November 1, 2008
Penny Priced Stock Options
Sometimes investors feel that they do not have sufficient leverage. When this happens, they find it difficult to use the opportunities that present themselves and make a profit from them. Penny options are one good way to gain leverage and build your portfolio at the same time.
A lot of stocks are priced incrementally – for example, at five or ten cent increments. Penny stock pricing methods do not use increments but vary by pennies. Traders can increase their leverage with penny stocks because they can get into trading with less capital to start with and if their stocks should fail, they have not lost too much.
With penny options, you can make a profit in a relatively short time because you are playing in a smaller field and with less money. A lot of people like the penny stock idea because you cannot lose more than your initial investment. Options, as opposed to underlying stock, do have some drawbacks though. Penny options can change massively in a short period of time. These might be positive changes for you or negative.
It is important to find out whether a penny option would suit your requirements. A penny stock might be cheap but perhaps the liquidity does not suit your needs. You have to find out what the brokerage cancellation policy is too. Also, ask what the time decay of the options is before purchasing them. Before you buy anything, ask yourself for how long you plan to be trading the options. You should buy options that expire well after when you plan to sell, so if you want to trade an option for 10 days, choose one ending in 30 or 40 days.
If you already decided that you are going to trade for one day only, there is no need to worry about expiration dates. The front month option should work fine for you in this instance. Penny options are not actually that common these days. Traders and crafty brokerage firms use the method so others should catch up soon.
You have to be patient when trading penny stocks. The options can move quite a lot in just a few minutes so if you are too nervous, you need to relax rather than panic. If you are prone to panic and stress, maybe penny options are not a good idea for you.
If you are interested in increasing leverage but do not have enough capital to begin with blue chips, penny options are a good way to start.
By: Mark Crisp
About the Author:
A lot of stocks are priced incrementally – for example, at five or ten cent increments. Penny stock pricing methods do not use increments but vary by pennies. Traders can increase their leverage with penny stocks because they can get into trading with less capital to start with and if their stocks should fail, they have not lost too much.
With penny options, you can make a profit in a relatively short time because you are playing in a smaller field and with less money. A lot of people like the penny stock idea because you cannot lose more than your initial investment. Options, as opposed to underlying stock, do have some drawbacks though. Penny options can change massively in a short period of time. These might be positive changes for you or negative.
It is important to find out whether a penny option would suit your requirements. A penny stock might be cheap but perhaps the liquidity does not suit your needs. You have to find out what the brokerage cancellation policy is too. Also, ask what the time decay of the options is before purchasing them. Before you buy anything, ask yourself for how long you plan to be trading the options. You should buy options that expire well after when you plan to sell, so if you want to trade an option for 10 days, choose one ending in 30 or 40 days.
If you already decided that you are going to trade for one day only, there is no need to worry about expiration dates. The front month option should work fine for you in this instance. Penny options are not actually that common these days. Traders and crafty brokerage firms use the method so others should catch up soon.
You have to be patient when trading penny stocks. The options can move quite a lot in just a few minutes so if you are too nervous, you need to relax rather than panic. If you are prone to panic and stress, maybe penny options are not a good idea for you.
If you are interested in increasing leverage but do not have enough capital to begin with blue chips, penny options are a good way to start.
By: Mark Crisp
About the Author:
Mark Crisp is the Weekly Momentum Stock Trader Get your free momentum stock trading course at: http://www.stressfreetrading.com
Filed under Finance by Administrator
October 31, 2008
You Will Never Make Money Trading Stocks, Futures Or Forex Part 1
You may think you know what a CFD, a currency pair, or an option is, but you probably don’t know anywhere near as much as you should. For example, trading a CFD and an option using the same outlay can result in two completely different scenarios; the CFD can take out your initial outlay, plus more sometimes resulting in a margin call (if you know what one of these are). Bad traders can have their entire capital wiped in very short time if they’re not careful.
