I profited around 5,000 three weeks ago and the past couple weeks have been nothing but losses. I made about 1,000 profit on Tuesday and lost it all and more since then. I'm new and I would appreciate helpful feedback on how to read charts and when is the best time to place calls.
2 weeks in a gutter
- Thread starter hungkangaroo
- Start date
Everyone here has the same problem.
Actually 99.99% of traders have the same problem. Everyone is looking for the holy grail and wanting to make more than 0% per year. Most recent discussions here are about markets being random and zero sum game, because no one believes that making money from trading is possible (with exceptions). While when someone comes here and says that they make money, no one believes them. And for good reasons.
Though you’ve also picked the worst time to buy calls since their value implodes after earnings. Most professionals avoid trading options through earnings.
Finally, trade small and don’t take big risks, so that you don’t lose more than you can afford. Or don’t trade at all.
(I’m being a bit cynical but not that far from the truth, as me and everyone else wish to be given the recipe for making money)
Actually 99.99% of traders have the same problem. Everyone is looking for the holy grail and wanting to make more than 0% per year. Most recent discussions here are about markets being random and zero sum game, because no one believes that making money from trading is possible (with exceptions). While when someone comes here and says that they make money, no one believes them. And for good reasons.
Though you’ve also picked the worst time to buy calls since their value implodes after earnings. Most professionals avoid trading options through earnings.
Finally, trade small and don’t take big risks, so that you don’t lose more than you can afford. Or don’t trade at all.
(I’m being a bit cynical but not that far from the truth, as me and everyone else wish to be given the recipe for making money)
I understand man, but at the same time I can make about a 2-3 thousand gain one week and then the next lose all profits. I'm actually curious on if I choose to use one stock for options, what type of economic information or news updates should I be attentive to for gains or losses?
If you do not know how to read stockcharts, you have no business trading. There are numerous books out there, lots of information on the internet or even You Tube. Start there. Technical analysis or knowing how to read chart patterns is a very complicated and time consuming endeavor. Nobody can teach you how to read a stockchart because they have no idea what you know so far. Also, this is time consuming and you have to do the hard work if you want to learn something. So, get cracking. As to trading stock options, be it calls or puts, you have to get direction right and the stock has to move a huge amount for you to make substantial profits.
Think about this...
When it comes to a traders P/L curve, she is either at the HWM (high water mark/all time high) or in a drawdown. Thus, if you aren’t making new heights via profits you are in a drawdown.
Traders (whether aware of this or not) are usually in a drawdown period most of the time. Now this isn’t a bad thing but it’s something to keep in mind. If you made $5,000 you are doing well my friend. If you lost $1,000, you are still up $4k. So yes you did “lose” money but it’s money you didn’t even have prior to that 5k profit.
if I were you I’d size down and trade smaller and more frequent to get a better feel for the variance of your P/L.
run a linear regresssion analysis if you’re witty and figure out what’s the cause of the drawdown.
read up on van Tharp R-Multiple for position sizing, and read up on the Kelly criterion for anti martingaling
When it comes to a traders P/L curve, she is either at the HWM (high water mark/all time high) or in a drawdown. Thus, if you aren’t making new heights via profits you are in a drawdown.
Traders (whether aware of this or not) are usually in a drawdown period most of the time. Now this isn’t a bad thing but it’s something to keep in mind. If you made $5,000 you are doing well my friend. If you lost $1,000, you are still up $4k. So yes you did “lose” money but it’s money you didn’t even have prior to that 5k profit.
if I were you I’d size down and trade smaller and more frequent to get a better feel for the variance of your P/L.
run a linear regresssion analysis if you’re witty and figure out what’s the cause of the drawdown.
read up on van Tharp R-Multiple for position sizing, and read up on the Kelly criterion for anti martingaling
First question: You bought or you wrote? And do you understand how options are priced?
There is too much to discuss and learn about options, so go through some quick courses online, on YouTube, or Udemy. Compare different ways of trading options and spend months learning and experimenting without taking much risk. Making 2-3 thousand by accident is pure gambling and has nothing to do with trading. Anyone can get lucky and make a few thousand.
At minimum study the implied volatility: https://www.google.com/search?q=options+iv
Stop trading and take the necessary YEARS to perfect your game-plan.
That's probably what you don't want to hear but without that proper game-plan you haven't really got much of a chance.
Always expections to the rule but for most professional traders it takes YEARS to learn. Think about it? Trader A has taken the years (of pain, heartache, frustration etc), Trader B hasn't, he's jumped in the game and almost from day one is expecting to make steady profits. Where do you think the money is going to end up overtime?
I agree, and another thing. Not only does it take literally years to fully comprehend trading but the learning never stops. I’m constantly studying while simultaneously trading. I study my trades and I also study other topics on the side to better my overall knowledge that can help me become a better trader.
I’ve been doing this about a decade now and I learn something new everyday