Stock Option Trading Millionaire Principles
Having been trading stocks and alternatives in the capital markets expertly throughout the years, I have seen lots of ups and downs.
I have seen paupers end up being millionaires overnight …
And
I have seen millionaires become paupers overnight …
One story told to me by my mentor is still etched in my mind:
"As soon as, there were two Wall Street stock market multi-millionaires. Both were extremely effective 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 know their views that he invested all of his $20,000 savings to buy both their opinions. His friends were naturally excited about what the two masters had to say about the stock market`s instructions. When they asked their pal, he was fuming mad. Confused, they asked their friend about his anger. He said, `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 choice market, people can have various opinions of future market direction and still profit. The differences lay in the stock selecting or alternatives method and in the mental attitude and discipline one utilizes in carrying out that strategy.
I share here the basic stock and option trading principles I follow. By holding these principles securely in your mind, they will direct you regularly to profitability. These principles will help you decrease your danger and permit you to assess both what you are doing right and what you might be doing wrong.
You might have read concepts comparable to these prior to. I and others utilize them due to the fact that they work. And if you remember and review these principles, your mind can utilize them to direct you in your stock and alternatives trading.
PRINCIPLE 1.
SIMPLENESS IS MASTERY.
Wendy Kirkland
I picked up this trick from Option Trading in Your Spare Time, When you feel that the stock and options trading approach that you are following is too intricate even for basic understanding, it is probably not the very best.
In all elements of effective stock and alternatives trading, the easiest methods frequently emerge triumphant. In the heat of a trade, it is easy for our brains to end up being emotionally overwhelmed. If we have a complex strategy, we can not stay up to date with the action. Simpler is better.
CONCEPT 2.
NOBODY IS GOAL 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 hazardous types or you are an inexperienced trader.
No trader can be definitely unbiased, specifically when market action is unusual or wildly irregular. Similar to the ideal storm can still shake the nerves of the most seasoned sailors, the best stock market storm can still unnerve and sink a trader very quickly. For that reason, one should strive to automate as lots of critical elements of your method 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 important principle.
A lot of stock and choices traders do the opposite …
They hold on to their losses way too long and see their equity sink and sink and sink, or they leave their gains prematurely just to see the cost go up and up and up. Over time, their gains never ever cover their losses.
This concept takes time to master appropriately. Contemplate this principle and evaluate your previous stock and choices trades. If you have been unrestrained, you will see its reality.
PRINCIPLE 4.
BE AFRAID TO LOSE MONEY.
Are you like most beginners who can`t wait to leap right into the stock and alternatives 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 losing out on "the next huge trade" than they hesitate of losing cash! The secret here is STAY WITH YOUR TECHNIQUE! Take stock and options trades when your method signals to do so and avoid 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 money since you traded unnecessarily and without following your stock and options method.
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 money management guidelines and put in whatever you have? Do you remember what typically takes place after that? It isn`t pretty, is it?
No matter how confident you may be when going into a trade, the stock and choices market has a way of doing the unanticipated. For that reason, constantly adhere to your portfolio management system. Do not compound your awaited wins due to the fact that you might end up intensifying your very genuine losses.
CONCEPT 6.
ASSESS YOUR PSYCHOLOGICAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY.
You know by now how various paper trading and real stock and alternatives trading is, do not you?
In the very same method, after you get utilized to trading real cash consistently, you find it very different when you increase your capital by ten fold, do not you?
What, then, is the distinction? The difference is in the emotional concern that comes with the possibility of losing increasingly more genuine money. This occurs when you cross from paper trading to genuine trading and also when you increase your capital after some successes.
After a while, the majority of traders recognize their maximum capability in both dollars and emotion. Are you comfortable trading up to a couple of thousand or tens of thousands or numerous thousands? Know your capability prior to dedicating the funds.
CONCEPT 7.
YOU ARE A NEWBIE AT EVERY TRADE.
Ever felt like an expert after a few wins and after that lose a lot on the next stock or options trade?
Overconfidence and the incorrect sense of invincibility based upon previous wins is a dish for disaster. All specialists respect their next trade and go through all the proper steps of their stock or alternatives strategy before entry. Treat every trade as the very first trade you have actually ever made in your life. Never ever differ your stock or options strategy. Never.
CONCEPT 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or alternatives strategy just to fail terribly?
You are the one who identifies whether a method prospers or fails. Your personality and your discipline make or break the technique that you use not vice versa. Like Robert Kiyosaki states, "The investor is the property or the liability, not the investment."
Comprehending yourself first will cause eventual success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever altered 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 exchange fluctuations have more variables than can be mathematically created. By following a proven strategy, we are guaranteed that somebody effective has stacked the chances in our favour. When you review both winning and losing trades, identify whether the entry, management, and exit met every criteria in the strategy and whether you have actually followed it exactly prior to altering anything.
In conclusion …
I hope these simple guidelines that have led my ship of the harshest of seas and into the best harvests of my life will assist you too. All the best.