An option on the other hand can only ever go to zero; in other words, you can only lose your initial outlay, but with options there is a thing called time decay, which simply means, the longer you hold an option, (all else being equal), the less valuable your option becomes. CFD’s don’t have time decay, but they do incur interest when bought for every 24 hours you hold the position open.
Options also have various components that go into making up their price, including time (already mentioned), and intrinsic value, not to mention a few others. A lot of newbie options traders are bewildered when they see the underlying asset go up in price yet their call option does nothing. For some reason it escapes these people that it may be a good idea to learn what an option is.
So if you decide you think the little green bar is going to keep going up, what do you buy an option, CFD or just the stock? Then there are market makers and brokers, regulators, and laws which differ greatly between just these two derivatives markets. You can’t trade CFD’s in the US, so what happens if you get sold on a real great trading system promising huge returns only to find out that the owner of the system lives in the UK and trades his system with CFD’s?
Then you have Forex, the market where people think they can start with a measly $10! Unlike all other markets, Forex has two opposing forces at play. By buying the EUR/USD, you are in fact buying the Euro currency with US Dollars, and if you live outside the US, then you’ve got to factor in the currency exchange rate between the US dollar and your own currency, otherwise you have no idea what you’re risking.
Another example; if I live in New Zealand and I decide to go short the CAD/JPY pair, how do I work out my risk for the trade? Well for starters, going short the CAD/JPY means I am buying Japanese Yen, with Canadian Dollars. How many of these Canadian Dollars am I willing to risk so I only risk ‘X’ amount New Zealand Dollars?
This is not to mention that fact that CFD and Forex markets are unregulated. If you think you’re getting the same price at any given time as someone else on the other side of the world, think again, because you aren’t!
Futures and Commodities; Ah, the big juicy bull market that no one seemed to care about when our little friend with the bow tie was singing from the rooftops to an empty street. Of course now that our favourite money channels can’t stop talking about them everyone else seems interested. Have you ever seen the little pop up ad claiming an 80% success rate trading Oil? Well that’s all good and dandy but unless you have the capital to trade Oil, it’s absolutely hopeless to you. The standard method of trading one Oil contract requires you have about a $4000 margin. Check out the margin requirements to trade all the other commodities in the news lately, Wheat, Corn, Sugar, and Gold.
Rest assured, now that we have a bull market in commodities, the ways in which one can trade these markets will explode allowing smaller margins and more retail traders to experiment (yes that’s what the majority will be doing even if they don’t know it). However, these instruments all have their own characteristics that you need to learn.
Every market is different, it has different characteristics, different laws and regulations (if at all), they act differently, and they have different driving forces fundamentally. Pick one or two markets to learn and get comfortable with them, but for goodness sake, pick the markets that will suit you and your goals and allow you to trade with the limited resources you have available.
By: Dean Whittingham
About the Author:
An option on the other hand can only ever go to zero; in other words, you can only lose your initial outlay, but with options there is a thing called time decay, which simply means, the longer you hold an option, (all else being equal), the less valuable your option becomes. CFD’s don’t have time decay, but they do incur interest when bought for every 24 hours you hold the position open.
Options also have various components that go into making up their price, including time (already mentioned), and intrinsic value, not to mention a few others. A lot of newbie options traders are bewildered when they see the underlying asset go up in price yet their call option does nothing. For some reason it escapes these people that it may be a good idea to learn what an option is.
So if you decide you think the little green bar is going to keep going up, what do you buy an option, CFD or just the stock? Then there are market makers and brokers, regulators, and laws which differ greatly between just these two derivatives markets. You can’t trade CFD’s in the US, so what happens if you get sold on a real great trading system promising huge returns only to find out that the owner of the system lives in the UK and trades his system with CFD’s?
Then you have Forex, the market where people think they can start with a measly $10! Unlike all other markets, Forex has two opposing forces at play. By buying the EUR/USD, you are in fact buying the Euro currency with US Dollars, and if you live outside the US, then you’ve got to factor in the currency exchange rate between the US dollar and your own currency, otherwise you have no idea what you’re risking.
