Do you believe buy & hold is safe? Or that selling short is risky? Read below the top 4 myths that are widely believed, and keeping people from their trading potential. When you properly understand these myths, you will be leaps ahead of everyone else.
Myth #1 Selling Short Is Risky
This trading myth comes from the fact that some stocks can trade down to zero while there is no limit to how high that stock can trade. So losses for long positions are limited on the downside, but short positions can suffer unlimited losses.
But the belief that short selling is risky is preventing you from minimizing risk and preventing you making money. You see, selling short works just as well as buying long if done properly. The level of a positions risk depends on good money management methods.
A small percentage of traders have realized this and have developed a trading strategy to sell short and profit easily regardless of which way the stock market is moving.
Myth #2 Buying & Holding is Safe
This would have to be the most common trading myth, that stems from the belief that the stock market always goes up in the long run. This is true enough, but it can also take an extremely long time. Some markets have been known to drop dramatically, and not return for 25 years! Like the Dow Jones Industrial Average from 1929 to 1954.
It dropped so low during this time that no one would sit through it. Money managers who can duplicate the performance of the general market are very rare. You need an exit strategy that limits risk for every strategy, whether investor or trader.
A small percentage of traders are using a trading method that will actually apply to any market. This potentially gives them a winning edge. They aren’t simply buying, holding, and hoping like most traders do.
Myth #3 Trading is easy
If making money consistently from the stock market was easy, everyone would be doing it, and all be wealthy from it. Yeah, the physical part is easy enough, but many people have this idea that trading is easy, but they were never given the tools that make it easy.
It’s not that trading needs to be difficult, but it requires a solid trading method, and diligence on the traders part to stick with it. And unless you also trade with discipline and use good money management principals like the most successful traders, you can only hope to be less than successful.
Myth #4 The existence of the Holy Grail
I see far too many traders hopping from method to method, pursuing the next guaranteed thing only to be repeatedly let down. Newbies tend to think they should be able to win practically every trade. Thinking they should be having a straight line of wins without any major setbacks.
When armatures try something, they conclude that their system doesn’t work after the first few losses in a row. So they jump on something else. How can anyone expect to succeed this way. Unless you want to continue to suffer losing trades, and eventually give up, stop chasing this holy grail nonsense.
The holy grail of trading doesn’t exist. It would seem more than 90% of traders are wasting years of their life with this myth. Think of the progress, the money that could have been made, if they had spent that time and energy on a solid trading system, and a good trading method.
Where to go from here:
Well first, simply understand and clear your head of the above stock, and trading myths. Free yourself from these beliefs that restrain your potential as a trader. This will automatically put you in front of most traders.
There are a few traders however, less than 1%, who understand the above and more. who are quietly making a killing from the stock market, and are spending no more time trading than you. A lot of them keep their winning system and their successful trading secrets to themselves, but there are a few who will share this information with the public
Just remember, none of these super traders are born geniuses. And they don’t have a crystal ball forecasting the stock market. They simply have found a winning system that isn’t restricted to any time frame or market. The most successful traders are nobody special, apart from the stock market secrets they learned and diligence to put them in action.
Regardless of whether you trade Stocks, Options, Futures or Forex, or your level of experience, you can’t afford to keep buying and hoping. Stop leaving your success to chance when you can take control. It isn’t necessary to keep wasting all this time and money on the common trading methods. Even if you are ahead, the average trader could trade far more efficiently.
You too can become one of the very small percent of traders. Seriously, you just need to learn how to properly, plot the chart, the right setup conditions, the best entry point, stop loss point, and place your profit target point.
To learn how to do the things listed above, and for actual insider trading secrets on how the most profitable traders really do it - Read on.
By: Peter Bosch
About the Author:
Myth #1 Selling Short Is Risky
This trading myth comes from the fact that some stocks can trade down to zero while there is no limit to how high that stock can trade. So losses for long positions are limited on the downside, but short positions can suffer unlimited losses.
But the belief that short selling is risky is preventing you from minimizing risk and preventing you making money. You see, selling short works just as well as buying long if done properly. The level of a positions risk depends on good money management methods.
