It's very easy to make 10% per month with options. At least a coupla times. Doing it on a consistent, sustained basis isn't because there's always that one unexpected blow up that takes away many months of hard earned samll gains (pre-announcement or bad earnings release or maybe GS on expiration Friday?). For a noob asking the questions in this chain, even more highly unlikely that it can be done for even for a coupla months.
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New options trader needs help.
- Thread starter sebastionay
- Start date
Many brokers offer simulated trading. So does the CBOE, tho I have no clue if it's any good:Quote from sebastionay:
Are there live contests with options on demo or real that I can look at?
http://www.cboe.com/tradtool/virtualtrade.aspx
Be aware that simulated trading is nothing like real trading.
Quote from sebastionay:
If i can shoot for 4 times more reward than risk for instance
that has absolutely no meaning. People like to "place trades where the reward to risk is at least 2" or something like that. But the real world is not nearly that clean. The market does not perform to your plans, rather it chews people like you up like a tornado filled with chainsaws...
then with some knowledge of fundamentals,technicals and the underlying asset I don't think it would be unrealistic to have an expected hit rate of 40% then id be profitable.
Yes it is unrealistic. Many traders blow out, in spite of their trading metrics. It is all about the rare event that wipes you clean. Given your desire for high leverage, I have this overwhelming desire to grab and shake you by the shoulders and say "wake up, man!!!"
I know the risk of ruin is pretty high with more than 2% risk per trade.
The Risk of Ruin also does not work like that. It is based on your account size ($1000 you are pretty much 100% Risk of Ruin), it is based on your money management (2% rules at your accoutn size will cause you to constantly lose due to stops that are too small - I mean, $20 stops seriously?), it is based on your edge(s), it is based on your trading costs and it is based on black swan/unforeseens. I see no way in the world you would do anything than lose everything.
If i can shoot for 4 times more reward than risk for instance
that has absolutely no meaning. People like to "place trades where the reward to risk is at least 2" or something like that. But the real world is not nearly that clean. The market does not perform to your plans, rather it chews people like you up like a tornado filled with chainsaws...
then with some knowledge of fundamentals,technicals and the underlying asset I don't think it would be unrealistic to have an expected hit rate of 40% then id be profitable.
Yes it is unrealistic. Many traders blow out, in spite of their trading metrics. It is all about the rare event that wipes you clean. Given your desire for high leverage, I have this overwhelming desire to grab and shake you by the shoulders and say "wake up, man!!!"
I know the risk of ruin is pretty high with more than 2% risk per trade.
The Risk of Ruin also does not work like that. It is based on your account size ($1000 you are pretty much 100% Risk of Ruin), it is based on your money management (2% rules at your accoutn size will cause you to constantly lose due to stops that are too small - I mean, $20 stops seriously?), it is based on your edge(s), it is based on your trading costs and it is based on black swan/unforeseens. I see no way in the world you would do anything than lose everything.
Sebastion,
I'm glad you are asking questions. It's far better to ask questions before you try to use options than after you have lost your money. Keep asking. Most of the people on this forum want to help you keep your money!
As I (and many others) stated before, you really should save your money and have several thousand to work with before you start. Otherwise, you can't have more than one or two positions to work with when you should be able to work with at least five or six and still have half your cash on the sidelines at the very least.
The next comment is about stops and options trading. Stops are a nice theoretical idea, but in practice options trading is pretty volatile. Stops pretty much guarantee you will be fleeced sooner or later. The bid-ask spread for almost all options traded is pretty wide. Although you can usually split the bid-ask at least close to halfway in regular trading, stops will not work that way. As soon as the bid (or ask) hits a certain point, you will be triggered and forced to accept a poor price, perhaps even a terrible price! Most of us simply watch our positions fairly carefully and trade manually when our risks exceed the comfort level. That way, we can control the bidding much better.
Third, realize that that are many ways to handle a position. Options are 10X (actually,probably 100X) more sophisticated than stocks as a financial tool for investing. For example, if you were bearish on financial stocks, you might short one of 20 stocks or an ETF.