Another example; if I live in New Zealand and I decide to go short the CAD/JPY pair, how do I work out my risk for the trade? Well for starters, going short the CAD/JPY means I am buying Japanese Yen, with Canadian Dollars. How many of these Canadian Dollars am I willing to risk so I only risk ‘X’ amount New Zealand Dollars?
This is not to mention that fact that CFD and Forex markets are unregulated. If you think you’re getting the same price at any given time as someone else on the other side of the world, think again, because you aren’t!
Futures and Commodities; Ah, the big juicy bull market that no one seemed to care about when our little friend with the bow tie was singing from the rooftops to an empty street. Of course now that our favourite money channels can’t stop talking about them everyone else seems interested. Have you ever seen the little pop up ad claiming an 80% success rate trading Oil? Well that’s all good and dandy but unless you have the capital to trade Oil, it’s absolutely hopeless to you. The standard method of trading one Oil contract requires you have about a $4000 margin. Check out the margin requirements to trade all the other commodities in the news lately, Wheat, Corn, Sugar, and Gold.
Rest assured, now that we have a bull market in commodities, the ways in which one can trade these markets will explode allowing smaller margins and more retail traders to experiment (yes that’s what the majority will be doing even if they don’t know it). However, these instruments all have their own characteristics that you need to learn.
Every market is different, it has different characteristics, different laws and regulations (if at all), they act differently, and they have different driving forces fundamentally. Pick one or two markets to learn and get comfortable with them, but for goodness sake, pick the markets that will suit you and your goals and allow you to trade with the limited resources you have available.
By: Dean Whittingham
About the Author:
Dean Whittingham created A Traders Universe – Trading System Development in 2005 as a resource site for traders of all levels, with education, courses, brokers, tips, free videos, newsletters, trading systems, simulations and a free 7 step process for building a profitable stock, futures or forex trading system. His coaching program is at Pentagonal Trading System Development
Filed under Finance by Administrator
October 12, 2008
Keeping your Emotions at Bay When Trading Stocks, Futures or Forex
If you’ve been trading for a while, I bet you have had situations where you just felt beaten. You then either came close to quitting, or you tried to re-assure yourself with positive affirmations which at the time felt like a waste of time. If you’re a novice trader this is bound to happen, as your aim is to make money!
Feelings like this can cause you to trade impulsively, whereby you trade with too much risk at the hope of hitting a big winner. You do this because you may want that feeling of success, pride, adrenalin and so on. The problem with this is that should the trade go wrong, you can turn that beaten feeling into a more severe depressed state of mind.
Changing your mindset to become more detached is easier said than done but there are a few things you can do, and with practice and awareness, they can become a lot easier to implement.
Accept losses. You need to accept that losses will occur. Every single trader out there has to deal with losses, so thinking that you’re alone when it comes to dealing with losses is just silly. Before you set out to trade, you should remind yourself that losses occur.
Now the trick here is not to expect a loss every time you trade. This is a negative mindset and believe it or not, if you expect to have a loss every single time you trade, your mind will play tricks on you and make you do things to support your belief. The mind is a very powerful organ!
Instead, rehearse how you will respond to a loss. Before you trade next, visualize placing the trade and then seeing price go against you and actually taking out your stop. Now monitor your posture, your facial expressions, how you are around other people, especially loved ones and so on.
If you’re not happy with the way you respond, in other words you react, then visualize a different response. It will take practice but you do need to be aware of how you respond or react to losses, because once you become aware, you can prepare better and therefore practice a better way.
Once you become aware and change your response, losses won’t hurt you as much, because you’re prepared for them and you now know how you’ll respond.