A small percentage of traders have realized this and have developed a trading strategy to sell short and profit easily regardless of which way the stock market is moving.
Myth #2 Buying & Holding is Safe
This would have to be the most common trading myth, that stems from the belief that the stock market always goes up in the long run. This is true enough, but it can also take an extremely long time. Some markets have been known to drop dramatically, and not return for 25 years! Like the Dow Jones Industrial Average from 1929 to 1954.
It dropped so low during this time that no one would sit through it. Money managers who can duplicate the performance of the general market are very rare. You need an exit strategy that limits risk for every strategy, whether investor or trader.
A small percentage of traders are using a trading method that will actually apply to any market. This potentially gives them a winning edge. They aren’t simply buying, holding, and hoping like most traders do.
Myth #3 Trading is easy
If making money consistently from the stock market was easy, everyone would be doing it, and all be wealthy from it. Yeah, the physical part is easy enough, but many people have this idea that trading is easy, but they were never given the tools that make it easy.
It’s not that trading needs to be difficult, but it requires a solid trading method, and diligence on the traders part to stick with it. And unless you also trade with discipline and use good money management principals like the most successful traders, you can only hope to be less than successful.
Myth #4 The existence of the Holy Grail
I see far too many traders hopping from method to method, pursuing the next guaranteed thing only to be repeatedly let down. Newbies tend to think they should be able to win practically every trade. Thinking they should be having a straight line of wins without any major setbacks.
When armatures try something, they conclude that their system doesn’t work after the first few losses in a row. So they jump on something else. How can anyone expect to succeed this way. Unless you want to continue to suffer losing trades, and eventually give up, stop chasing this holy grail nonsense.
The holy grail of trading doesn’t exist. It would seem more than 90% of traders are wasting years of their life with this myth. Think of the progress, the money that could have been made, if they had spent that time and energy on a solid trading system, and a good trading method.
Where to go from here:
Well first, simply understand and clear your head of the above stock, and trading myths. Free yourself from these beliefs that restrain your potential as a trader. This will automatically put you in front of most traders.
There are a few traders however, less than 1%, who understand the above and more. who are quietly making a killing from the stock market, and are spending no more time trading than you. A lot of them keep their winning system and their successful trading secrets to themselves, but there are a few who will share this information with the public
Just remember, none of these super traders are born geniuses. And they don’t have a crystal ball forecasting the stock market. They simply have found a winning system that isn’t restricted to any time frame or market. The most successful traders are nobody special, apart from the stock market secrets they learned and diligence to put them in action.
Regardless of whether you trade Stocks, Options, Futures or Forex, or your level of experience, you can’t afford to keep buying and hoping. Stop leaving your success to chance when you can take control. It isn’t necessary to keep wasting all this time and money on the common trading methods. Even if you are ahead, the average trader could trade far more efficiently.
You too can become one of the very small percent of traders. Seriously, you just need to learn how to properly, plot the chart, the right setup conditions, the best entry point, stop loss point, and place your profit target point.
To learn how to do the things listed above, and for actual insider trading secrets on how the most profitable traders really do it - Read on.
By: Peter Bosch
About the Author:
Peter Bosch is a young article author who has experience in most internet related subjects. For more crucial information on how you can trade far more effectively - Read on.
