Stock Option Trading Millionaire Principles
Having been trading stocks and options in the capital markets professionally over the years, I have seen many ups and downs.
I have seen paupers become millionaires over night …
And
I have seen millionaires become paupers overnight …
One story informed to me by my coach is still etched in my mind:
"When, there were 2 Wall Street stock market multi-millionaires. Both were incredibly successful and decided 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 savings to buy both their opinions. His friends were naturally delighted about what the two masters had to say about the stock market`s direction. When they asked their friend, he was fuming mad. Confused, they asked their friend about his anger. He stated, `One stated BULLISH and the other said 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 profit. The differences lay in the stock selecting or choices technique and in the mental attitude and discipline one utilizes in implementing that strategy.
I share here the fundamental stock and choice trading concepts I follow. By holding these concepts strongly in your mind, they will direct you regularly to profitability. These concepts will assist you reduce your danger and permit you to examine both what you are doing right and what you might be doing wrong.
You may have read concepts similar to these before. I and others utilize them because they work. And if you remember and assess these concepts, your mind can utilize them to guide you in your stock and choices trading.
CONCEPT 1.
SIMPLICITY IS MASTERY.
Wendy Kirkland
I picked this up from Option Trading in Your Spare Time, When you feel that the stock and alternatives trading technique that you are following is too complex even for basic understanding, it is most likely not the best.
In all aspects of effective stock and choices trading, the easiest methods often emerge triumphant. In the heat of a trade, it is simple for our brains to become mentally strained. If we have a complex method, we can not stay up to date with the action. Easier is much better.
PRINCIPLE 2.
NO ONE IS GOAL ENOUGH.
If you feel that you have absolute control over your emotions and can be objective in the heat of a stock or choices trade, you are either a hazardous types or you are an inexperienced trader.
No trader can be definitely unbiased, especially when market action is unusual or wildly erratic. Just like the best storm can still shake the nerves of the most seasoned sailors, the ideal stock exchange storm can still unnerve and sink a trader really quickly. Therefore, one must endeavor to automate as numerous important elements of your method as possible, especially your profit-taking and stop-loss points.
CONCEPT 3.
HOLD 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 see their equity sink and sink and sink, or they leave their gains too soon just to see the cost go up and up and up. In time, their gains never cover their losses.
This principle takes some time to master appropriately. Contemplate this principle and evaluate your previous stock and options trades. If you have actually been unrestrained, you will see its fact.
PRINCIPLE 4.
HESITATE TO LOSE CASH.
Are you like a lot of newbies who can`t wait to jump right into the stock and options market with your cash wanting to trade as soon as possible?
On this point, I have discovered that most unprincipled traders are more scared of missing out on "the next huge trade" than they hesitate of losing cash! The key here is STICK TO YOUR STRATEGY! Take stock and alternatives trades when your strategy signals to do so and prevent taking trades when the conditions are not met. Exit trades when your method 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 money due to the fact that you traded needlessly and without following your stock and choices strategy.
PRINCIPLE 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you absolutely think that your next stock or options trade is going to be such a huge winner that you break your own finance guidelines and put in whatever you have? Do you remember what generally takes place after that? It isn`t pretty, is it?
No matter how confident you might be when going into a trade, the stock and options market has a method of doing the unanticipated. Therefore, always adhere to your portfolio management system. Do not intensify your expected wins because you may end up intensifying your very real losses.
PRINCIPLE 6.
ASSESS YOUR EMOTIONAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY.
You understand by now how different paper trading and real stock and alternatives trading is, do not you?
In the very same way, after you get used to trading genuine money consistently, you discover it very different when you increase your capital by ten fold, don`t you?
What, then, is the difference? The difference is in the psychological concern that features the possibility of losing increasingly more genuine money. This takes place when you cross from paper trading to real trading and also when you increase your capital after some successes.
After a while, a lot of traders understand their maximum capability in both dollars and emotion. Are you comfortable trading as much as a few thousand or 10s of thousands or numerous thousands? Know your capability before devoting the funds.
PRINCIPLE 7.
YOU ARE An AMATEUR AT EVERY TRADE.
Ever felt like an expert after a few wins and after that lose a lot on the next stock or choices trade?
Overconfidence and the incorrect sense of invincibility based on past wins is a dish for disaster. All professionals respect their next trade and go through all the proper 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 technique. Never.
CONCEPT 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or choices strategy only to stop working terribly?
You are the one who determines whether a technique prospers or stops working. Your character and your discipline make or break the strategy that you use not vice versa. Like Robert Kiyosaki states, "The investor is the asset or the liability, not the financial investment."
Comprehending yourself first will lead to ultimate success.
CONCEPT 9.
CONSISTENCY.
Have you ever changed your mind about how to carry out a method? When you make changes day after day, you end up capturing nothing but the wind.
Stock exchange changes have more variables than can be mathematically created. By following a tested technique, we are guaranteed that somebody effective has actually stacked the chances in our favour. When you evaluate both winning and losing trades, determine whether the entry, management, and exit fulfilled every requirements in the technique and whether you have actually followed it specifically 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 guide you too. Good Luck.