The Key to Options Trading Success «

The Key to Options Trading Success

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.


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