Filed under Investing by Administrator
October 31, 2008
The Truth about Stock Options and Options On Futures Trading
Let’s look at the basic facts about options trading before we go any further. Like any human endeavor, options trading is best described in very careful language so that there’s no confusion about our meaning. First, let’s take a look at exactly what an “option” is. An option refers to just that, the option to purchase certain stocks or certain commodity items by a certain date. This means you do not gain controlling interest in the stock or commodity until that date. For this reason, options can, and often do, expire worthless. There are two types of options contracts:
1) Contracts to buy blocks of stocks by a certain date 2) Commodity futures which are options to buy blocks of hard goods by a certain date
If you have options on 10,000 bushels of corn, whoever sold it to you cannot sell it to someone else until the expiration date of your contract has expired. In exchange for giving you this right, they wrote the contract and took money from you. If you don’t exercise your options prior to the expiration date, they will expect full control of their corn again, and will sell it someone else. What makes options such fascinating instruments are these facts:
1) With options you can sell that which you don’t own or ever plan on buying 2) You can buy something you don’t ever plan on physically holding and sell it for a profit
Another great thing about options is their inherent flexibility: although you have the right to buy or sell a certain stock or commodity, the choice is yours. You’re not forced to exercise your options. You can always sell your options contract to someone else. Many traders of commodities and options always sell the contracts only and have never taken physical possession of any underlying asset they’ve ever traded. The leverage in options gives you a chance to earn extremely high returns. These types of options we’re describing are referred to as covered options. With covered options you actually plan on or do own the underlying asset that you purchase options contracts for. Uncovered options are the exact opposite. Like the word uncovered means exposed, uncovered or naked options are considered more dangerous, because you are merely speculating without having an ownership interest. You are exposed to the risk without the benefit of owning the asset.
Options trading involves a great deal of leverage in the form of margin loans to your trading account. All options trades are highly leveraged, so you need to add margin interest to your calculated costs when considering a career in trading options. Pricing and potential returns on options trading depend very much on real world circumstances. If you purchase corn futures, for instance, there are literally hundreds of variables that affect the price of the corn, and hence your investment. If a corn shortage is expected in a certain part of the world, your investment might hit big because the price of corn could rise dramatically. On the contrary, perhaps government subsidies have introduced a glut of corn into the world market. In that case, your investment might tumble. Futures contracts for commodities and options contracts on stocks are strictly based on guessing what events will happen in the future. Of course you’ll always attempt to make as accurate as a guess as possible, but let’s face facts: in this world unforeseen things can and do happen. For this reason, protect your downside, and only invest with money you can afford to lose. Options trading can be very profitable, but unsurpisingly it’s also very risky.
By: Darren Mclaughlin
About the Author:
1) Contracts to buy blocks of stocks by a certain date 2) Commodity futures which are options to buy blocks of hard goods by a certain date
If you have options on 10,000 bushels of corn, whoever sold it to you cannot sell it to someone else until the expiration date of your contract has expired. In exchange for giving you this right, they wrote the contract and took money from you. If you don’t exercise your options prior to the expiration date, they will expect full control of their corn again, and will sell it someone else. What makes options such fascinating instruments are these facts:
1) With options you can sell that which you don’t own or ever plan on buying 2) You can buy something you don’t ever plan on physically holding and sell it for a profit
Another great thing about options is their inherent flexibility: although you have the right to buy or sell a certain stock or commodity, the choice is yours. You’re not forced to exercise your options. You can always sell your options contract to someone else. Many traders of commodities and options always sell the contracts only and have never taken physical possession of any underlying asset they’ve ever traded. The leverage in options gives you a chance to earn extremely high returns. These types of options we’re describing are referred to as covered options. With covered options you actually plan on or do own the underlying asset that you purchase options contracts for. Uncovered options are the exact opposite. Like the word uncovered means exposed, uncovered or naked options are considered more dangerous, because you are merely speculating without having an ownership interest. You are exposed to the risk without the benefit of owning the asset.
Options trading involves a great deal of leverage in the form of margin loans to your trading account. All options trades are highly leveraged, so you need to add margin interest to your calculated costs when considering a career in trading options. Pricing and potential returns on options trading depend very much on real world circumstances. If you purchase corn futures, for instance, there are literally hundreds of variables that affect the price of the corn, and hence your investment. If a corn shortage is expected in a certain part of the world, your investment might hit big because the price of corn could rise dramatically. On the contrary, perhaps government subsidies have introduced a glut of corn into the world market. In that case, your investment might tumble. Futures contracts for commodities and options contracts on stocks are strictly based on guessing what events will happen in the future. Of course you’ll always attempt to make as accurate as a guess as possible, but let’s face facts: in this world unforeseen things can and do happen. For this reason, protect your downside, and only invest with money you can afford to lose. Options trading can be very profitable, but unsurpisingly it’s also very risky.
