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The Key to Options Trading Success
from: William TanCopyright 2005 William Tan
The stock market is a fascinating exchange that always provides
hope and promises traders the possibility of becoming rich
overnight. The hope and promise comes in the form that one day
they may hit a jackpot or home run as we have seen daily -
stocks flashing past our eyes with wonderful up day or down day.
One day, the common trader thinks that he will be able to catch
this shooting stock just before it takes off.
For many novice traders they think that there must be a system
out there that can provide reliable indications to jump on these
stocks right before it takes off. So the common trader heads out
to the market place seeking stock or investment gurus for the
holy grail of trading. This Holy Grail will provide all the
answers and solutions to finding the right timing and the right
stock before it plummets or takes off like a shooting star.
Unfortunately, for the common trader, there is no such thing as
a holy grail in trading. If there is, then the market would
collapse as eventually nobody would lose money in the stock
market. When there is no one to lose, then how can anyone gain?
However, there are plenty of successful trading systems in the
market place that can be used for long term financial gains.
Most of the time, traders are too impatient thinking that a
winning system is one that cannot lose. A winning system is one
that will win in the medium to long run but will still
occasionally lose.
Some trading school of thought will say that it is best to take
small losses and aim for the home run. These occasional home
runs will more than cover the small losses that you would so
often take. This is may be a good system provided that you are
resilient and strong in self discipline to stick to the system.
If you do not have a good discipline, you may take a series of
small losses and decides to quit- just before your system is
about to pick out a home run. So who is it to blame for your
losses? The system or yourself?
Other school of thoughts will say that it is always good to take
small short term profit and once in a while take a medium sized
loss. The advantage of this is that you will always see good
profit consistently. The disadvantage of this system is that for
every losing trade that you may have it will probably take 2-3
trades of profit to cover 1 losing trade. Again, in the long
run, if the winning probability is high, then this strategy will
work out much better in the long run as you would be able to
compound your returns for accelerated profit.
Trading strategies and systems are plentiful out there. Of
course, there is no harm to have several portfolios that employ
different investment strategies as long as you have the time to
monitor your investments. But do not waste any of your time to
search for the holy grail of trading as it does not exist.
At the first sign of loss, too often, traders will decide to
change to a new system and abandon a system that may have
worked. These traders will keep on changing everything they lose
and eventually will be out of the game because they will never
be able to keep to a strategy. Unfortunately, most novice
traders will feel that a "Perfect System" exists and it will be
a system that provides zero risk and zero loss. And so they
continue their search for the perfect system each time they lose
with an existing strategy.
The holy grail of trading is always nearby - in fact it exists
within you. The holy grail of trading is self discipline. It is
not the system that will determine success or failure but it
largely depends on the discipline of the investor.
The key to your trading success is the need for you to identify
a winning system and have the discipline stick to it. A winning
system is not one that does not lose but is one that will grow
your portfolio and net worth in the long run.
About the author:
CASHFLOW AVENUE is established to provide Low-Risk Options
Trading Recommendations to the common traders in their pursuit
of financial freedom and a better lifestyle.
http://www.cashflowavenue.com
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