Stock Option Trading Millionaire Principles
Having been trading stocks and alternatives in the capital markets expertly throughout the years, I have actually seen numerous ups and downs.
I have seen paupers end up being millionaires over night …
And
I have actually seen millionaires become paupers over night …
One story told to me by my coach is still etched in my mind:
"When, there were 2 Wall Street stock market multi-millionaires. Both were very successful and decided 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 viewpoints. His friends were naturally thrilled about what the two masters had to state about the stock market`s direction. When they asked their buddy, he was fuming mad. Baffled, they asked their buddy about his anger. He stated, `One said 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 alternative market, people can have various opinions of future market instructions and still earnings. The differences lay in the stock picking or alternatives method and in the mental attitude and discipline one uses in carrying out that strategy.
I share here the basic stock and option trading concepts I follow. By holding these principles firmly in your mind, they will assist you consistently to profitability. These concepts will help you decrease your risk and allow you to examine both what you are doing right and what you may be doing wrong.
You might have read ideas similar to these prior to. I and others use them since they work. And if you remember and reflect on these concepts, your mind can use them to assist you in your stock and alternatives trading.
PRINCIPLE 1.
SIMPLENESS IS PROFICIENCY.
Wendy Kirkland
I picked up this trick from Wendy Kirkland, When you feel that the stock and options trading method that you are following is too intricate even for simple understanding, it is most likely not the best.
In all aspects of effective stock and choices trading, the easiest approaches typically emerge triumphant. In the heat of a trade, it is simple for our brains to end up being mentally strained. If we have a complex method, we can not keep up with the action. Easier is better.
CONCEPT 2.
NOBODY 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 options trade, you are either a hazardous species or you are an inexperienced trader.
No trader can be definitely unbiased, especially when market action is unusual or extremely irregular. Just like the ideal storm can still shake the nerves of the most seasoned sailors, the ideal stock exchange storm can still unnerve and sink a trader very rapidly. Therefore, one should strive to automate as lots of important aspects of your technique as possible, especially your profit-taking and stop-loss points.
CONCEPT 3.
HANG 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 prematurely only to see the rate go up and up and up. With time, their gains never cover their losses.
This concept takes some time to master effectively. Contemplate this principle and evaluate your previous stock and options trades. If you have actually been unrestrained, you will see its truth.
CONCEPT 4.
HESITATE TO LOSE MONEY.
Are you like many novices who can`t wait to leap right into the stock and choices market with your cash wanting to trade as soon as possible?
On this point, I have actually discovered that the majority of unprincipled traders are more scared of missing out on "the next big trade" than they are afraid of losing money! The secret here is STICK TO YOUR TECHNIQUE! Take stock and options trades when your technique signals to do so and prevent taking trades when the conditions are not fulfilled. Exit trades when your technique states to do so and leave them alone when the exit conditions are not in place.
The point here is to be afraid to discard your cash since you traded needlessly and without following your stock and alternatives technique.
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 guidelines and put in whatever you have? Do you remember what usually 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. For that reason, constantly stick to your portfolio management system. Do not intensify your awaited wins since you may wind up intensifying your extremely real losses.
PRINCIPLE 6.
EVALUATE YOUR EMOTIONAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY.
You understand by now how various paper trading and genuine stock and options trading is, do not you?
In the very same way, after you get utilized to trading genuine money consistently, you find it incredibly various when you increase your capital by ten fold, don`t you?
What, then, is the distinction? The distinction is in the emotional concern that comes with the possibility of losing more and more real cash. 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, most traders understand their maximum capacity in both dollars and feeling. Are you comfortable trading up to a couple of thousand or 10s of thousands or numerous thousands? Know your capability prior to committing the funds.
CONCEPT 7.
YOU ARE A NOVICE AT EVERY TRADE.
Ever felt like a specialist 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 on past wins is a recipe for catastrophe. All specialists appreciate their next trade and go through all the appropriate actions of their stock or alternatives technique prior to entry. Deal with every trade as the very first trade you have actually ever made in your life. Never differ your stock or choices strategy. Never.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed a successful stock or options technique just to stop working severely?
You are the one who identifies whether a method prospers or fails. Your personality and your discipline make or break the method that you use not vice versa. Like Robert Kiyosaki says, "The financier is the asset or the liability, not the investment."
Understanding yourself initially will cause ultimate success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever altered 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 changes have more variables than can be mathematically formulated. By following a tested method, we are ensured that someone effective has actually stacked the odds in our favour. When you examine both winning and losing trades, identify whether the entry, management, and exit met every requirements in the method and whether you have actually followed it precisely prior to changing anything.
In conclusion …
I hope these simple guidelines that have actually led my ship of the harshest of seas and into the very best harvests of my life will guide you too. Best of luck.