Stock Option Trading Millionaire PrinciplesStock Option Trading Millionaire Principles
Stock Option Trading Millionaire Principles
Having been trading stocks and alternatives in the capital markets expertly over the years, I have seen lots of ups and downs.
I have actually seen paupers become millionaires over night …
And
I have actually seen millionaires end up being paupers overnight …
One story told to me by my mentor is still etched in my mind:
"Once, there were 2 Wall Street stock exchange multi-millionaires. Both were incredibly effective and chose 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 know their views that he spent all of his $20,000 savings to buy both their opinions. His friends were naturally delighted about what the two masters needed to state about the stock exchange`s direction. When they asked their pal, he was fuming mad. Baffled, they asked their 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 choice market, individuals can have various opinions of future market instructions and still earnings. The distinctions lay in the stock picking or choices method and in the mental attitude and discipline one utilizes in carrying out that technique.
I share here the basic stock and choice trading concepts I follow. By holding these principles securely in your mind, they will direct you consistently to success. These concepts will help you decrease your risk and permit you to evaluate both what you are doing right and what you may be doing wrong.
You may have read concepts comparable to these prior to. I and others use them due to the fact that they work. And if you remember and review these concepts, your mind can use them to direct you in your stock and alternatives trading.
PRINCIPLE 1.
SIMPLENESS IS PROFICIENCY.
Wendy Kirkland
I picked up this trick from Option Trading in Your Spare Time, When you feel that the stock and options trading approach that you are following is too complicated even for simple understanding, it is most likely not the best.
In all aspects of successful stock and alternatives trading, the simplest methods typically emerge victorious. In the heat of a trade, it is simple for our brains to end up being emotionally strained. If we have a complex method, we can not stay up to date with the action. Easier is better.
PRINCIPLE 2.
NOBODY IS OBJECTIVE ENOUGH.
If you feel that you have absolute control over your emotions and can be unbiased in the heat of a stock or options trade, you are either a harmful types or you are an inexperienced trader.
No trader can be definitely objective, specifically when market action is uncommon or extremely unpredictable. Just like the best storm can still shake the nerves of the most experienced sailors, the best stock market storm can still unnerve and sink a trader extremely quickly. Therefore, one need to endeavor to automate as numerous crucial aspects of your strategy as possible, especially your profit-taking and stop-loss points.
PRINCIPLE 3.
HANG ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most important concept.
Many stock and choices 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 prematurely just to see the price increase and up and up. In time, their gains never cover their losses.
This principle takes time to master properly. Reflect upon this principle and examine your previous stock and options trades. If you have actually been undisciplined, you will see its reality.
CONCEPT 4.
HESITATE TO LOSE MONEY.
Are you like many novices who can`t wait to jump right into the stock and alternatives market with your cash wishing to trade as soon as possible?
On this point, I have actually found that many unprincipled traders are more scared of losing out on "the next huge trade" than they are afraid of losing cash! The secret here is STICK TO YOUR TECHNIQUE! Take stock and alternatives trades when your method signals to do so and avoid taking trades when the conditions are not satisfied. Exit trades when your strategy states to do so and leave them alone when the exit conditions are not in place.
The point here is to be scared to discard your money since you traded needlessly and without following your stock and choices method.
PRINCIPLE 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you definitely believe that your next stock or choices trade is going to be such a huge winner that you break your own finance rules and put in whatever you have? Do you remember what normally occurs after that? It isn`t quite, is it?
No matter how confident you may be when getting in a trade, the stock and alternatives market has a way of doing the unanticipated. Therefore, constantly stay with your portfolio management system. Do not intensify your expected wins because you might end up intensifying your extremely real losses.
PRINCIPLE 6.
ASSESS YOUR EMOTIONAL CAPACITY PRIOR TO INCREASING CAPITAL OUTLAY.
You know by now how different paper trading and real stock and alternatives trading is, don`t you?
In the very same way, after you get used to trading genuine money regularly, you find it very different when you increase your capital by 10 fold, do not you?
What, then, is the distinction? The distinction is in the psychological problem that comes with the possibility of losing a growing number of real money. This happens when you cross from paper trading to genuine trading and also when you increase your capital after some successes.
After a while, the majority of traders recognize their optimal capability in both dollars and feeling. Are you comfy trading up to a few thousand or 10s of thousands or hundreds of thousands? Know your capability before committing the funds.
PRINCIPLE 7.
YOU ARE A NOVICE AT EVERY TRADE.
Ever felt like a professional after a few wins and after that lose a lot on the next stock or alternatives trade?
Overconfidence and the incorrect sense of invincibility based upon past wins is a recipe for catastrophe. All professionals appreciate their next trade and go through all the correct steps of their stock or alternatives method before entry. Treat every trade as the very first trade you have ever made in your life. Never ever deviate from your stock or choices technique. Never ever.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed a successful stock or alternatives technique just to fail badly?
You are the one who identifies whether a method prospers or fails. Your personality and your discipline make or break the technique that you use not vice versa. Like Robert Kiyosaki says, "The financier is the possession or the liability, not the financial investment."
Comprehending yourself initially will lead to eventual success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever altered your mind about how to execute a strategy? When you make changes day after day, you wind up catching nothing but the wind.
Stock exchange fluctuations have more variables than can be mathematically created. By following a proven strategy, we are guaranteed that someone effective has stacked the odds in our favour. When you examine both winning and losing trades, determine whether the entry, management, and exit satisfied every requirements in the technique and whether you have actually followed it exactly prior to altering anything.
In conclusion …
I hope these basic guidelines that have actually led my ship of the harshest of seas and into the best harvests of my life will assist you too. Good Luck.