Finally, be very careful how much of your capital you risk. Can you afford to lose $100 in a trade without it affecting your account balance and your emotions too much? If you answer yes, then only risk that much. Why put yourself in a state of uneasiness and stress, when you don’t need to. Rather than going with a fixed percentage of your capital in every trade, risk what you know you can handle to lose. If it’s only $50 then only risk that.
You should know by now that most of the time, if you only lose a small amount of money you can find it again from somewhere else. It’s when you go for the big home runs that you risk your capital and your emotional state. Don’t let the lure of a big home run ruin the long term rewards of becoming a disciplined, detached and unemotional trader….
By: Dean T Whittingham
About the Author:
Feelings like this can cause you to trade impulsively, whereby you trade with too much risk at the hope of hitting a big winner. You do this because you may want that feeling of success, pride, adrenalin and so on. The problem with this is that should the trade go wrong, you can turn that beaten feeling into a more severe depressed state of mind.
Changing your mindset to become more detached is easier said than done but there are a few things you can do, and with practice and awareness, they can become a lot easier to implement.
Accept losses. You need to accept that losses will occur. Every single trader out there has to deal with losses, so thinking that you’re alone when it comes to dealing with losses is just silly. Before you set out to trade, you should remind yourself that losses occur.
Now the trick here is not to expect a loss every time you trade. This is a negative mindset and believe it or not, if you expect to have a loss every single time you trade, your mind will play tricks on you and make you do things to support your belief. The mind is a very powerful organ!
Instead, rehearse how you will respond to a loss. Before you trade next, visualize placing the trade and then seeing price go against you and actually taking out your stop. Now monitor your posture, your facial expressions, how you are around other people, especially loved ones and so on.
If you’re not happy with the way you respond, in other words you react, then visualize a different response. It will take practice but you do need to be aware of how you respond or react to losses, because once you become aware, you can prepare better and therefore practice a better way.
Once you become aware and change your response, losses won’t hurt you as much, because you’re prepared for them and you now know how you’ll respond.
Finally, be very careful how much of your capital you risk. Can you afford to lose $100 in a trade without it affecting your account balance and your emotions too much? If you answer yes, then only risk that much. Why put yourself in a state of uneasiness and stress, when you don’t need to. Rather than going with a fixed percentage of your capital in every trade, risk what you know you can handle to lose. If it’s only $50 then only risk that.
You should know by now that most of the time, if you only lose a small amount of money you can find it again from somewhere else. It’s when you go for the big home runs that you risk your capital and your emotional state. Don’t let the lure of a big home run ruin the long term rewards of becoming a disciplined, detached and unemotional trader….
By: Dean T Whittingham
About the Author:
Dean Whittingham created A Traders Universe – Trading System Development in 2005 as a resource site for traders of all levels, with eduction, courses, brokers, tips, free videos, newsletters, trading systems, simulations and a free 7 step process for building a profitable stock, futures or forex trading system.
Filed under Investing by Administrator
Stock Trading is of great interest to many people. Stock trading is an exciting, shorter term strategy where it is you against the market. Stock trading is one of the most exciting things you can do, but it does require a lot of skill and discipline to succeed. Stock trading is done at at a stock exchanges, which are places where buyers and sellers meet and decide on a price. Stock trading is affected by supply and demand. Online stock trading is considered one of the best ways for valmost anyone to get in on the market. One of the best resources out there on the internet today for the investor looking to educate him or her self about online stock trading is http://dowtrend.com and http://tradelikethepros.com. Online stock trading is all about selecting the best stock opportunities and following your buy and sell signals.
Trading
Trading stocks online is downright fun if you enjoy the art of maximizing gains and protecting them by minimizing risks. Trading stock online has been becoming popular tremendously as a large percentage of population is having an access to the computers. Trading a stock basically means you are either buying or selling. You will need to be well-disciplined and goal orientated, as these are the main skills that separate winners and losers in the trading world. Online trading can be a good way to make a lot of money or to bring a small residual income to supplement your regular income. Being greedy in the online stock trading world can cost you a lot of money; however, you will be able to find advice everyone on the Internet about online stock trading; and if you follow the advice properly, then you may be able to make your living off of the stock market alone.
