Posts Tagged ‘Strategies’
The day trade involves the practice of trading financial products like stocks, options shares, futures and currency. The transaction during the day ends the same day before the markets close.
Day trade can help make you high profits. We know people have succeeded in the day, and some even claim million dollar profits in a year.
However, the day trade, like other types of transactions on the market,comes with its risks. The fact remains – each day can really make some money, but we must also remember that the day can also make you suffer serious financial losses.
The day trading is considered very risky type of operation. We know that many people do go bankrupt because of the day trade.
Day exchange is recommended for people at the same time, experience and adequate funding. You must realize that almost every trader suffers losses during the first month of practice of the day. Many of them didn’t wait to recover their loss, they just gave up trading completely.
So keep in mind that every great player must have suffered a few losses when they started out
If you want to do day trading, you can minimize the risks and increase the opportunity to be able to enjoy it. To be a better trader try ans work with some of the following suggested strategies:
Six kinds of strategies are used for day traders make a profit:
1. Trends Following – Traders use this strategy of buying stocks on the rise or short-sell if it is declining. It is based on the idea that the trend will continue.
2. Range Trading – Traders use the strategy of buying stocks at low prices and selling when they rise. It is assumed that once a stock peaks, it will start going down and will do so for a while.
3. News Strategy – Trading with a news strategy is the most basic and common strategy. Traders buy a stock that was in the news as rising, and they see following bad news.
4. Scalping – This is the strategy where traders liquidated and established a good position quickly. This normally happens in a matter of seconds or minutes.
5. Short Stocks Strategy – This strategy assumes that a purchased stock is about to rise. Another strategy of shorting stocks is that traders borrow stocks from market brokers and sand resell in the hope that prices will come down and then buy again.
Day trading is a complex issue. You need some of these qualities to succeed at it:
First, it is a mentally challenging operation. You need to be able to keep your focus for long periods of time.
And then you need to be good with your money. Do not go overboard in the hope of making your millions quickly.
Do not expect to start making money immediately. You will probably lose out on the first month. Thats why you need to have a good amount of money to last you through this time.
The best Stock Market advice you will ever read is to learn from mistakes when someone else has made them. So, this stock market advice list I made a list of some of the most common trading mistakes that are made. Even I`ve made some of these. If you have already made some of the mistakes, you can rest assured that you aren`t alone in making them. If you haven`t made them, then here`s a way to get around having to learn by making the mistakes yourself, by reading my stock market advice list.
The Stock Market advice tip #1, and worst mistake that people make is that they believe trading is the easy answer, a way to get rich quickly. People will often expect to become wizards in the market overnight, but they fail to realize that trading is like any profession; you must learn how to do it first.
For example, would you attend a weekend doctor`s seminar and expect to conduct heart surgery on Monday? Of course not! I am shocked at what people expect when they go to a weekend trading seminar. They think they will create wealth without having to work, invest or think, and it just doesn`t happen that way.
After treating trading like a get rich quick scheme, my next stock market advice tip #2 and most common mistake, is to approach the market without a plan. Without a trading plan, traders approach the market in an inconsistent manner. One day they trade stocks and the next they trade the foreign exchange. Or, they may use one set of indicators one day, and the next day they will throw these indicators out the window and take on a completely new set. Without a consistent approach, the only thing governing their trading decisions is really emotions, and that will doom them to failure.
If a new trader has managed to skip these last two mistakes, they often fall down when they try to go it alone. This is my Stock Market advice #3, all traders should find themselves a coach, or a mentor. Someone who can help them spot the errors in their system that they might not have noticed. An outside point of view can help you avoid other costly mistakes, and greatly increase your profits.
These are some common and quite basic mistakes. The next errors I`ll mention are ones that are just as prevalent in the trading industry, but they often occur once traders have been around for a while. I have some personal experience with these mistakes. Let`s call this stock market advice list, the three most expensive mistakes I`ve made.
My stock market advice mistake tip #4, or the first most expensive mistake, I made was to search for the “Holy Grail” of trading. This was an incredible waste of both time and money. During the first three years of my trading career, I spent over $25,677 on a library full of books, videos and seminars as well as spending thousands of hours in search of the perfect trading methods. Honestly, 95% of what I bought was pure junk… I should have listened to my mentor earlier and realized the “Holy Grail” of trading is simply excellent money management!
My stock market advice mistake tip #5 or the second most expensive mistake I made was not having a predefined exit point. Early in my trading career, I remember trading a stock I thought had a high percentage chance of rising. I was too confident. I fully leveraged the position. Unfortunately, when things did not go as planned, I did not know when to exit, and was paralysed. I kept rationalizing why I should hold onto that stock. As the stock continued to fall, I made more and more excuses. At the very end, I remember thinking, “I can`t take it anymore!”
I sold out. That, of course, was the point the stock turned.
I learned two very valuable lessons that day. First, always have your exit points predefined. Second, big losses once started out as small losses, and it is much easier to take a small loss than a big one.
My Stock Market advice mistake tip #6 or the last most expensive mistake, I made is not one that took money out of my pocket; instead it was a mistake that made me leave money on the table. In fact, this reoccurring mistake cost me big.
Early on, I remember selling positions as soon as they showed a profit. I would not let my profits run, as I was too afraid to give the money back to the market. I figured the profit as mine. The result was that I ended up selling the stocks that were making me money.
It wasn`t until my mentor explained to me that when you are trading, and showing a profit, that is the point where you should be adding to the position, not closing it out, that I began to understand what I was doing. Once I started following his advice, my trading profits soared.
