Stock Option Investing Millionaire Guidelines

Having been trading stocks and options in the capital markets professionally for many years, I have seen many ups and downs. I have seen paupers become millionaires over night … And I have seen millionaires become paupers over night … One story told to me by my mentor is still etched in my mind: ” Once, there were 2 Wall Street stock market multi-millionaires. Both were extremely successful and chose to share their insights with others by selling 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 spent all of his $20,000 savings to buy both their opinions. His buddies were naturally thrilled about what the two masters had to say about the stock market’s direction. When they asked their pal, he was fuming mad. Confused, they asked their pal about his anger. He stated, ‘One stated BULLISH and the other stated BEARISH!'”. Option Trading in Your Spare Time - by Wendy Kirkland & Virginia McCullough (Paperback) is a noteworthy example. The point of this illustration is that it was the trader who was wrong. In today’s stock and option market, people can have different opinions of future market direction and still profit. The distinctions lay in the stock selecting or options strategy and in the mental attitude and discipline one uses in executing that strategy. I share here the standard stock and option trading principles I follow. By holding these principles securely in your mind, they will guide you regularly to success. These principles will help you reduce your danger and enable you to evaluate both what you are doing right and what you might be doing wrong. You might have checked out ideas similar to these prior to. I and others use them due to the fact that they work. And if you memorize and assess these principles, your mind can use them to guide you in your stock and options trading. PRINCIPLE 1. SIMPLENESS IS MASTERY. When you feel that the stock and options trading approach that you are following is too complicated even for simple understanding, it is probably not the very best. In all aspects of successful stock and options trading, the simplest methods often emerge triumphant. In the heat of a trade, it is easy for our brains to become emotionally overloaded. PRINCIPLE 2. NO ONE 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 species or you are an unskilled trader. No trader can be absolutely unbiased, especially when market action is unusual or hugely unpredictable. Much like the ideal storm can still shake the nerves of the most seasoned sailors, the ideal stock market storm can still unnerve and sink a trader really rapidly. One should strive to automate as many critical aspects of your strategy as possible, especially your profit-taking and stop-loss points. PRINCIPLE 3. HANG ON TO YOUR GAINS AND CUT YOUR LOSSES. This is the most essential principle. The majority of 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 just to see the cost increase and up and up. Over time, their gains never ever cover their losses. This principle takes some time to master effectively. Reflect upon this principle and examine your previous stock and options trades. If you have been unrestrained, you will see its reality. PRINCIPLE 4. BE AFRAID TO LOSE MONEY. Are you like the majority of beginners who can’t wait to leap right into the stock and options market with your cash hoping to trade as soon as possible? On this point, I have discovered that the majority of unprincipled traders are more afraid of missing out on “the next huge trade” than they hesitate of losing cash! The key here is STICK TO YOUR STRATEGY! Take stock and options trades when your strategy signals to do so and prevent taking trades when the conditions are not satisfied. Exit trades when your strategy states to do so and leave them alone when the exit conditions are not in place. The point here is to be afraid to discard your cash due to the fact that you traded unnecessarily and without following your stock and options strategy. 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 everything you have? Do you remember what normally takes place after that? It isn’t quite, is it? No matter how confident you might be when going into a trade, the stock and options market has a method of doing the unexpected. Therefore, constantly adhere to your portfolio management system. Do not compound your anticipated wins due to the fact that you might wind up compounding your really real losses. PRINCIPLE 6. GAUGE YOUR EMOTIONAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY. You know by now how different paper trading and real stock and options trading is, do not you? In the very same method, after you get used to trading real cash regularly, you find it extremely different when you increase your capital by 10 fold, do not you? What, then, is the distinction? The distinction remains in the psychological problem that includes the possibility of losing a growing number of real 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, the majority of traders realize their maximum capacity in both dollars and emotion. Are you comfortable trading up to a few thousand or 10s of thousands or hundreds of thousands? Know your capacity prior to devoting the funds. PRINCIPLE 7. YOU ARE A NOVICE AT EVERY TRADE. Ever felt like a specialist after a few wins and then lose a lot on the next stock or options trade? Overconfidence and the incorrect sense of invincibility based on previous wins is a recipe for disaster. All professionals respect their next trade and go through all the proper steps of their stock or options strategy prior to entry. Treat every trade as the very first trade you have ever made in your life. Never ever deviate from your stock or options strategy. Never ever. PRINCIPLE 8. YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE. Ever followed a successful stock or options strategy just to fail severely? You are the one who identifies whether a technique succeeds or stops working. Your personality and your discipline make or break the strategy that you use not vice versa. Like Robert Kiyosaki states, “The financier is the property or the liability, not the financial 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 catching nothing but the wind. Stock exchange variations have more variables than can be mathematically developed. By following a tested strategy, we are ensured that someone successful has stacked the odds in our favour. When you examine both winning and losing trades, identify whether the entry, management, and exit satisfied every criteria in the strategy and whether you have followed it exactly prior to changing anything. In conclusion … I hope these simple guidelines that have led my ship of the harshest of seas and into the very best harvests of my life will guide you too. Good Luck.