Stocks
Stocks that are well traded have a group of major traders and those traders have habits, patterns. It seems pretty easy to make money by trading stocks but predicting short term price movements and to benefit from that is very difficult in real life. You need a system or set of indicators to find stocks to trade. Fortunately, with a little education and a little research the average stock trader can decide whether online stocks are the right tools for success or if they are more comfortable sticking with traditional venues. When it comes to finding stocks, there are free stock screeners but you can also spend hundreds of dollars per month, it all depends on what you are looking for and how close to the market you want to be. Discipline is required for every decision and action you make while trading stocks. Now the easy part, finding stocks to trade. Either by viewing stock charts or using technical analysis software stocks which present good buying opportunities can be found. Please remember, trading stocks is a probability game.
Stock trading is not as difficult as many people think. Stock trading is very enjoyable and I wish you good luck. Stock trading is a very competitive field and in order to succeed you need to FOCUS on a set of simple strategies that you can implement without hesitation. Stock trading is educatiuon is so important that day traders from all over the world are indeed frequent visitors to top stock trading websites. In truth, stock trading is like anything else that requires the utmost skill and discipline to succeed. The Basics Of Stock Trading The most important aspect of stock trading is to develop a stock trading strategy that suits your needs, expectations and personality type. One of the biggest advantages option trading has over outright stock trading is to be able to take a view on market direction with limited risk while at the same time having unlimited profit potential. The only thing needed to start online stock trading is a brokerage account.
By: Larry Schade
About the Author:
Trading
Trading stocks online is downright fun if you enjoy the art of maximizing gains and protecting them by minimizing risks. Trading stock online has been becoming popular tremendously as a large percentage of population is having an access to the computers. Trading a stock basically means you are either buying or selling. You will need to be well-disciplined and goal orientated, as these are the main skills that separate winners and losers in the trading world. Online trading can be a good way to make a lot of money or to bring a small residual income to supplement your regular income. Being greedy in the online stock trading world can cost you a lot of money; however, you will be able to find advice everyone on the Internet about online stock trading; and if you follow the advice properly, then you may be able to make your living off of the stock market alone.
Stocks
Stocks that are well traded have a group of major traders and those traders have habits, patterns. It seems pretty easy to make money by trading stocks but predicting short term price movements and to benefit from that is very difficult in real life. You need a system or set of indicators to find stocks to trade. Fortunately, with a little education and a little research the average stock trader can decide whether online stocks are the right tools for success or if they are more comfortable sticking with traditional venues. When it comes to finding stocks, there are free stock screeners but you can also spend hundreds of dollars per month, it all depends on what you are looking for and how close to the market you want to be. Discipline is required for every decision and action you make while trading stocks. Now the easy part, finding stocks to trade. Either by viewing stock charts or using technical analysis software stocks which present good buying opportunities can be found. Please remember, trading stocks is a probability game.
Stock trading is not as difficult as many people think. Stock trading is very enjoyable and I wish you good luck. Stock trading is a very competitive field and in order to succeed you need to FOCUS on a set of simple strategies that you can implement without hesitation. Stock trading is educatiuon is so important that day traders from all over the world are indeed frequent visitors to top stock trading websites. In truth, stock trading is like anything else that requires the utmost skill and discipline to succeed. The Basics Of Stock Trading The most important aspect of stock trading is to develop a stock trading strategy that suits your needs, expectations and personality type. One of the biggest advantages option trading has over outright stock trading is to be able to take a view on market direction with limited risk while at the same time having unlimited profit potential. The only thing needed to start online stock trading is a brokerage account.
By: Larry Schade
About the Author:
Written by Larry Schade at www.dowtrend.com on the topic of Stock Trading You can also get more information here on Stock Trading
Filed under Finance by Administrator