Stock Options Trading Millionaire Concepts
Having actually been trading stocks and options in the capital markets expertly for many years, I have seen lots of ups and downs.
I have actually seen paupers become millionaires over night …
And
I have seen millionaires become paupers over night …
One story informed to me by my mentor is still etched in my mind:
"As soon as, there were two Wall Street stock exchange multi-millionaires. Both were exceptionally successful and decided to share their insights with others by selling their stock market forecasts in newsletters. Each charged US$ 10,000 for their opinions. One trader was so curious to understand their views that he invested all of his $20,000 cost savings to buy both their viewpoints. His friends were naturally thrilled about what the two masters had to say about the stock exchange`s direction. When they asked their buddy, he was fuming mad. Baffled, they asked their friend about his anger. He stated, `One stated BULLISH and the other stated BEARISH!`."
The point of this illustration is that it was the trader who was wrong. In today`s stock and choice market, people can have various viewpoints of future market direction and still profit. The differences lay in the stock selecting or choices method and in the mental attitude and discipline one uses in executing that method.
I share here the fundamental stock and option trading principles I follow. By holding these principles firmly in your mind, they will guide you regularly to profitability. These principles will help you decrease your danger and permit you to evaluate both what you are doing right and what you might be doing wrong.
You may have checked out ideas similar to these prior to. I and others use them since they work. And if you memorize and assess these principles, your mind can use them to direct you in your stock and alternatives trading.
CONCEPT 1.
SIMPLICITY IS MASTERY.
Wendy Kirkland
I picked up this trick from Option Trading Spare Time by Wendy Kirkland, When you feel that the stock and choices trading technique that you are following is too intricate even for simple understanding, it is most likely not the best.
In all elements of effective stock and choices trading, the easiest methods frequently emerge triumphant. In the heat of a trade, it is easy for our brains to become emotionally strained. If we have a complex method, we can not keep up with the action. Easier is much better.
PRINCIPLE 2.
NOBODY IS OBJECTIVE ENOUGH.
If you feel that you have absolute control over your feelings and can be objective in the heat of a stock or options trade, you are either a hazardous species or you are an inexperienced trader.
No trader can be definitely objective, particularly when market action is unusual or wildly unpredictable. Similar to the best storm can still shake the nerves of the most seasoned sailors, the best stock market storm can still unnerve and sink a trader very rapidly. For that reason, one need to strive to automate as numerous critical aspects of your technique as possible, particularly your profit-taking and stop-loss points.
CONCEPT 3.
HANG ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most essential principle.
The majority of stock and options traders do the opposite …
They hang on to their losses way too long and enjoy their equity sink and sink and sink, or they leave their gains too soon just to see the price go up and up and up. Over time, their gains never cover their losses.
This principle takes time to master appropriately. Reflect upon this concept and evaluate your previous stock and options trades. If you have been unrestrained, you will see its truth.
CONCEPT 4.
HESITATE TO LOSE MONEY.
Are you like many beginners who can`t wait to jump right into the stock and options market with your money wishing to trade as soon as possible?
On this point, I have discovered that the majority of unprincipled traders are more afraid of losing out on "the next huge trade" than they are afraid of losing cash! The key here is ADHERE TO YOUR STRATEGY! Take stock and choices trades when your strategy signals to do so and avoid taking trades when the conditions are not met. Exit trades when your strategy says to do so and leave them alone when the exit conditions are not in place.
The point here is to be afraid to get rid of your cash due to the fact that you traded unnecessarily and without following your stock and alternatives technique.
PRINCIPLE 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you definitely believe that your next stock or options trade is going to be such a big winner that you break your own money management rules and put in whatever you have? Do you remember what typically occurs after that? It isn`t quite, is it?
No matter how positive you may be when going into a trade, the stock and options market has a way of doing the unanticipated. For that reason, constantly adhere to your portfolio management system. Do not compound your awaited wins because you might end up compounding your really real losses.
PRINCIPLE 6.
DETERMINE YOUR EMOTIONAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY.
You know by now how different paper trading and genuine stock and choices trading is, do not you?
In the very same method, after you get used to trading genuine cash consistently, you discover it exceptionally various when you increase your capital by ten fold, do not you?
What, then, is the difference? The distinction is in the psychological problem that comes with the possibility of losing more and more genuine money. This takes place when you cross from paper trading to genuine trading and likewise when you increase your capital after some successes.
After a while, the majority of traders understand their optimal capacity in both dollars and emotion. Are you comfy trading up to a couple of thousand or tens of thousands or hundreds of thousands? Know your capability prior to devoting the funds.
CONCEPT 7.
YOU ARE A NOVICE AT EVERY TRADE.
Ever seemed like a specialist after a couple of wins and after that lose a lot on the next stock or options trade?
Overconfidence and the incorrect sense of invincibility based on previous wins is a dish for disaster. All experts appreciate their next trade and go through all the proper steps of their stock or choices technique prior to entry. Treat every trade as the first trade you have ever made in your life. Never differ your stock or choices method. Never.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or alternatives technique only to stop working terribly?
You are the one who figures out whether a strategy is successful or fails. Your character and your discipline make or break the method that you use not vice versa. Like Robert Kiyosaki states, "The financier is the asset or the liability, not the financial investment."
Understanding yourself first will cause eventual success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever changed your mind about how to carry out a strategy? When you make changes day after day, you end up capturing nothing but the wind.
Stock market variations have more variables than can be mathematically developed. By following a tested method, we are assured that someone effective has actually stacked the odds in our favour. When you examine both winning and losing trades, figure out whether the entry, management, and exit fulfilled every requirements in the strategy and whether you have followed it precisely before altering anything.
In conclusion …
I hope these easy guidelines that have led my ship of the harshest of seas and into the very best harvests of my life will direct you too. Best of luck.