With options, (and please don't try these until you have studied this VERY carefully and completely understand the risks involved, how assignment and exercise are handled, margin, etc.) you could buy puts, put spreads, OTM put butterflies, diagonal put positions, or you could sell calls or call spreads, buy several kinds of ratio spreads, calendars, butterflies and condors and also sell several of the above depending on whether you are using calls or puts and what strikes you are using. The combinations possible to achieve your goal are virtually endless and can be specifically tailored to your risk tolerance. If you don't know what these things are, you need to keep studying because you're not ready yet!
I'm glad you are asking questions. It's far better to ask questions before you try to use options than after you have lost your money. Keep asking. Most of the people on this forum want to help you keep your money!
As I (and many others) stated before, you really should save your money and have several thousand to work with before you start. Otherwise, you can't have more than one or two positions to work with when you should be able to work with at least five or six and still have half your cash on the sidelines at the very least.
The next comment is about stops and options trading. Stops are a nice theoretical idea, but in practice options trading is pretty volatile. Stops pretty much guarantee you will be fleeced sooner or later. The bid-ask spread for almost all options traded is pretty wide. Although you can usually split the bid-ask at least close to halfway in regular trading, stops will not work that way. As soon as the bid (or ask) hits a certain point, you will be triggered and forced to accept a poor price, perhaps even a terrible price! Most of us simply watch our positions fairly carefully and trade manually when our risks exceed the comfort level. That way, we can control the bidding much better.
Third, realize that that are many ways to handle a position. Options are 10X (actually,probably 100X) more sophisticated than stocks as a financial tool for investing. For example, if you were bearish on financial stocks, you might short one of 20 stocks or an ETF.
With options, (and please don't try these until you have studied this VERY carefully and completely understand the risks involved, how assignment and exercise are handled, margin, etc.) you could buy puts, put spreads, OTM put butterflies, diagonal put positions, or you could sell calls or call spreads, buy several kinds of ratio spreads, calendars, butterflies and condors and also sell several of the above depending on whether you are using calls or puts and what strikes you are using. The combinations possible to achieve your goal are virtually endless and can be specifically tailored to your risk tolerance. If you don't know what these things are, you need to keep studying because you're not ready yet!
Quote from spindr0:
Many brokers offer simulated trading. So does the CBOE, tho I have no clue if it's any good:
http://www.cboe.com/tradtool/virtualtrade.aspx
Be aware that simulated trading is nothing like real trading.
Thanks spindr ive set up an account and will use it to become more familiar with options. It does however say that there are some significant differences between the demo and real options trading.
Any experienced traders here that have used that demo platform and can say what those significant differences are? Or can someone suggest a demo that uses a live feed and handles simular to real?
Ive noticed already that slippage is considerably worse in options than with forex.
Quote from JohnGreen:
Sebastion,
I'm glad you are asking questions. It's far better to ask questions before you try to use options than after you have lost your money. Keep asking. Most of the people on this forum want to help you keep your money!
As I (and many others) stated before, you really should save your money and have several thousand to work with before you start. Otherwise, you can't have more than one or two positions to work with when you should be able to work with at least five or six and still have half your cash on the sidelines at the very least.
The next comment is about stops and options trading. Stops are a nice theoretical idea, but in practice options trading is pretty volatile. Stops pretty much guarantee you will be fleeced sooner or later. The bid-ask spread for almost all options traded is pretty wide. Although you can usually split the bid-ask at least close to halfway in regular trading, stops will not work that way. As soon as the bid (or ask) hits a certain point, you will be triggered and forced to accept a poor price, perhaps even a terrible price! Most of us simply watch our positions fairly carefully and trade manually when our risks exceed the comfort level. That way, we can control the bidding much better.
Third, realize that that are many ways to handle a position. Options are 10X (actually,probably 100X) more sophisticated than stocks as a financial tool for investing. For example, if you were bearish on financial stocks, you might short one of 20 stocks or an ETF.
With options, (and please don't try these until you have studied this VERY carefully and completely understand the risks involved, how assignment and exercise are handled, margin, etc.) you could buy puts, put spreads, OTM put butterflies, diagonal put positions, or you could sell calls or call spreads, buy several kinds of ratio spreads, calendars, butterflies and condors and also sell several of the above depending on whether you are using calls or puts and what strikes you are using. The combinations possible to achieve your goal are virtually endless and can be specifically tailored to your risk tolerance. If you don't know what these things are, you need to keep studying because you're not ready yet!
