No dude, I'm not going to spoil it for you. Keep reading! It get's really good.
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
No dude, I'm not going to spoil it for you. Keep reading! It get's really good.
lol he joined mav.
I spent the best part of a year doing credit spreads. Fictitiously paper trading. Turned out to be a waste of time.
In that year, I pyramided and doubled the money twice pretty much, but twice the market dived and wiped me out.
There are others on here can explain it better. If you trade just a portion of your account, then credit spreads do not make enough money fast enough. If you pyramid, or compound, you do well, until a plunge happens. During that time, any bets you have exposed, will accelerate the volatility, which then balloons the premiums and you get wiped out. You cannot exit fast enough, or rollover, or whatever you desired as a security fail safe. I´m sure others on here can give you the nitty gritty better. Sufficient to say, I wasted my year at it, like so many others. Got wiped out twice, before giving up.
I now option trade directly, buying and selling options contracts. Have a method, if worked properly doubles your money about every six months, or a little less. You make mistakes and end up not doing quite that, but increasing your risk is part of the game.
I´m currently doing the same thing and to handle the risk, use gambling techniques. When you have a run of the LUCK and are doing everything seemingly right, then you keep increasing the risk. When you get burnt, once or twice ( your choice ) REVERT immediately to one contract, as far OUT THE MONEY as you feel comfortable with. The idea being to stay in the game technically, but to minimize any drawdown. No sense giving it back. Until you figure out what hit you? Market changed, or you had a fight with your wife or something and you are obviously off. Keep trading minimums and soon as you get a couple of winners, the LUCK ( or your pyschology, or the market has moved on ) and start accelerating your size, and risk again. Sort of like those famous MIT students who took the casinos for millions with Blackjack.
In that year, I pyramided and doubled the money twice pretty much, but twice the market dived and wiped me out.
There are others on here can explain it better. If you trade just a portion of your account, then credit spreads do not make enough money fast enough. If you pyramid, or compound, you do well, until a plunge happens. During that time, any bets you have exposed, will accelerate the volatility, which then balloons the premiums and you get wiped out. You cannot exit fast enough, or rollover, or whatever you desired as a security fail safe. I´m sure others on here can give you the nitty gritty better. Sufficient to say, I wasted my year at it, like so many others. Got wiped out twice, before giving up.
I now option trade directly, buying and selling options contracts. Have a method, if worked properly doubles your money about every six months, or a little less. You make mistakes and end up not doing quite that, but increasing your risk is part of the game.
I´m currently doing the same thing and to handle the risk, use gambling techniques. When you have a run of the LUCK and are doing everything seemingly right, then you keep increasing the risk. When you get burnt, once or twice ( your choice ) REVERT immediately to one contract, as far OUT THE MONEY as you feel comfortable with. The idea being to stay in the game technically, but to minimize any drawdown. No sense giving it back. Until you figure out what hit you? Market changed, or you had a fight with your wife or something and you are obviously off. Keep trading minimums and soon as you get a couple of winners, the LUCK ( or your pyschology, or the market has moved on ) and start accelerating your size, and risk again. Sort of like those famous MIT students who took the casinos for millions with Blackjack.
I spent the best part of two years, trying many different spread trading techniques. Some of them work, but small bets of your account size, earning 3% or so, per winning trade, just isn´t it, for me.
The idea is to earn money on your whole account. It has to increase say at 40% a year perhaps, or whatever figure makes sense to you.
You can´t do that nibbling at small bets, spread trading. Just not going to happen.
No spread trading in my humble opinion is SAFE. They all have different quirks. I finally figured out that the only way to make decent money was a sort of compounding, but the risk goes up, so recently hit on the drawdown control method, I explained to you, of a gambler. This is not investing, this is not really speculation per se, this option trading is gambling. SAFE is not a word you can use trading options, eventually you realize it. You are betting each time. It makes sense to me at least, to figure on hot and cold trends. How you handle a run of luck to maximize returns based on your account size, versus what you do when your luck reverses until you figure it out, is the name of the game. At least my game! Nor do you need to know the GREEKS, volatility stuff, etc. Options are like an ice cream cone. They melt in the sun, you have to lick it fast, or it is gone. So all bets are of necessity short. Mind you I had a couple of tests using 2 year out options on longer time frames which returned well. But prefer either; one day, or up to five or six days. I felt out of control with the long term options.
You are trading against the mob pyschology out there, and also going against the market makers. The recent few weeks of no trends in the market for example, which you can trade, but against the market makers, which they don´t like at all. The odds are stacked against you. Gambling methods in my view work best. HOT and COLD trending.
The idea is to earn money on your whole account. It has to increase say at 40% a year perhaps, or whatever figure makes sense to you.
You can´t do that nibbling at small bets, spread trading. Just not going to happen.
