Stock Option Trading Millionaire Principles
Having actually been trading stocks and options in the capital markets professionally for many years, I have actually seen numerous ups and downs.
I have seen paupers become millionaires overnight …
And
I have seen millionaires end up being paupers over night …
One story told to me by my coach is still etched in my mind:
"When, there were 2 Wall Street stock exchange multi-millionaires. Both were very successful and chose to share their insights with others by offering their stock exchange projections 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 opinions. His buddies were naturally excited about what the two masters needed to say about the stock market`s instructions. When they asked their good friend, he was fuming mad. Baffled, they asked their good 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 alternative market, individuals can have different opinions of future market instructions and still revenue. The distinctions lay in the stock picking or alternatives method and in the mental attitude and discipline one uses in implementing that strategy.
I share here the basic stock and alternative trading principles I follow. By holding these concepts securely in your mind, they will guide you consistently to profitability. These concepts will assist you reduce your danger and enable you to evaluate both what you are doing right and what you might be doing wrong.
You might have read ideas similar to these before. I and others use them due to the fact that they work. And if you remember and assess these principles, your mind can use them to assist you in your stock and alternatives trading.
PRINCIPLE 1.
SIMPLICITY IS PROFICIENCY.
Wendy Kirkland
I learned this from Option Trading in Your Spare Time , When you feel that the stock and choices trading approach that you are following is too intricate even for simple understanding, it is most likely not the very best.
In all elements of effective stock and options trading, the most basic methods frequently emerge triumphant. In the heat of a trade, it is simple for our brains to become mentally strained. If we have a complex strategy, we can not keep up with the action. Easier is much better.
PRINCIPLE 2.
NO ONE IS GOAL ENOUGH.
If you feel that you have absolute control over your feelings and can be objective in the heat of a stock or choices trade, you are either a harmful types or you are an unskilled trader.
No trader can be absolutely objective, specifically when market action is unusual or hugely erratic. Much like the best storm can still shake the nerves of the most seasoned sailors, the ideal stock market storm can still unnerve and sink a trader extremely rapidly. For that reason, one should venture to automate as lots of 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 crucial concept.
The majority of stock and choices traders do the opposite …
They hang on to their losses way too long and view their equity sink and sink and sink, or they get out of their gains too soon just to see the price increase and up and up. In time, their gains never ever cover their losses.
This principle requires time to master effectively. Reflect upon this principle and examine your past stock and options trades. If you have actually been unrestrained, you will see its truth.
CONCEPT 4.
HESITATE TO LOSE CASH.
Are you like the majority of newbies who can`t wait to leap right into the stock and choices market with your money wishing to trade as soon as possible?
On this point, I have found that a lot of unprincipled traders are more afraid of losing out on "the next huge trade" than they hesitate of losing money! The key here is ADHERE TO YOUR TECHNIQUE! Take stock and alternatives trades when your strategy 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 get rid of your cash since you traded unnecessarily 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 options trade is going to be such a huge winner that you break your own money management rules and put in whatever you have? Do you remember what typically takes place after that? It isn`t quite, is it?
No matter how positive you may be when entering a trade, the stock and options market has a way of doing the unanticipated. Therefore, constantly stick to your portfolio management system. Do not compound your awaited wins due to the fact that you might end up compounding your very real losses.
PRINCIPLE 6.
ASSESS YOUR PSYCHOLOGICAL CAPABILITY PRIOR TO INCREASING CAPITAL OUTLAY.
You know by now how various paper trading and real stock and options trading is, don`t you?
In the very same way, after you get used to trading real money consistently, you discover it very various when you increase your capital by 10 fold, don`t you?
What, then, is the difference? The difference is in the emotional problem that features the possibility of losing more and more 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 comfortable trading approximately a couple of thousand or tens of thousands or hundreds of thousands? Know your capacity before dedicating the funds.
PRINCIPLE 7.
YOU ARE A BEGINNER AT EVERY TRADE.
Ever seemed like an expert after a few wins and then lose a lot on the next stock or alternatives trade?
Overconfidence and the incorrect sense of invincibility based on past wins is a dish for catastrophe. All experts respect their next trade and go through all the proper actions of their stock or choices strategy before entry. Treat every trade as the first trade you have ever made in your life. Never ever differ your stock or alternatives strategy. Never ever.
CONCEPT 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed a successful stock or options technique only to fail badly?
You are the one who identifies whether a technique succeeds or fails. Your character and your discipline make or break the method that you utilize not vice versa. Like Robert Kiyosaki says, "The financier is the property or the liability, not the investment."
Understanding yourself first will lead to eventual success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever changed your mind about how to carry out a technique? When you make changes day after day, you wind up capturing nothing but the wind.
Stock market 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, determine whether the entry, management, and exit satisfied every criteria in the strategy and whether you have followed it specifically before altering anything.
In conclusion …
I hope these easy standards that have led my ship out of the harshest of seas and into the very best harvests of my life will guide you too. Good Luck.