bad I was already down over $100,000 at that point. It would make for a much better story, huh?

I’m a recovering day trading addict. I day traded my first stock when I was 18, and continued to trade through college first with stocks, then options, then currencies. I gained access to capital from credit cards, personal loans and even family members as my trades got larger, and my risks more out of control.

I ended up with over a quarter million dollars in debt because of my losses.

I’m 25 now and have not traded for almost 2 years. I lost my home, my credit, a girlfriend, and nearly my sanity because of my addiction. I lived on the floor of my small office for two months, spending some nights in my car because it was more comfortable.

Things are going much better now. I still have a long way to go to pay off the debts I have from my addiction, but I’m making progress. I have a place to sleep, food to eat, and family and friends who care about me. I feel truly blessed.

Here are just a few of the lessons I’ve learned over the past few tumultuous years.

Invest for the right reasons
I first started day trading to make lots of money so I could impress a girl. Yes, I know. Worst reason ever. Once I started day trading, and I saw a little talent (aka beginner’s luck) in myself, I got greedy.

My trading soon became all about the money. How much could I make in a day? $1000? $5,000? $20,000? Yes. Yes. and Yes. The bigger gains I made the more confident I felt in taking out loans to cover my losses.

I was in big time denial. And yet I kept dreaming of a big house, a million dollar bank account, and impressing all my friends.

Invest for your child’s education. Invest so that you can retire in comfort. Invest so you can sleep well at night.

Don’t invest to make a quick buck. Or impress a girl.

Don’t trade what you don’t understand
I thought I knew how to trade FOREX (foreign exchange) from a technical perspective, because I had some limited success trading stocks as a technician. I was way off base.

Bottom line: If you don’t understand the investment completely, stay away from it.

Take risks based on your strengths, not blind luck
Take risks where you are in control and that involve your passions or talent.

Buying a random stock because some talking head recommended it is not taking a risk. That’s just gambling. Can you control the price of that stock? No.

Let’s look at current example of good vs. bad risk. You’re a programmer named Sam in silicon valley. You’re sitting on a nice bit of cash and you think it’s time to get into the real estate market. You read a few articles online and start looking at foreclosures to buy in Vegas and Miami.

Now let’s say there is a successful real estate agent named John in Vegas who’s made a killing the last few years and wisely stocked away a ton of cash. John knows the market well, so well in fact, he’s had a list of 5 properties on office wall the last few months he’s been just waiting for price drops on.

Who should be buying homes? The answer of course, is John, the real estate agent. Sam the programmer is much more likely to have success starting his own web startup. Risk is really a relative term. You can minimize risk and maximize your returns when you invest in where your talents lie.

You’ll never find a more motivated and trustworthy investment than you.

Don’t hide your mistakes. We’re all human.
For nearly 3 years I hid all my losses from my family, friends, everyone. I kept my secret because I thought I could still correct my errors all on my own. And that was my biggest mistake of all. Sometimes we all need a little help.

Had I shared some of my early trading mistakes with my Dad, I might have avoided the huge losses I accumulated. I could have learned my lesson after losing just 10,000, instead of after 300,000 when I hit absolute rock bottom.

Photo credits: chrischappelear, groud.zero

If you enjoyed this article, please visit Debtkid. You can follow Debtkid on twitter or subscribe to his blog.

Active stock trading has more in common with gambling than it does with investing. On top of that, it’s expensive gambling. When you step up to a quarter slot machine, you know each bet will cost a quarter. You don’t lose a nickel on each spin as a “transaction fee.” In order to play the stock market, with “play” being the operative word, you lose money right off the bat in the form of commissions.

So if you’re going to invest in stocks, it makes sense to find the least expensive option. Here are some of the more popular choices, updated October 5, 2008 to include TradeKing. What are your experiences with these brokerages?

TradeKing. This online brokerage features low $4.95 online trades. SmartMoney Magazine has awarded TradeKing the award for Best Discount Broker in 2006 and 2007 and Best Customer Service among discount brokerages in 2008. New account holders can qualify for a $50 bonus by maintaining a $2,500 minimum and executing one trade within six months.