By: Darren Mclaughlin
About the Author:
Please visit the Options Trading Forum for more information on Trading Options
Filed under Finance by Administrator
October 11, 2008
Tips for Better Options Trading
There are two types of options available: call options and put options.
Call options give the taker the right but not the obligation to buy the shares at a specific price on or before a specific date.
The put options give the taker the right but not the obligation to sell the shares at a specific price on or before a specific date. The taker of a put is only required to deliver the underlying shares if they exercise option.
There are a few advantages in option trading:
Put options allow you to hedge against a possible fall in the price of the shares you hold. You can consider taking it out as insurance against a loss in the share price.
By taking a call option, the purchase price for the shares is locked in. This gives the call option holder until the expiry date to decide whether he or she will or will not buy the shares. This is also applicable to the taker; he or she has to decide whether or not to sell the shares before the deadline.
The ease of trading in and out of an option position makes it possible to trade options with no intention of ever exercising them. If you expect the market to rise, you may want to buy call options, and if you are expecting a fall in the market, you may decide to buy put options. This means that you can sell the option prior to the expiry date to take a profit or limit a loss.
Options also allow you to build a diversified portfolio for a lower initial outlay than purchasing shares directly.
The income generation for options can get you profits over dividends by writing call options against your shares. By writing an option, you receive the option premium up front. While you get to keep the option premium, it is possible that you could be exercised against and have to deliver your shares to the taker at the exercise price. This strategy uses stock bought on margin.
By combining different options, or stocks with options, you can create a wide range of strategies.
You can earn extra income by writing options against shares you already own or are purchasing. This is one of the simplest and most rewarding strategies.
Using options gives you time to decide. Taking a call option can give you time to decide if you want to buy shares. You pay the premium, which is only a fraction of the price of the underlying shares.
The option then locks in a buying price for the shares if you decide to exercise. You then have until the expiry date of the option to decide if you want to buy the shares. This is the same as to the put option.
Keep in mind that, same as any other trades do not trade what you cannot afford to lose.
By: Sue Jan
About the Author:
Call options give the taker the right but not the obligation to buy the shares at a specific price on or before a specific date.
The put options give the taker the right but not the obligation to sell the shares at a specific price on or before a specific date. The taker of a put is only required to deliver the underlying shares if they exercise option.
There are a few advantages in option trading:
Put options allow you to hedge against a possible fall in the price of the shares you hold. You can consider taking it out as insurance against a loss in the share price.
By taking a call option, the purchase price for the shares is locked in. This gives the call option holder until the expiry date to decide whether he or she will or will not buy the shares. This is also applicable to the taker; he or she has to decide whether or not to sell the shares before the deadline.
The ease of trading in and out of an option position makes it possible to trade options with no intention of ever exercising them. If you expect the market to rise, you may want to buy call options, and if you are expecting a fall in the market, you may decide to buy put options. This means that you can sell the option prior to the expiry date to take a profit or limit a loss.
Options also allow you to build a diversified portfolio for a lower initial outlay than purchasing shares directly.
The income generation for options can get you profits over dividends by writing call options against your shares. By writing an option, you receive the option premium up front. While you get to keep the option premium, it is possible that you could be exercised against and have to deliver your shares to the taker at the exercise price. This strategy uses stock bought on margin.
By combining different options, or stocks with options, you can create a wide range of strategies.
You can earn extra income by writing options against shares you already own or are purchasing. This is one of the simplest and most rewarding strategies.
Using options gives you time to decide. Taking a call option can give you time to decide if you want to buy shares. You pay the premium, which is only a fraction of the price of the underlying shares.
The option then locks in a buying price for the shares if you decide to exercise. You then have until the expiry date of the option to decide if you want to buy the shares. This is the same as to the put option.
Keep in mind that, same as any other trades do not trade what you cannot afford to lose.
By: Sue Jan
About the Author:
For More Article Visit :: http://www.thearticleinsiders.com/
Filed under Finance by Administrator