read one everydayWhen it comes to trading any instrument (stocks, bonds, CFDs, forex etc), there are many resources out there to help you learn the ropes. Online courses, seminars and even one-on-one training are available. But sometimes the best way to learn is the old-fashioned way – reading a book.
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To make money in the stock market, setting stops is an imprecise science and involves a lot of trial and error, but it is an integral part of being a successful trader. A good analogy is to compare stops to buying insurance for your business. Should you avoid insurance altogether just because you`re not sure exactly how much you need, or because it will cost you a little money? No. Instead, you estimate and do the best you can, and in the end it will be well worth the effort.
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Nothing we do in society prepares us to function effectively in the commodity markets and an environment with no real boundaries. But, most of us are brought up to function well in society, so we`ve acquired strategies for fulfilling our needs and desires that are geared toward social interaction and acceptance. We don`t just take what we want we take other people into consideration, too. Not only have we learned to depend on each other to fulfill our needs and desires, but in the process we`ve acquired many socially-based techniques for assuring that other people behave in a manner that is consistent with what we want.
When a options trader understand that it is important to set stops on all their positions, they often don`t know where to set them. As a options trader, how close should a stop be to price of the position they are entering? Should they be tight, set quite close to the price, or a little looser? What about trailing stops? Here are some factors to consider that will help the options trader decide where to place your stops. Not every one of these applies to every trade, but the ones that do will give you some useful guidelines.
Trading is often considered a risky business. But, no one denies that there are also great rewards to be found in the markets. This dichotomy appears in every trade made. The key to making good futures trades is to understand this fact, and calculate the risk to reward ratio of all futures trades you make. You need to know what the likely return of the trade is if it goes according to plan, and how much are you likely to lose if it doesn`t. You need to know this before you make one or more futures trades.
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You may or may not have heard of credit spread option trading but they can be used to profit in bullish, neutral or bearish conditions.
They are a cashflow generating strategy that involves both the buying and selling of either calls or puts of different strike prices but same expiration date to establish an overall ‘credit’ i.e. spendable cash.
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Writing Covered Calls is a conservative strategy where you buy a stock that you would like to invest in and then write a call option against that stock.
This is a cash generating strategy that not only offers downside protection that you otherwise wouldn’t enjoy if you just bought the stock, but also gives you the ability to generate a consistent monthly income, for only minutes of your time.
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In basic terms there are only 2 types of options you can trade, Calls and Puts. As a buyer of options you always want the underlying stock to go up if you buy calls and down if you buy puts.
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A LEAP (Long-term Equity Anticipation Product) is simply a long-dated option.
LEAP options that don’t expire upto 2 years into the future give the buyer much more time to be right about the future direction of a stock and at the same time offer tremedous leverage.
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This is a question that every option trader needs to ask themselves, especially those traders that are ‘stressed out’ and losing more often than they are winning.
This is because when you have an option trading system that you are truly comfortable with i.e. you have backtested it extensively and paper traded it on live market prices, you have built a solid foundation for your long-term success.
Read more on Are Your Option Trading System & Your Trading Psychology In Sync?…