Thanks John I will follow your advice closely.
Ive noticed how stops aren't particularly safe with options now, and I have traded using a donchian trend following method before so I have become used to using time to determine TP without stops before.
What are your thoughts on this? http://www.forexfactory.com/showthread.php?t=223010
Do reputable brokers ever offer incentives such as ridiculously small premiums for a period of time to new customers?
Quote from TraderZones:
Quote from sebastionay:
If i can shoot for 4 times more reward than risk for instance
that has absolutely no meaning. People like to "place trades where the reward to risk is at least 2" or something like that. But the real world is not nearly that clean. The market does not perform to your plans, rather it chews people like you up like a tornado filled with chainsaws...
then with some knowledge of fundamentals,technicals and the underlying asset I don't think it would be unrealistic to have an expected hit rate of 40% then id be profitable.
Yes it is unrealistic. Many traders blow out, in spite of their trading metrics. It is all about the rare event that wipes you clean. Given your desire for high leverage, I have this overwhelming desire to grab and shake you by the shoulders and say "wake up, man!!!"
I know the risk of ruin is pretty high with more than 2% risk per trade.
The Risk of Ruin also does not work like that. It is based on your account size ($1000 you are pretty much 100% Risk of Ruin), it is based on your money management (2% rules at your accoutn size will cause you to constantly lose due to stops that are too small - I mean, $20 stops seriously?), it is based on your edge(s), it is based on your trading costs and it is based on black swan/unforeseens. I see no way in the world you would do anything than lose everything.
Ill post a couple of examples of price action set ups that I use to find opportunities to enter turning points with decent probabilities.
Short example.
Attachments
These are just some of the more common patterns I use (pin bars) I take them in the direction of the long term trend when volume is at its highest because I think moves started at those times generally carry more weight.
.
I use EMA's and SMA's to spot MACD and draw lines across key areas of support and ressistance along with RSI, bollinger bands whilst keeping an eye on the economic calander and news.
These pin bars on what I would consider A+ set ups have good positive expectancy and the stops are set at the top of the reversal bar so they are very small.
Long example below.
.
I use EMA's and SMA's to spot MACD and draw lines across key areas of support and ressistance along with RSI, bollinger bands whilst keeping an eye on the economic calander and news.
These pin bars on what I would consider A+ set ups have good positive expectancy and the stops are set at the top of the reversal bar so they are very small.
Long example below.
Attachments
Quote from sebastionay:
Ill post a couple of examples of price action set ups that I use to find opportunities to enter turning points with decent probabilities.
Short example.
the chart would be a lot more meanginful without the future bars on it. Everything looks interesting in hindsight.
The future bars are there for the purpose of the example.
All I can recommend if your not sure if im talking crap is to just look at any forex pair or stock with candle bars and you will see that it is one of the most common reversal patterns.
when the tail is significantly larger than the real body (atleast 2/3 longer) with its eyes close to the other two candles as shown in my examples above then it has a high likelyhood of fulfilling itself.
Im saying this because I have back tested the pattern and found it to be accurate over a long period of time.
I know that the fact it has happened a lot in the past is no guarantee that it will happen in the future but I just think that this is one of many market patterns that Ive found that will continue to work this way unless it becomes popular in which case I think it will either become far less effective or not profitable at all.
All I can recommend if your not sure if im talking crap is to just look at any forex pair or stock with candle bars and you will see that it is one of the most common reversal patterns.
when the tail is significantly larger than the real body (atleast 2/3 longer) with its eyes close to the other two candles as shown in my examples above then it has a high likelyhood of fulfilling itself.
Im saying this because I have back tested the pattern and found it to be accurate over a long period of time.
I know that the fact it has happened a lot in the past is no guarantee that it will happen in the future but I just think that this is one of many market patterns that Ive found that will continue to work this way unless it becomes popular in which case I think it will either become far less effective or not profitable at all.