Post
by TraderGary » Wed Dec 09, 2020 8:07 am
SMF, if I may offer a suggestion, please be very careful with options if you're not well versed in them. I don't know if you're looking to buy or sell options, but you can really get hurt in a hurry. I've been trading for a number of years, and I can tell you most of the professionals (and even the non-professionals like myself) don't buy options. They sell options premium for weekly and monthly income. It's comparable to being an insurance company. You're assuming a certain amount of risk and collecting a monthly premium for that risk, with the odds stacked in your favor if you do it right. You should be using a combination of technical analysis combined with options fundamentals (“Greeks”).
I don’t know if you look at company fundamentals, but technical traders (myself included) believe the fundamentals are already reflected in the stock chart. But if you’re a long-term investor and plan to hold positions for months or years at a time, then I would definitely want to know about the company’s balance sheet.
Back to options. The biggest thing working against an option BUYER is Theta decay, which is the time premium. Volatility is another double-edged sword. You can be right on the direction of a stock and still lose money because options are a deteriorating asset based on Theta decay. And if Volatility is moving against you, that can hurt you even more. So if you're going to trade options, I would strongly suggest you be well versed in the options Greeks, particularly Theta, Delta, Vega, and Gamma. And maybe you already are? I don't know where you are in your learning curve but I just wanted to offer that suggestion. You seem like a good guy and I don't like to see anyone get hurt when they're just starting out and trying to learn the trading game.
Also, if you're really serious about trading, I would suggest working with a good trading platform like the professionals use. If you fund an account with TDAmeritrade, (don't recall if there's a minimum amount but I don't think there is although if you're planning to day trade you will need to have at least 25k in your account), you get access to "ThinkorSwim" free of charge and it's an excellent professional traders platform. It's the one I use FWIW.
There's a definite learning curve regarding the platform, but it's well worth your time and effort. It's a very powerful tool, particularly for options trading. It was originally created by Tom Sosnoff who's a very well known and highly regarded options trader/educator, who does a live daily options broadcast online during regular market hours. I believe it's still free to sign up and access but don't quote me on that. Just google Tom Sosnoff and it will pull up the page if you're interested.
Anyway, on that same platform, you can also practice your strategies using a paper trading account with no money on the line and no risk involved. If you're new to options, I strongly suggest doing that for a while till you become comfortable and confident in what you're doing. You can practice trade any strategy you choose, in any combination you can dream of. You get the same data, but it's just delayed by 15 or 20 minutes. But you get real world results based on actual data. It's a GREAT and very VALUABLE tool. When you log into the platform, you have the option of logging into the paper trading side or the funded side. Of course on the funded side, you get live real-time data free of charge. You cannot beat it IMO. (FYI, I'm not affiliated with them in any way, but TDAmeritrade should offer me a commission for this suggestion.... lol).
I'm also a self-taught trader, and when I first starting learning about the market years ago, we didn't have near the resources we do now. You're fortunate in that there is a wealth of very good info on the internet today. (Some of it not so great, but you have to filter through it). Soak it up. Even a lot of good stuff on YouTube if you're a visual learner like I am. When I was trying to teach myself how to trade years ago, about the only thing I had to learn from were books, the occasional webinar, and trial and error. It took much longer to achieve any success and I struggled for quite a while. Almost gave up a couple times. But with all the resources available to us today, it's so much better now. I don’t want to say easier because in my opinion it is not easy to learn how to trade successfully, on a consistent basis.
Many new traders on average blow through 2 separate trading accounts before the light bulb comes on, so you're doing very well. Congratulations and keep it up. Never stop learning. It's an ongoing education as the market is always changing and there's always something new to learn.
As far as knowing when to get out, learn how to project profit targets (Fibonacci's are great for that combined with price support/resistance, moving averages, trend lines, etc) and also how to use trailing stops to protect profits. There are a number of different ways to trail a stop. ATR (average true range) is a very popular method for doing that. A 2-bar trailing stop is another popular one along with moving averages. Tons of info on the net about all these things and so much more.
And before you enter into any trade, you should always know where you're exit point is if you're wrong, otherwise emotion can take over, and that's never a good thing. It can cause you to make bad/emotional decisions and justifications that could potentially wipe out your account. Everyone experiences losses. There isn’t a trader in history who has not had a drawdown from time to time. Think of it as a cost of doing business – “overhead” if you will.
Was just going to write a few sentences but ended up writing a book. I guess when I start talking about trading, (or Seahawks/Mariners), I sometimes get carried away. Please understand I’m no expert or world-class trader. I’m just an average trader with wins and losses like everyone else. But I saw your post and wanted to offer a few tidbits from things I've learned over the years in the hope that it might be at least a little helpful to you in some way.
Anyway, good luck to you and I hope you become the next millionaire. If you do, maybe you can teach me a few new things you learned about trading. lol It's always interesting to learn how different traders have different perspectives.
Last edited by
TraderGary on Wed Dec 09, 2020 2:02 pm, edited 3 times in total.
