Stock Option Trading Millionaire Concepts
Having actually been trading stocks and options in the capital markets expertly over the years, I have seen numerous ups and downs.
I have seen paupers end up being millionaires over night …
And
I have actually seen millionaires end up being paupers overnight …
One story informed to me by my mentor is still etched in my mind:
"As soon as, there were two Wall Street stock market multi-millionaires. Both were exceptionally successful and chose to share their insights with others by selling their stock market projections in newsletters. Each charged US$ 10,000 for their opinions. One trader was so curious to know their views that he spent all of his $20,000 cost savings to purchase both their opinions. His good friends were naturally delighted about what the two masters had to state about the stock market`s instructions. When they asked their friend, he was fuming mad. Baffled, they asked their good friend about his anger. He stated, `One said 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 option market, individuals can have various opinions of future market direction and still earnings. The distinctions lay in the stock picking or choices method and in the mental attitude and discipline one uses in carrying out that strategy.
I share here the fundamental stock and option trading principles I follow. By holding these concepts firmly in your mind, they will assist you regularly to success. These concepts will help you reduce your risk and allow you to evaluate both what you are doing right and what you might be doing wrong.
You might have read concepts similar to these prior to. I and others use them because they work. And if you remember and reflect on these principles, your mind can use them to guide you in your stock and options trading.
CONCEPT 1.
SIMPLICITY IS PROFICIENCY.
Wendy Kirkland
I learned this from -, When you feel that the stock and alternatives trading approach that you are following is too complicated even for simple understanding, it is probably not the best.
In all elements of effective stock and choices trading, the easiest methods typically emerge victorious. In the heat of a trade, it is easy for our brains to end up being mentally overloaded. If we have a complex strategy, we can not keep up with the action. Easier is much better.
CONCEPT 2.
NO ONE IS GOAL ENOUGH.
If you feel that you have outright control over your feelings and can be objective in the heat of a stock or choices trade, you are either an unsafe types or you are an unskilled trader.
No trader can be definitely objective, especially when market action is uncommon or extremely irregular. Similar to the best storm can still shake the nerves of the most experienced sailors, the perfect stock market storm can still unnerve and sink a trader really rapidly. For that reason, one must strive to automate as lots of critical aspects of your strategy as possible, specifically your profit-taking and stop-loss points.
PRINCIPLE 3.
HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most important principle.
Many stock and choices traders do the opposite …
They hang on to their losses way too long and watch their equity sink and sink and sink, or they leave their gains prematurely just to see the cost increase and up and up. In time, their gains never ever cover their losses.
This principle takes some time to master effectively. Reflect upon this principle and examine your past stock and choices trades. If you have actually been unrestrained, you will see its fact.
CONCEPT 4.
BE AFRAID TO LOSE CASH.
Are you like a lot of novices who can`t wait to jump right into the stock and choices market with your cash wanting to trade as soon as possible?
On this point, I have found that a lot of unprincipled traders are more scared of missing out on "the next big trade" than they hesitate of losing cash! The secret here is STAY WITH YOUR TECHNIQUE! Take stock and choices trades when your technique signals to do so and avoid taking trades when the conditions are not satisfied. Exit trades when your method says to do so and leave them alone when the exit conditions are not in place.
The point here is to be scared to throw away your cash due to the fact that you traded unnecessarily and without following your stock and choices method.
CONCEPT 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you definitely believe that your next stock or alternatives trade is going to be such a big winner that you break your own finance guidelines and put in whatever you have? Do you remember what generally occurs after that? It isn`t quite, is it?
No matter how confident you may be when entering a trade, the stock and options market has a method of doing the unanticipated. For that reason, constantly stay with your portfolio management system. Do not compound your expected wins since you might end up compounding your really real losses.
PRINCIPLE 6.
GAUGE YOUR EMOTIONAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY.
You understand by now how various paper trading and real stock and choices trading is, don`t you?
In the very same way, after you get utilized to trading genuine cash consistently, you discover it extremely different when you increase your capital by ten fold, do not you?
What, then, is the difference? The difference is in the emotional problem that includes the possibility of losing a growing number of genuine money. This happens when you cross from paper trading to genuine trading and likewise when you increase your capital after some successes.
After a while, most traders recognize their optimal capacity in both dollars and feeling. Are you comfortable trading as much as a few thousand or 10s of thousands or hundreds of thousands? Know your capacity before devoting the funds.
PRINCIPLE 7.
YOU ARE A NEWBIE AT EVERY TRADE.
Ever seemed like an expert after a few wins and then lose a lot on the next stock or choices trade?
Overconfidence and the false sense of invincibility based on past wins is a recipe for catastrophe. All specialists respect their next trade and go through all the correct steps of their stock or choices strategy before entry. Treat every trade as the very first trade you have ever made in your life. Never differ your stock or options strategy. Never.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or choices method only to stop working terribly?
You are the one who figures out whether a technique prospers or stops working. Your personality and your discipline make or break the strategy that you use not vice versa. Like Robert Kiyosaki says, "The investor is the possession or the liability, not the financial investment."
Understanding yourself initially will cause ultimate success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever changed your mind about how to execute a technique? When you make changes day after day, you end up catching nothing but the wind.
Stock exchange fluctuations have more variables than can be mathematically created. By following a tested technique, we are guaranteed that somebody successful has stacked the chances in our favour. When you examine both winning and losing trades, figure out whether the entry, management, and exit met every requirements in the strategy and whether you have followed it precisely prior to changing anything.
In conclusion …
I hope these easy guidelines that have led my ship out of the harshest of seas and into the best harvests of my life will direct you too. Best of luck.