Stock Option Trading Millionaire Principles

Having actually been trading stocks and alternatives in the capital markets professionally over the years, I have seen many ups and downs.

I have actually seen paupers become millionaires over night …

And

I have actually seen millionaires end up being paupers overnight …

One story informed to me by my mentor is still engraved in my mind:

"As soon as, there were 2 Wall Street stock exchange multi-millionaires. Both were incredibly 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 understand their views that he invested all of his $20,000 cost savings to purchase both their viewpoints. His pals were naturally excited about what the two masters needed to state about the stock market`s direction. When they asked their buddy, he was fuming mad. Confused, they asked their pal about his anger. He stated, `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 choice market, people can have different viewpoints of future market direction and still revenue. The differences lay in the stock picking or choices strategy and in the mental attitude and discipline one utilizes in implementing that strategy.

I share here the basic stock and choice trading principles I follow. By holding these concepts firmly in your mind, they will guide you consistently to profitability. These principles will assist you decrease your danger and permit you to examine both what you are doing right and what you might be doing wrong.

You may have read concepts similar to these before. I and others utilize them since they work. And if you memorize and reflect on these concepts, your mind can use them to assist you in your stock and alternatives trading.

PRINCIPLE 1.

SIMPLENESS IS MASTERY.
Wendy Kirkland
I picked up this trick from Wendy Kirkland, When you feel that the stock and choices trading approach that you are following is too complex even for basic understanding, it is most likely not the best.

In all aspects of effective stock and options trading, the simplest 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 method, we can not keep up with the action. Easier is better.

PRINCIPLE 2.

NOBODY IS OBJECTIVE ENOUGH.

If you feel that you have absolute control over your emotions and can be unbiased in the heat of a stock or options trade, you are either a hazardous types or you are an unskilled trader.

No trader can be definitely objective, particularly when market action is unusual or hugely irregular. Similar to the perfect storm can still shake the nerves of the most seasoned sailors, the ideal stock exchange storm can still unnerve and sink a trader really rapidly. For that reason, one must venture to automate as many important elements of your strategy as possible, especially your profit-taking and stop-loss points.

PRINCIPLE 3.

HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES.

This is the most crucial concept.

Most stock and options traders do the opposite …

They hang on to their losses way too long and view their equity sink and sink and sink, or they leave their gains too soon only to see the rate go up and up and up. In time, their gains never cover their losses.

This concept takes time to master correctly. Reflect upon this concept and evaluate your past stock and alternatives trades. If you have been undisciplined, you will see its reality.

CONCEPT 4.

HESITATE TO LOSE MONEY.

Are you like the majority of novices who can`t wait to leap right into the stock and options market with your money wanting to trade as soon as possible?

On this point, I have actually discovered that the majority of unprincipled traders are more afraid of missing out on "the next huge trade" than they are afraid of losing money! The key here is ADHERE TO YOUR STRATEGY! 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 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 money because you traded needlessly and without following your stock and options method.

PRINCIPLE 5.

YOUR NEXT TRADE COULD BE A LOSING TRADE.

Do you absolutely believe that your next stock or alternatives trade is going to be such a big winner that you break your own finance rules and put in everything you have? Do you remember what typically takes place after that? It isn`t pretty, is it?

No matter how positive you might be when entering a trade, the stock and alternatives market has a method of doing the unforeseen. For that reason, constantly stay with your portfolio management system. Do not intensify your anticipated wins since you might end up intensifying your very genuine losses.

CONCEPT 6.

ASSESS YOUR EMOTIONAL CAPACITY PRIOR TO INCREASING CAPITAL OUTLAY.

You understand by now how different paper trading and real stock and choices trading is, do not you?

In the very same way, after you get used to trading real money regularly, you discover it extremely different when you increase your capital by 10 fold, don`t you?

What, then, is the distinction? The difference is in the psychological problem that includes the possibility of losing more and more genuine cash. This takes place 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 optimal capability in both dollars and feeling. Are you comfortable trading approximately a few thousand or 10s of thousands or hundreds of thousands? Know your capacity prior to committing the funds.

CONCEPT 7.

YOU ARE A NEWBIE AT EVERY TRADE.

Ever seemed like an expert after a couple of wins and then lose a lot on the next stock or options trade?

Overconfidence and the false sense of invincibility based upon past wins is a recipe for disaster. All specialists appreciate their next trade and go through all the appropriate steps of their stock or choices strategy before entry. Treat every trade as the very first trade you have ever made in your life. Never deviate from your stock or choices method. Never ever.

CONCEPT 8.

YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.

Ever followed a successful stock or alternatives technique only to fail severely?

You are the one who determines whether a method succeeds or fails. Your character and your discipline make or break the strategy that you use not vice versa. Like Robert Kiyosaki says, "The financier is the possession or the liability, not the investment."

Comprehending yourself initially will lead to ultimate success.

PRINCIPLE 9.

CONSISTENCY.

Have you ever changed your mind about how to implement a technique? When you make changes day after day, you wind up capturing nothing but the wind.

Stock exchange fluctuations have more variables than can be mathematically formulated. By following a proven strategy, we are assured that someone effective has stacked the odds in our favour. When you examine both winning and losing trades, identify whether the entry, management, and exit met every requirements in the method and whether you have actually followed it specifically prior to changing anything.

In conclusion …

I hope these basic standards that have actually led my ship of the harshest of seas and into the best harvests of my life will direct you too. Best of luck.