Five Fundamental Steps to Successful Stock Option Trading

Stock option trading presents the opportunity to potentially make a fortune trading options than almost any other form of online trading in today’s market. The level of reduced risk combined with above average leverage allows a skilled option trader the chance to make sizable gains but an aspiring option trader must have a solid understanding about what creates a reliable option trading method to insure long term success at option trading. There are five fundamental steps that any option trader must implement when creating a superior stock option system.

To begin with you must realize the affects of time on the premium of the option you are choosing to trade. There are two parts you must factor when considering time into the stock option trading process. The first part that has to be considered is the time left on an option till expiration. Since stock options have a defined time period of anywhere from 30 days up to three years in some cases then you must be sure to select the proper stock option with enough time on it in order to profit. You must be sure that you purchase the correct option containing enough time on it to insure that time decay doesn’t erode your investment away before your position has enough time to be profitable.

This brings us to the second part of the option selection process of trading options successfully is factoring time into your trading system. Trading a particular stock option and knowing the key factors of your option trading system or setup by knowing the average time period of a trade once it has been signaled and entered. For example, if your average holding time for an option trade is five days then you don’t want to buy an option with four months of time premium left on it because you would be paying more for the extra time with the option’s purchase price. Nor would you buy an option with less than 30 days till expiration as time decay would eat away the value of option so rapidly that even if the stock option’s underlying stock moved favorably in your direction the time decay would be so great you would be too late to capture a gain in the option itself.

The third step to successful stock option trading comprehends the relationship of volatility between the markets, the underlying instrument that the option is based on, and the effect is has on the cost of the option itself. When the stock market as a whole as an index goes thru periods of low volatility or experiences low trading volume then the stocks that make up the market tend to follow general market and also begin to follow suit with periods of low volatility which cause the value of stock options to become cheap. However if the general market’s volatility begins to spike it causes individual stock option premiums to increase in value as long as the market moves in the trader’s favor.

The fourth key in successful stock option trading is having a trading method that takes factor these key steps into giving clear entry signals, clear exit signals, a defined system of trade management, and a profit factor greater than your average loss over a series of trades. Understanding all steps of various trade setups is meaningless if you don’t have a trading system that guides you through each step of the trade management process. A solid trading stock option system guides you by the hand and details each step while guiding you towards being a consistent winning trader in the markets and being profitable in the end.

The fifth and final step to trading stock options successfully is trading psychology. Traders and there mental makeup are usually complex so it is very important that stock option traders have a sound stock option trading system or method that factors this into their overall approach to trading the markets as well as the discipline to follow their trading methods. You can give two traders the same exact profitable trading system but its very likely that they will experience very different results. The reason for this is usually is because the one that has the ability to remain as detached from his losing trades as well as his winning trades while maintaining the discipline to follow the system’s rules no matter the individual trading result will come thru as the most profitable trader in the end which shows us that it comes down to a superior mental process towards trading the markets.

Using these five steps as a foundation to create your own stock option trading system can help you avoid the mistakes of many other stock and option traders. By understanding time decay, factoring an option’s time into your trading method, how volatility impacts a stock option’s intrinsic value, what details a winning stock option trading system, and your own trading psychology you now have a the key steps to build your trading career on.

Five Keys To Stock Option Trading

Stock option trading offers the skilled trader more potential for making a fortune option trading than almost any other form of online trading in today’s market. The degree of controlled risk along with superior leverage allows a knowledgeable option trader the chance to make huge profits but an aspiring option trader must have a solid foundation of education about what makes up a sound option trading method in order to have a long term success at option trading. There are five essential keys that any option trader must understand when developing a winning stock option system.

First, you must understand the degree which time affects the premium of the option you are considering trading. There are two parts you must consider when factoring time into the stock option trading decisions. The first thing that you must take into account is the intrinsic time left on an option. Since options have a limited time period of anywhere from 30 days to several year depending on the particular option that you bought you must be sure that you purchase the correct option containing enough time on it to insure that time decay doesn’t erode your investment away before your position has enough time to be profitable.

The second skill of trading options profitably is factoring time into your trading system in relation to trading a particular stock option and knowing the statistics of your option trading methodology or option trading setup by knowing the average holding period of a trade signal. If your average holding time for an option trade is seven days then you don’t want to buy an option with three months of time premium left on it because you would be paying more for the extra time with the option’s purchase price. Nor would you buy an option with less that 30 days till expiration as time decay would erode the value of option so quickly that even if the option’s underlying stock movement moved favorably to you the time decay would prevent you from realizing a gain in the option itself.

