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Hi,
Welcome to the Trade Tutor newsletter. This week, we are featuring two short articles from our Options trading services. The first is from Angelo Campione, editor of Advantage Credit Spreads. The second is from the Stock Options Speculator.
To try Advantage Credit Spreads at no cost for 4 whole weeks click here and use code ACS1115.
To try Stock Options Speculator at no cost for 4 entire weeks, click here and use code SOS1115.
To complete the transaction, click the Proceed to Checkout button, fill in your billing information and enter the code in the Message and Comments field. Try both at no cost for the 4 weeks, just click both links - either code will work here.
To Trade or Not To Trade
by Angelo Campoine
Does the thought of trading send tingles up and down your spine?
Trading generally holds great appeal through its implied high-risk high reward nature. But what is trading really about? True trading is more about emotional fortitude, discipline and mechanical systems, which is generally not very exciting.
The issue is that most people’s first experience with trading is a tip from a friend or colleague, if the tip goes well, they get the adrenalin rush of a quick profit and then they become like a drug addict looking for the next fix because it felt so good. This is not trading, it’s gambling, and is no different than what most people do at a casino.
True trading is a business and like any business, requires a clear plan, diligence and follow through, and also like any business the same stats apply to the success of it, i.e. 4 out of 5 will fail within 3 years. In fact the failure rate is even higher with trading as most won’t last the first year.
So if trading holds appeal to you, you need to be honest and ask yourself this question:
Is trading right for you?
To help you answer this, ask yourself:
1. Do I have a written trading plan with clear and achievable targets?
2. Have I got a trading system that I’ve tested thoroughly and is successful?
3. Do I stick to my entry and exit signals when trading live?
4. Do I accept losses as a part of trading?
5. When I have a trade open, do I sleep well at night?
If you answered “YES” to all these questions then you probably are a good fit for trading. However if any were “NO”, then you have work to do to before you enter the business of trading.
The key to anything you do is always YOU, specifically, what you bring to what you do. When I say “what you bring”, I mean your set of beliefs and underlying thought patterns and underneath that your consciousness.
The market can be a very expensive place if you’re not clear on what you bring in what you do.
If you know you can’t handle losing money then I recommend you stay away from trading because it happens. Ultimately trading is a reflection of life, things often don’t go as planned so it’s how you respond with what happens that will determine your overall success or failure. That is, if you complain, worry and make yourself wrong when things don’t go your way, the chances of leading a joyous and successful path from that place are virtually zero. Set backs happen and they are simply par for the course.
So where do you go if you don’t have a trading plan or system and you still feel drawn to trading?
Here are some steps, work out:
1. How much money you are willing to put at risk for trading as a whole.
2. How much money you are willing to put at risk per trade.
3. How many trades you will do per month, week or day.
4. What system to use, that will give you both entry AND exit signals.
5. How you will track and monitor your performance.
6. How you will stay true to your system (possibly seek mentors or discussion groups with othertraders)
Ultimately, you need to be accountable to yourself.
It definitely helps if you have a mentor or colleagues to discuss how you’re doing and that the relationship be open enough for them to be able to speak their minds if they see you stray from your path.
In relation to selecting a system, this should not be taken lightly. You can either develop your own (which can take years) OR, research the various systems out there by subscribing to as many services as you can deal with. Look for services that not only offer a high degree of success and profitability but also match the integrity that you want out of a service.
Cheers,
Angelo Campione
Advantage Credit Spreads
Options Trading Manual
SOS Targets trending activity.
This is where the 'big' money is made. In the options pricing model, you can make money from changes in volatility or changes in price. While a volatility change of 25 to 30% over a period of 42 days will result in a 23% gain, a 20% rise in stock price will yield over a 300% gain. Accordingly, we lean towards exploiting trends as the impact from a trend can be up to 14 times greater than the impact from volatility.
SOS Balances aggressive options plays with somewhat of a conservative methodology by buying either one more month of time or by buying 1 strike in from what we think we need.
SOS Suggests taking half your profits at 100% level.
Ride the other half until it gives back half its gains. Or exit half again if it later doubles once more.
SOS Considers stops at the 20% level.
Losing 20% in a position requires a 25% gain to break even. At a 33% loss, it'll require a 50% gain to break even. Option pricing is much more volatile than stocks. Accordingly a bit more room is required to allow for this volatility.
SOS Alerts are published at least weekly. However, the timing will vary due to our entry parameters.
SOS Uses a contrarian volatility trigger for entering positions.
Entering call position during periods of higher volatility and entering put positions during periods of low volatility. This means that the timing of our signals will vary.
SOS Believes Market timing impact can also be reduced by taking positions at regular intervals. We'll target one position per week and build a portfolio of up to 10 positions open at one time.
SOS View on money management is to compound earnings. For example, a dollar doubled every 10 days gives you $512 dollars. Every 20 days gives you $524,288. Obviously the power of compounding is serious if you catch it right.
SOS Suggests utilizing a 10% per position allocation.
This will allow your position size to increase or decrease depending on your performance.
SOS Will periodically recommend both put and call positions to allow for proper diversification and thereby leveraging the truncated risk nature of options.
SOS Reserves the right to modify this methodology at any time to accommodate periodic short term volatile changes in market conditions.
Let me know if you have any questions sos@stockbaromter.com. New recommendations to follow shortly.
Regards & Good Trading
Stock Options Speculator
We hope that you enjoyed these articles.
To try Advantage Credit Spreads at no cost for 4 whole weeks click here and use code ACS1115.
To try Stock Options Speculator at no cost for 4 entire weeks, click here and use code SOS1115.
To complete the transaction, click the Proceed to Checkout button, enter in your billing information and enter the code in the Message and Comments field. Try both at no cost for the 4 weeks, just click both links - either code will work here.
There is a very high degree of risk involved in trading. Past results are not indictive of future returns. Stock Barometer and all individuals affiliated with Stock Barometer assume no responsibility for your trading or investment results.
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