Stock Option Trading Millionaire Principles
Having been trading stocks and options in the capital markets professionally for many years, I have actually seen many ups and downs.
I have actually seen paupers become millionaires over night …
And
I have seen millionaires end up being paupers overnight …
One story informed to me by my mentor is still engraved in my mind:
"When, there were two Wall Street stock market multi-millionaires. Both were very successful and chose to share their insights with others by offering their stock market forecasts 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 purchase both their opinions. His buddies were naturally excited about what the two masters had to state about the stock exchange`s direction. When they asked their friend, he was fuming mad. Confused, they asked their pal 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 choice market, people can have different opinions of future market instructions and still earnings. The distinctions lay in the stock picking or options strategy and in the mental attitude and discipline one utilizes in implementing that method.
I share here the standard stock and choice trading concepts I follow. By holding these concepts securely in your mind, they will assist you consistently to success. These concepts will assist you decrease your danger and enable you to examine both what you are doing right and what you might be doing wrong.
You might have read ideas similar to these prior to. I and others use them since they work. And if you memorize and reflect on these principles, your mind can use them to assist you in your stock and options trading.
PRINCIPLE 1.
SIMPLICITY IS MASTERY.
Wendy Kirkland
I picked up this trick from -, When you feel that the stock and options trading method that you are following is too complicated even for basic understanding, it is most likely not the very best.
In all elements of effective stock and choices trading, the most basic methods often emerge triumphant. In the heat of a trade, it is easy for our brains to end up being mentally strained. If we have a complex strategy, we can not stay up to date with the action. Easier is better.
CONCEPT 2.
NOBODY IS OBJECTIVE ENOUGH.
If you feel that you have absolute control over your feelings and can be unbiased in the heat of a stock or choices trade, you are either a dangerous types or you are an inexperienced trader.
No trader can be absolutely objective, particularly when market action is uncommon or hugely irregular. Much like the perfect storm can still shake the nerves of the most seasoned sailors, the perfect stock exchange storm can still unnerve and sink a trader very quickly. For that reason, one must endeavor to automate as lots of vital aspects of your method as possible, particularly your profit-taking and stop-loss points.
CONCEPT 3.
HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most important concept.
Many stock and alternatives traders do the opposite …
They hold on to their losses way too long and watch their equity sink and sink and sink, or they leave their gains prematurely just to see the rate go up and up and up. Over time, their gains never ever cover their losses.
This concept requires time to master effectively. Contemplate this concept and review your past stock and options trades. If you have been unrestrained, you will see its reality.
PRINCIPLE 4.
HESITATE TO LOSE CASH.
Are you like many beginners who can`t wait to jump right into the stock and choices market with your money wanting to trade as soon as possible?
On this point, I have discovered that most unprincipled traders are more afraid of missing out on "the next huge trade" than they hesitate of losing money! The key here is ADHERE TO YOUR METHOD! 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 says to do so and leave them alone when the exit conditions are not in place.
The point here is to be afraid to get rid of your cash since you traded unnecessarily and without following your stock and alternatives strategy.
PRINCIPLE 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you absolutely 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 everything you have? Do you remember what typically happens after that? It isn`t pretty, is it?
No matter how positive you might be when going into a trade, the stock and choices market has a way of doing the unforeseen. Therefore, constantly stay with your portfolio management system. Do not compound your anticipated wins due to the fact that you may wind up intensifying your very real losses.
CONCEPT 6.
ASSESS YOUR PSYCHOLOGICAL CAPABILITY BEFORE INCREASING CAPITAL OUTLAY.
You understand by now how various paper trading and genuine stock and alternatives trading is, don`t you?
In the very same method, after you get utilized to trading real cash consistently, you discover it exceptionally different when you increase your capital by 10 fold, do not you?
What, then, is the difference? The distinction remains in the psychological problem that comes with the possibility of losing a growing number of genuine money. This occurs when you cross from paper trading to real trading and also when you increase your capital after some successes.
After a while, the majority of traders understand their optimal capacity in both dollars and feeling. Are you comfy trading approximately a few thousand or tens of thousands or hundreds of thousands? Know your capability prior to committing the funds.
PRINCIPLE 7.
YOU ARE An AMATEUR AT EVERY TRADE.
Ever seemed like an expert after a few wins and after that lose a lot on the next stock or alternatives trade?
Overconfidence and the false sense of invincibility based on previous wins is a dish for disaster. All experts appreciate their next trade and go through all the appropriate steps of their stock or options technique before entry. Treat every trade as the very first trade you have ever made in your life. Never ever deviate from your stock or alternatives method. Never ever.
CONCEPT 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or choices technique only to fail badly?
You are the one who identifies whether a method prospers or stops working. Your personality and your discipline make or break the strategy that you utilize not vice versa. Like Robert Kiyosaki states, "The financier is the possession or the liability, not the investment."
Understanding yourself initially will result in eventual 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 catching nothing but the wind.
Stock market fluctuations have more variables than can be mathematically formulated. By following a proven technique, we are assured that someone effective has actually stacked the odds in our favour. When you review both winning and losing trades, figure out whether the entry, management, and exit fulfilled every criteria in the strategy and whether you have followed it specifically prior to changing anything.
In conclusion …
I hope these simple guidelines that have led my ship of the harshest of seas and into the very best harvests of my life will assist you too. All the best.