ShareBuilder. ShareBuilder’s lowest commission fee on an account without a monthly fee is $4. Last year, ShareBuilder was incorporated into ING Direct. Out of all the discount brokerages listed here, ShareBuilder is the only one with which I’ve had direct experience, and I haven’t had any problems. I currently have three investment accounts, each initiated with free money from account opening bonuses. I invested in one exchange-traded fund and two stocks, MSFT and AKAM. The accounts haven’t fared well, but since I’m playing with small amounts of free money, I am not shouldering much overall risk to my portfolio.

If you trade more often, ShareBuilder is willing to give you a discount on your commissions and some free trades, but you’ll have to fork over $12 or $20 each month. Keep in mind that the low commission will only qualify you for a bulk purchase. That is, if I place a $4 order today, it won’t be executed until next Tuesday with all this week’s orders. If I wanted to purchase a stock in real time, I’d have to spend $9.95 for a real-time purchase.

No matter which monthly plan you join, you’ll have to pay a $9.95 fee for selling.

Zecco. Zecco offers up to ten free trades every month if you maintain a minimum of $2,500 with the brokerage. Otherwise, each trade costs $4.50. These are all real-time transactions, not bulk, like ShareBuilder. Zecco charges $10 if you want to buy a no-load mutual fund, however. That’s an unappealing fee, and it’s a reminder than one should keep holdings in an appropriate account. Zecco might be a good low-cost option for stock trading, but Vanguard and Fidelity might be more appropriate for mutual funds.

Both Zecco and ShareBuilder will not charge you for inactivity. It doesn’t hurt to let your account sit if you decide to stop trading, at least until they change their terms and decide to begin charging an inactivity fee.

E*TRADE. If you have less than $12,000 at E*trade, this brokerage will charge a $12.99 commission fee for each trade. Additionally, E*TRADE will charge a quarterly fee unless you meet one of the many conditions described here.

My comapny stock purchase plan is maintained by E*trade, and due to the market’s poor performance, I’m waiting until the stock is higher before selling my shares acquired over the past two quarters. By combining more share sales in one transaction in the future, I’m also saving on transaction fees. It costs $19.95 every time I sell ESPP shares, so I can save money by not selling four times a year (and also, I hope, waiting for the stock to rise).

Scottrade. Three years ago, Wachovia announced they were adding a $50 annual fee to my discount brokerage account. I tried to get the fee waived, but my protests fell on deaf ears. Rather than paying the $50 fee once and continuing to do so every year, I opted to pay the $75 account termination fee to move my funds to Scottrade. Scottrade offers no account fees other than the $7 commission for online trading. As I was holding only one mutual fund and I didn’t plan to do any trading, the account was free for me.

When I opened up my new Scottrade account, I was referred to a “local” branch. The closest branch was an hour away. I didn’t have to visit the branch to open my account and transfer the mutual fund shares, but they did call me quite often until they realized I wasn’t planning on buying any more products.

TD Ameritrade. TD Ameritrade is “that broker with the actor spokesperson,” formerly TD Waterhouse. To trade stocks online, TD Ameritrade charges a $9.95 commission.

These are the low-cost stock trading brokerages I am familiar with, though I’ve had personal experience with only a few. If there are any others I should know about, please leave a comment with some information. Also, please share your experiences and reviews.

Last month, ING Direct acquired ShareBuilder, a discount online brokerage. The two companies seem to make a good pair, so I think it was a good move for the company.

ShareBuilder has now lowered the commission charged for real-time trades to $9.95. Automatic investments, orders which are grouped together with many customers and executed as many as 7 days later, are still $4. Low prices make dabbling in the stock market more appealing to novices. Lower prices are always welcome, but is this a good thing? Personally, I’ll stick with my buy-and-hold strategy and wide diversification among stocks.

A few years ago, ShareBuilder was offering sign-up bonuses, so I used some free money to buy an ETF and two stocks, IYZ, MSFT, and AKAM. I can’t say that any one of these options has shown stellar performance since I placed the orders. This “play money” is only a small fraction of my investments.