Stock Option Trading Millionaire Principles
Having actually been trading stocks and alternatives in the capital markets expertly over the years, I have seen lots of ups and downs.
I have seen paupers become millionaires overnight …
And
I have actually seen millionaires end up being paupers overnight …
One story told to me by my mentor is still engraved in my mind:
"Once, there were 2 Wall Street stock exchange multi-millionaires. Both were extremely 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 know their views that he invested all of his $20,000 cost savings to purchase both their viewpoints. His pals were naturally delighted about what the two masters needed to state about the stock market`s instructions. When they asked their pal, he was fuming mad. Baffled, they asked their good friend about his anger. He said, `One said BULLISH and the other stated BEARISH!`."
The point of this illustration is that it was the trader who was wrong. In today`s stock and option market, individuals can have different opinions of future market instructions and still revenue. The distinctions lay in the stock choosing or choices technique and in the mental attitude and discipline one uses in carrying out that technique.
I share here the standard stock and alternative trading concepts I follow. By holding these concepts strongly in your mind, they will assist you regularly to success. These concepts will assist you reduce your risk and permit you to assess both what you are doing right and what you may be doing wrong.
You might have read ideas comparable to these prior to. I and others use them because they work. And if you memorize and assess these concepts, your mind can use them to guide you in your stock and choices trading.
CONCEPT 1.
SIMPLICITY IS PROFICIENCY.
Wendy Kirkland
I picked this up from Wendy Kirkland Trading, When you feel that the stock and options trading approach that you are following is too complicated even for easy understanding, it is probably not the very best.
In all elements of successful stock and alternatives trading, the simplest approaches often emerge victorious. In the heat of a trade, it is easy for our brains to become emotionally overwhelmed. If we have a complex method, we can not stay up to date with the action. Simpler is much better.
PRINCIPLE 2.
NO ONE IS GOAL ENOUGH.
If you feel that you have absolute control over your feelings and can be objective in the heat of a stock or options trade, you are either a dangerous types or you are an inexperienced trader.
No trader can be absolutely unbiased, particularly when market action is unusual or wildly unpredictable. Much like the best storm can still shake the nerves of the most experienced sailors, the best stock exchange storm can still unnerve and sink a trader very quickly. Therefore, one should endeavor to automate as numerous crucial aspects of your method as possible, specifically your profit-taking and stop-loss points.
CONCEPT 3.
HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most crucial concept.
A lot of stock and alternatives traders do the opposite …
They hang on to their losses way too long and watch their equity sink and sink and sink, or they leave their gains too soon only to see the price go up and up and up. Gradually, their gains never ever cover their losses.
This principle takes some time to master effectively. Contemplate this principle and examine your past stock and alternatives trades. If you have been unrestrained, you will see its fact.
PRINCIPLE 4.
BE AFRAID TO LOSE MONEY.
Are you like a lot of newbies who can`t wait to jump right into the stock and options market with your cash wishing to trade as soon as possible?
On this point, I have actually found that many unprincipled traders are more afraid of losing out on "the next big trade" than they hesitate of losing cash! The key here is ADHERE TO YOUR STRATEGY! Take stock and options trades when your strategy signals to do so and prevent taking trades when the conditions are not fulfilled. Exit trades when your method states to do so and leave them alone when the exit conditions are not in place.
The point here is to be scared to discard your cash due to the fact that you traded needlessly and without following your stock and alternatives method.
CONCEPT 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 big winner that you break your own finance rules and put in whatever you have? Do you remember what typically takes place after that? It isn`t quite, is it?
No matter how confident you might be when getting in a trade, the stock and alternatives market has a way of doing the unforeseen. Therefore, constantly stick to your portfolio management system. Do not intensify your awaited wins since you might wind up intensifying your very genuine losses.
CONCEPT 6.
DETERMINE YOUR EMOTIONAL CAPABILITY PRIOR TO INCREASING CAPITAL OUTLAY.
You understand by now how different paper trading and genuine stock and alternatives trading is, do not you?
In the very same way, after you get utilized to trading genuine cash regularly, you discover it very different when you increase your capital by 10 fold, don`t you?
What, then, is the difference? The difference remains in the psychological concern that includes the possibility of losing more and more genuine money. This happens when you cross from paper trading to real trading and also when you increase your capital after some successes.
After a while, a lot of traders realize their maximum capacity in both dollars and feeling. Are you comfy trading up to a few thousand or 10s of thousands or hundreds of thousands? Know your capability before devoting the funds.
CONCEPT 7.
YOU ARE A NOVICE AT EVERY TRADE.
Ever seemed like a professional 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 upon past wins is a dish for disaster. All experts appreciate their next trade and go through all the correct steps of their stock or options technique before entry. Treat every trade as the first trade you have actually ever made in your life. Never ever differ your stock or choices method. Never.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or choices technique just to fail severely?
You are the one who identifies whether a strategy is successful or fails. Your character 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 first will result in eventual success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever changed your mind about how to implement a strategy? When you make changes day after day, you end up capturing nothing but the wind.
Stock exchange variations have more variables than can be mathematically formulated. By following a proven method, we are ensured that somebody successful has actually stacked the chances in our favour. When you review both winning and losing trades, identify whether the entry, management, and exit satisfied every requirements in the method and whether you have followed it specifically prior to altering anything.
In conclusion …
I hope these basic standards that have led my ship out of the harshest of seas and into the very best harvests of my life will guide you too. Good Luck.