Trading is not an easy profession, but it give you great rewards. Avoid these common errors on my Stock Market advice list, create a simple, well-designed trading system, and learn your market. If you take the time to study the market, and learn from other`s mistakes as well as your own, you will become a successful trader.
Most people lose money in a bear market. Do you remember the tech bubble and recession in 2000-2002? This article will discuss three option trading strategies that can make you big profits in a bear market or recession.
Option Strategy No. 1 – Buying Put Options
It is fairly easy to purchase put options. This option trading strategy can even be used in an IRA account as long as you have been authorized by your broker. You desire to select a stock, which you feel has a good chance of going down in price. Your risk will be limited to the cost of the put option. For example, stock XYZ is currently trading at $50 per share and you buy a put option on XYZ with an expiration date of two month later with a strike price of $50. If the stock drops from $50 to $40, your put option would be worth $10 per share.
Option Trading Strategy No. 2 – Buying Bear Put Spread
Buying a put spread is a little more complicated than just buying a put option but gives you the benefit of reducing your cost but caps your profit. A put spread is characterized by the trading of two same month expiration put options, buying one at a given strike price and selling the other put option at a strike price lower than the purchased put option. You want to pick a stock that you believe will be falling in value. Your risk will be limited to the cost of the put spread. As an example, if we purchase the put option as listed above but also sold a put option with a strike price of $45. In this example, should the stock plunge to $40, you would profit $5 per share ($50 strike price – $45 strike price). And while you are making less per share, your savings comes in the fact that the cost of buying the put option outright would be much higher than the initial cost for the bear put spread.
Option Trading Strategy No. 3 – Married Put
Risk can be minimized by utilizing a married put, which is a hedging strategy. This strategy consists of purchasing a stock that you believe will appreciate in value and buying a put option at the same time to minimize any losses due to adverse market movement. You might have heard the saying that there is always a bull market going on somewhere. In order to benefit from this strategy find out what business sectors and securities go against the grain and appreciate in a bear market. Next you buy the stocks you chose and protect your investment by buying a put option to limit your losses if the stock goes south.
In conclusion, you can still make big profits in bear markets by looking for stocks that you think are going to fall in price and buying a put option or a bear put spread. Alternatively, you could buy a married put on a stock in a sector you believe is going to appreciate, thus minimizing your risk. In addition to buying options on stocks, you can also buy put options on exchange traded funds or index options. Exchange traded funds let you invest in global markets, commodities and even currencies. It is possible to receive a large profit in a bear market. However, it is vital to comprehend the details of the option strategies, choose the correct stock, exchange traded fund or index option, and make use of a proven tactic and begin.
Just as there are two dominant styles of investing, there are also two dominant styles for trading stocks. Growth investors buy and hold young companies with big potential.
Value investors buy what they perceive to be undervalued stocks, and hold them until their value is realized. Growth and value are styles for stock trading, too, but they differ from their investment counterparts.
The Difference Between Investing in Stocks and Trading Stocks
Investors buy and hold with the hope of long-term appreciation. People engaged in stock trading buy for the hope of a quick flip.
Some hope to hold for three weeks or even a couple months. Others want to hold their stocks for only a few days or even less than one day – some people engaged in trading stocks will buy and sell the same stock several times the same day!
Trading stocks that rapidly is a strategy of neither growth nor value, which are both longer-term strategies, even for traders. When talking about stock trading, as opposed to investing, long-term doesn’t mean decades or years, but just a few weeks or months.
Trading Stocks Strategy #1 – Value Plays
Trading stocks based on valuation is the more conservative of the two strategies we’ll explore. This strategy for stock trading relies on finding stocks with prices that are beaten down, and hoping for a turnaround.
Some examples of stocks like this in the current market are eBay (EBAY), Intel (INTC), Microsoft (MSFT), and Yahoo! (YHOO).
People who like stock trading on value love it when we enter a bear market. They view it as a buying opportunity! If you begin trading stocks this way, you need to buy on the “dips” – each time a stock goes down in price, and sell on the “pops” – each time it bounces back up.
Also, you probably want to stop stock trading altogether when the market is on a big bull run. After all, from your perspective, there won’t be any bargains to be found.
Trading Stocks Strategy #2 – Growth is Good
Growth traders are pretty much the exact opposite of value traders. While value traders love it when stocks are “on sale” during a bear market and get out of the market altogether when things are bullish, growth traders love it each time stocks hit new highs and stop stock trading when things turn bearish.
Growth traders tend to rely very heavily on charts, and what is called “technical analysis.” By contrast, value traders prefer “fundamental analysis” – examining a company’s income statement, balance sheet, and cash flow in order to determine its real value.
Growth traders pose the question that if you keep buying on “dips,” what if your stock turns out to be Enron? They say that buying each time a stock hits a new high makes more sense, because a stock can’t really fly unless it continuously hits new highs.
Growth traders say that you should always, no matter what, sell any stock if it falls 7 or 8 percent below your purchase price, and this way, you’re guaranteed not to lose too much. Meanwhile, if you keep buying on the highs, some of your stocks are going to go through the roof, more than making up for any of the 7 or 8 percent losses you might sustain.
The Truth – Trading Stocks Requires Discipline
Each of these strategies for stock trading has its merits, and both have worked, historically. Where most traders go wrong is failing to stick to their game-plan.
If you’re going to be involved in trading stocks, you must develop a strategy, and by all means, stick to it!