try using options,vertical sprds,puts go down when the stock rallys ,calls go down when the stock sels off,so if vmi just rallied to 108 and that is resistance,and you think it might pull back ,you could sell the 115 call and buy the 100 call,if the stock drops back to 100,your vertical call sprd will shrink,or you could just buy the 110 puts at say $4 and put in sell (order cxls order) O.C.O. at $2 and $10 if your wrong the put sells at 2 and you lose $200 for each one you bought and the sell at $10 is automatically cxled,if your right and it trades to $10 you are filled and you made 600 and the $2 sell order is automatically cxled,this way you always know your risk and it works when you are away.You also don't have to put up the large amount of money to buy or sell the stock,if you use the first example,the vertical sprd your profits and losses will be smaller,the sprds will shrink or grow slower because you are long at 1 price and short at another,they also will hold premium so if you sprd always be a seller of calls if its going down and puts if its going up,the premium erodes with time so if your stock sits there you still make money
Strategies for a beginner
- Thread starter Lilypond10
- Start date
I have to admit that I agree with you about the title of my book. When Atlantic Publishing decided on use me to write the guide, they had already decided on the title.
I usually regard investing as longer term, inherent (fundamental) value stuff, and short term as technical trading, although I have seen short term used to cover times from minutes to weeks.
By the way, I have just started work on a candlestick charting book for Atlantic - it will be a few months before it is out, maybe around the turn of the year. It will be much more detailed than the "short term trading book", and I hope will become one of the definitive guides.
Watch your stops, money management is key!
I usually regard investing as longer term, inherent (fundamental) value stuff, and short term as technical trading, although I have seen short term used to cover times from minutes to weeks.
By the way, I have just started work on a candlestick charting book for Atlantic - it will be a few months before it is out, maybe around the turn of the year. It will be much more detailed than the "short term trading book", and I hope will become one of the definitive guides.
Watch your stops, money management is key!
I agree, while you can leverage your money in a way that seems attractive, if you don't get it right, that leverage wipes you out quickly.
You can also put single stock futures, which only came out in 2002, in with options - I recently wrote a single stock futures course for Insight Support in London, England, and that involved me preparing some comparison tables of the different financial instruments.
Of course, futures are even more dangerous for the beginner - at least with options you get the option, and just lose your stake. With futures you're committed to the whole ride down if you are asleep at the wheel.
You can also put single stock futures, which only came out in 2002, in with options - I recently wrote a single stock futures course for Insight Support in London, England, and that involved me preparing some comparison tables of the different financial instruments.
Of course, futures are even more dangerous for the beginner - at least with options you get the option, and just lose your stake. With futures you're committed to the whole ride down if you are asleep at the wheel.
For someone who wrote a book, that seems like a pretty short answer, lol. If this is the real Alan Northcott, I wanted to say I like your book on short term trading. As a matter of fact, I wanted to buy a copy for several of my family members at x-mas. It's a pretty complete introduction on trading.
I haven't had the time to read the whole thread but if this is a discussion on whether a beginner should trade futures or not, there are comparisons on forex and futures etc in Mastering the Trade by John Carter. He says they can close out your account in Forex before you could lose your house. He wrote that because of slippage in futures, there's only like $3 difference in commissions between forex and futures.
If I even wanted to consider trading futures it would be because when you want to short a stock and no shares are available to short, your trade is cancelled. However, the money management part of it is kind of tricky. You can only risk small amounts in futures.
I just finished reading a bunch of books on trading and I spent time comparing trade setups in different books and I can tell you I want to start with paper trading. Then I want to do some trading with small amounts of money with lots of paper trading on the side. And this is coming from someone who already has experience and already read more than 3 dozen books on trading.
My difficulty of course in the past came from the fact I could not make up my mind on what kind of trading style I wanted to settle on. I figured if I traded for the experience, I might eventually make up my mind. I finally did although I think I should have risked less.
One thing I did figure out about options is this: the bid-ask spread was a "psychological block" for me. It prevented me from taking a loss when I should have or even taken a profit when I should have because I kept on thinking about the slippage.
My plan now is to start with small amounts of money in stocks with no leverage. Then add some leverage on the first day of trading after some time with positive results. Then I might venture into Forex in several months but only if my results are positive and that means I would totally skip options this time.