No spread trading in my humble opinion is SAFE. They all have different quirks. I finally figured out that the only way to make decent money was a sort of compounding, but the risk goes up, so recently hit on the drawdown control method, I explained to you, of a gambler. This is not investing, this is not really speculation per se, this option trading is gambling. SAFE is not a word you can use trading options, eventually you realize it. You are betting each time. It makes sense to me at least, to figure on hot and cold trends. How you handle a run of luck to maximize returns based on your account size, versus what you do when your luck reverses until you figure it out, is the name of the game. At least my game! Nor do you need to know the GREEKS, volatility stuff, etc. Options are like an ice cream cone. They melt in the sun, you have to lick it fast, or it is gone. So all bets are of necessity short. Mind you I had a couple of tests using 2 year out options on longer time frames which returned well. But prefer either; one day, or up to five or six days. I felt out of control with the long term options.
You are trading against the mob pyschology out there, and also going against the market makers. The recent few weeks of no trends in the market for example, which you can trade, but against the market makers, which they don´t like at all. The odds are stacked against you. Gambling methods in my view work best. HOT and COLD trending.
Credit Spreads can technically generate a monthly income, BUT will destroy you when the market drops or changes. Destroy you totally, ALL YOUR ACCOUNT, or 95% of it.
A 5% drop in the market will damage you to the point that your account will only have a smidgen left. A 10% market correction will WIPE OUT YOUR TOTAL ACCOUNT. There are technical details regarding this, that would take a book to write.
There are many long term traders on here, who can fill you in with gory details of theory and lore, in all kinds of Spread trading, not just credit spreads. They will fill your head with curves, and statistics, and sneaky adjustments, volatility, and risk calculations, so that you will make your head spin. All very rational, complex and logical. You could say they have put in many years acquiring esoteric formulas and methods. A newbie then has to go through all this esoteric stuff and long term learning and still lose money as the market ever changes and adjusts. You are trading against mob pyschology, not theory, learning, or common sense.
My own conclusion is, we are all gambling. Being results orientated, I want to know the bottom line. How much, percentage wise of your total account did you make for this year, in the end.
It comes down to YOU ARE GAMBLING. If you gamble, you might as well toss a coin. At that rate, you have a 50 - 50 chance of winning. You can put the odds on your side, by understanding winning streaks and losing streaks. Reducing draw down during a losing streak is putting the odds on your side. Identifying a pattern that works EVERY TIME also is a good method of increasing the odds. But then you get into trading against YOURSELF. Pyschologically, you will become GREEDY. Afraid that is it. You will become fearful and panic, when the mob does not do what you expected it to do. Controlling greed, YOUR GREED is the name of the game and using gambling methods seems to give the best results. There is a reason that the EXCHANGES do not allow PATTERN TRADERS, to day trade. It works! When you extend the time period for trading, you increase the improbabilities, to the advantage of the market makers and the brokers. Your odds go up in option trading, as you shorten the time spent with a bet. That is because pyschologically you have less time to be frightened into making a mistake. To make money, your most important thing is bet size. Traditional lore and internet advice is keep your bets small. Reduce risk. But you will become dissatisfied that way, as you cannot make a living at it.
A 5% drop in the market will damage you to the point that your account will only have a smidgen left. A 10% market correction will WIPE OUT YOUR TOTAL ACCOUNT. There are technical details regarding this, that would take a book to write.
There are many long term traders on here, who can fill you in with gory details of theory and lore, in all kinds of Spread trading, not just credit spreads. They will fill your head with curves, and statistics, and sneaky adjustments, volatility, and risk calculations, so that you will make your head spin. All very rational, complex and logical. You could say they have put in many years acquiring esoteric formulas and methods. A newbie then has to go through all this esoteric stuff and long term learning and still lose money as the market ever changes and adjusts. You are trading against mob pyschology, not theory, learning, or common sense.
My own conclusion is, we are all gambling. Being results orientated, I want to know the bottom line. How much, percentage wise of your total account did you make for this year, in the end.
It comes down to YOU ARE GAMBLING. If you gamble, you might as well toss a coin. At that rate, you have a 50 - 50 chance of winning. You can put the odds on your side, by understanding winning streaks and losing streaks. Reducing draw down during a losing streak is putting the odds on your side. Identifying a pattern that works EVERY TIME also is a good method of increasing the odds. But then you get into trading against YOURSELF. Pyschologically, you will become GREEDY. Afraid that is it. You will become fearful and panic, when the mob does not do what you expected it to do. Controlling greed, YOUR GREED is the name of the game and using gambling methods seems to give the best results. There is a reason that the EXCHANGES do not allow PATTERN TRADERS, to day trade. It works! When you extend the time period for trading, you increase the improbabilities, to the advantage of the market makers and the brokers. Your odds go up in option trading, as you shorten the time spent with a bet. That is because pyschologically you have less time to be frightened into making a mistake. To make money, your most important thing is bet size. Traditional lore and internet advice is keep your bets small. Reduce risk. But you will become dissatisfied that way, as you cannot make a living at it.