Learning to Trade for Profit
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Our goal is to help you discover how to profitably trade stocks and options. We want to help educate you on the some of the best ways we have found to trade the market. We want to educate you on how to leverage your knowledge and finances to achieve the best results possible for your situation.
There are many ‘experts’ out there and they would tell you their strategy is the best. One of our favorites is that ‘you never make money buying options’. Is that true? Well, it depends. If you are buying them why are you buying them?
Also, how long are you planning on holding them? I rarely buy an option that I hold until expiration. The only way you can make money buying an option and holding until expiration is if you are correct about stock direction and timing. That is very difficult to do.
Mostly we trade hoping for stocks to remain range bound. Yes, that is true in my personal covered call portfolio also. Although if it were to go up that would normally be alright in that portfolio, unless of course I have some sort of range bound hedge trade on also in play.
Typically we consider ourselves successful if we are 100% right 60% of the time. One key is to make as much as you can when you are right and cut your losses when you are wrong. That can be difficult, sometimes we have found ourselves watching a stock do what it was not supposed to and we keep telling ourselves that it is going to change direction if we just wait.
Usually, it does not and losses just continue to mount. I will say this again later but “NEVER FIGHT THE TREND” and “THE TREND IS THE TREND UNTIL IT CHANGES”. Just because you think a stock should trend one way or another does not mean it will. Just because you think the stock is at the bottom or top of its range does not mean it is. It is alright to be wrong, but remember to cut your losses; do not ride them.
You probably noticed I said “100% right 60% of the time” above. One advantage to trading options is that if you are 100% right that is great. But, many times you can just be 51% right and still make a little money or break even.
Any trader can be profitable if they are right at least 60% of the time provided they make more on their wins than they lose on their losses. What I mean by that is if each time I win a trade I make $100.00 and each time I lose a trade I lose $75.00 and I am right 60%.
Let’s say on a given week I place 10 trades. I win 60% (or 6) of them and lose 40% (or 4) of them. Each win was $100.00 which totaled $600.00 (6*$100.00) and my four losses of $75.00 totaled $300.00. My profit for the week was $300.00 ($600.00-$300.00) and I was only right 60% of the time.
Trading options you have even more advantages, leverage and trade options.
We trade Long and Short Calls, Long and Short Puts, Covered Calls, Diagonals, Spreads, Calendars, Condors and Butterflys. Sometimes you might even see a covered put or synthetic option position out there.
You can search my site for explanations of all of these types of trades if you are not familiar with them.