I might be tempted to trade options with small amounts of money later on. As a matter of fact, I thought about using a reward system where I would only trade an option with profits from my trades. However, I might have to aim for large moves which means larger time frames but that means more time decay. And if it's shorter term, welll, I might hesitate in even taking a profit because of the slippage. The options experience was a little "weird" for me.
I also wanted to add that I found the book by John Carter is excellent except I did not find his trade setups appealing. And Forex is still a little bit âthe Wild Westâ. You can read about that in Getting Started in Currency Trading. Also, if anyone is wondering, the trading style I finally settled upon is based on ideas by Oliver Velez.
Hi Clambill
Just wanted to say that this IS the real Alan Northcott, taking a break from writing to look around on the net! And thank you very much for your kind words on the book, I certainly tried to be as comprehensive as I could (like the "Dummies" series, I thought, but better!)
I don't know whether you've included them on your reading list, but I find the Toni Turner books very engaging and informative, and whole-heartedly recommend them. On the other hand, I wouldn't recommend anyone to take on Alan Farley - very knowledgeable, wonderful guy, but I have to fight to understand him. I find his use of the passive voice learned in concept but totally incomprehensible! I even thought about offering to translate his books for him (just joking)!
Watch your stops, remember no more than 2% portfolio loss on any trade and you'll be able to keep going. Good luck!
Just wanted to say that this IS the real Alan Northcott, taking a break from writing to look around on the net! And thank you very much for your kind words on the book, I certainly tried to be as comprehensive as I could (like the "Dummies" series, I thought, but better!)
I don't know whether you've included them on your reading list, but I find the Toni Turner books very engaging and informative, and whole-heartedly recommend them. On the other hand, I wouldn't recommend anyone to take on Alan Farley - very knowledgeable, wonderful guy, but I have to fight to understand him. I find his use of the passive voice learned in concept but totally incomprehensible! I even thought about offering to translate his books for him (just joking)!
Watch your stops, remember no more than 2% portfolio loss on any trade and you'll be able to keep going. Good luck!
Read How to Trade in Stocks by Jesse Livermore. After that don't read any thing else but instead go and develope your own study in the market. Keep a journal and start familiarizing yourself with the way price moves monthly, weekly, hourly and in minutes as well. The more dvd's and books you buy the more your mind and overall trading instinct will be conflicted. Trading stocks is a business. To be a surgeon or a lawyer one does not read how to books on the topic, they study principles and then develope their own individual insights and idea's on how the business or procedure is supposed to go. Trading is a business.
As a beginner I think one of the most important things you can do is understand your risk relative to your reward and learn to find trades that are appropriate relative to your risk.
With stocks its easy, your stop loss is your risk and your target is your reward. I usually set my target based on a 3 to 1 return based on my stop.
If I can see that a 3 to 1 is technically impossible, I move on. I will also look at ways to tighten up my stop, therbye reducing my risk and then making my target even less for the profit goal.
You can vary your entry with different strategies to get a tighter stop.
The diffaculty comes when you jump to the option chain and try and asses your risk. This is where 99% of all options traders fail and end up crying like a spanked puppy because they have no clue as to what the true problem is when it comes to their horrible demise.
I have an options analyzer software piece that uses greeks and time in trade and your stop to "attempt" to evaluate your rissk.
You can use the link in my sig. to download it.
<A HREF="http://www.candlestickgenius.com">candlestick genius</A>
It won't come until video 2. Or you can email me and Ill send it to you.
Mark
With stocks its easy, your stop loss is your risk and your target is your reward. I usually set my target based on a 3 to 1 return based on my stop.
If I can see that a 3 to 1 is technically impossible, I move on. I will also look at ways to tighten up my stop, therbye reducing my risk and then making my target even less for the profit goal.
You can vary your entry with different strategies to get a tighter stop.
The diffaculty comes when you jump to the option chain and try and asses your risk. This is where 99% of all options traders fail and end up crying like a spanked puppy because they have no clue as to what the true problem is when it comes to their horrible demise.
I have an options analyzer software piece that uses greeks and time in trade and your stop to "attempt" to evaluate your rissk.
You can use the link in my sig. to download it.
<A HREF="http://www.candlestickgenius.com">candlestick genius</A>
It won't come until video 2. Or you can email me and Ill send it to you.
Mark
ROTFLMAO!! I read The Master Swing Trader and thought the same thing "Someone needs to translate this." I found myself reading the same sentence about 5 times, then ended up just looking at the damn chart he was referring to. Something in there must've stuck, though, because I now have an good intuition for a stock's behavior based on charts
