Quote from JSHINV:
I just started reading a few books. I was very attracted to the mathematical and statistical pricing of options. Specifically, I am more attracted to the math of options, than the technical and fundemental analysis of common stock. In McMillan's book he says, "Don't confuse brains with a bull market."
I read his book. Good read. I started out in options 15 years ago because that was pretty much all I could afford to enter on a $3k account. Traded stock and OEX options. The spooz (Pit traded S&P futures) had an initial margin of $8k-10K back then.
It is my opinion one can do all the technical and fundemental analysis you want, but how can compete against a large firm that hires PHds with electrical engineering degrees to say be analysts for semiconductor stocks. These same analysts visit the CEOs of companies, look them in the eye and ask tough questoins.
This supposition is untrue. First of all, the scale of the bigger player dictates that must play within a time frame that is commersurate with their size. So they would be playing with a long term view. Speculators have an advantage because of their generally smaller size. They can take advantage of smaller moves in the market which lend themselves very, very well to technical analysis. My time frame for trading varies depending on the instrument I'm trading. For S&P futures, it's daily. Some trades last as long as a few hours to a few weeks. For Forex, I daytrade. But I'm not looking for absolute tops and bottoms. I catch anywhere from 25%-80% of a move.
The Big boys have no real advantage. Just look at their annual ROI. Speculators, when their average to good, do at least twice as much in percentage terms. If they're exceptional, they'll do many times more. It's easier to move less than so many millions in the market than it is so many hundred millions and beyond.
Also, I have a business degree with a major in accounting (that is going on 30 years ago). Financial statement analysis is something I can do. But, it is boring to me. This mathematical approach I find very interesting.
I have an economics background. Useless for trading other than I know when Eco reports will come out.
But you seem to have an analytical mind. You should apply it to pattern recongition. That's the foundation of technical analysis. It's not that you need to predict tops and bottoms. You only need to know when the market has turned. Then enter or exit. And that's accomplished by studying what represents a turn(reversal) and what represents a continuation. You can start with chart patterns (bars/candlesticks). Then add in indicators such a Moving average to know if you're in an uptrend/downtrend. Then Oscillators... etc etc. Point is keep it simple with the foundation that concentrates on patter recognition. Codified you analysis which will become your rules. Then before you trade, define you money management rules. Stops, risk-reward, etc.
As far as options as opposed to futures, well I simply started reading books about stock options first. I just haven't got around to reading about futures that much.
I strongly recommend that you look into futures. E-mini S&p to be specific. Superior liquidity ( a must for serious trading) and being that it is based off an index, will not be affected all that much by any one stock's news. If you do go into futures, make certain that you find a broker that has roundturn commissions less than 1 tick, ($25).
It is interesting, I've noted some debate on this board about what is a better instrument to trade. I will get around to reading about futures trading. But, I just don't know much about them. I am learning about options. I guess my thoughts are I'd like to assimilate one complex subject at a time.
Well, I understand that certainly. But futures are less complex than options on the whole. For a trader's timeframe (differs from an investor's), there are no "greeks" to worry about. So you can concentrate on your technical studies and entry/exit strategies.