The third thing to profitable stock option trading is understanding the relation of volatility between the market, the underlying stock that underlies the stock option, and the effect is has on the value of the option itself. When the general stock market as an index goes thru periods of volatility or low trading ranges the stocks that make up the market tend to follow overall trend and also begin to experience periods of low overall volatility which in turn can cause derivative like stock options to become cheap or low premiums. But if the market’s volatility rises it is likely that individual stocks will follow the trend causing stock option premiums to increase in value given that the market moves in the trader’s favor.

The next key in how to trade stock options successfully is having a stock option trading method that takes these key factors into consideration while giving clear entry signals, clear exit signals, a defined system of trade management, and a profit factor greater than your average loss over a series of trades. Knowing the ins and outs of various trade setups is useless if you don’t have a trading methodology that guides you in every step of the trade process. A solid trading method holds you by the hand and defines each step while leading you to being a consistent winner in the markets and a profitable trader when all is said and done.

Finally, the fifth and final key to successfully trading stock options is yourself, particularly your trading psychology. Human beings and there mental makeup are extremely complex so it is extremely important that stock option traders not only have a sound stock option trading methodology but the discipline to follow their trading methods. You can give two people the same exact winning trading system but it is very common for them to have different results. Invariably, the one that has the ability to remain as detached from his losing trades as well as his winning trades while maintaining the discipline to follow the system’s rules no matter the trading result will emerge the greatest winner in the end.

Using these five keys as a basis to develop your stock option trading methodology can help you avoid the mistakes and pitfalls of many beginning option traders. By understanding time decay, factoring an option’s time into your trading method, how volatility impacts a stock option’s value, what defines a reliable stock option trading methodology, and your own trading psychology you now have a foundation to develop into a winning stock option trader.

Online Stock Market Trading: A Path to Wealth Building and Financial Freedom

Online stock market trading may be your path to financial freedom. If you are like many others out there and are tired of waiting on hold for your financial advisor for a half hour just to check your account balance, only to have him be reluctant to actually tell you how much of your money he has lost, this may be the day you get your freedom. By taking charge of your investments and control of your financial future, you are putting the important choices in the hands of the person most qualified to make them, you.

In trying to decide if online stock market trading is right for you, there are some key points you need to consider. The first is whether you have the time to devote to doing it properly. While being an online trader does not mean that you need to quit your job and set up a home office just to make it work, there is a certain amount of time you must dedicate to make things go smoothly. In reality a few hours a week is usually enough to keep on top of the latest news and research. This added to a basic understanding of the way the markets work will be enough to keep you on the right track.

Another, and some say the most important, quality that most involved in online stock market trading is the ability to remain emotionally detached as there stocks fluctuate up and down. If the thought of a dip in the market makes you queasy, then being your own broker is probably not for you. Some have found a way around this by only looking at there stocks once or twice a week, and if you have the self discipline to do so you may be o.k., but if you feel the need to look at your investments ten or more times a day, you may want to reconsider why you are trading on your own.

No matter what your reason for deciding to get into online stock market trading, good advice on the fundamentals of trading is a must. Be sure to do plenty of research and look into the best trading sites to see which will fit your needs. Always remember, investing is about growing your money, and any information that helps you do so is worth looking into.

Online Stock Future Trading: Making Money by Predicting Tomorrows Market

Online Stock Future Trading is a new way to make money in the market. By combining the speculation and leveraging benefits of futures to the underlying commodity of stocks, a new investment security has been created that opens up many new and exciting avenues of wealth accumulation. This article is for those of you who may not already have a basic understanding of the stock market or one of futures contracts. Once you see the benefits of futures trading you will see how the two naturally work well together.

The key words in the phrase online stock future trading are stock and future. Simply put, a stock represents part ownership in a company that was sold by said company. The value of a stock goes up and down based on the perceived worth of the company that issued it. Stock markets are where people come together to buy and sell stock in different companies. The price of a stock fluctuates by the laws of supply and demand. If more people are selling a stock than are buying, the price goes down. If, on the other hand more are buying than selling, the price goes up. By playing the market, you can make money off either movement in a stock.

A futures contract is your way of betting on the path a particular stock will take over a specified length of time. In online stock future trading you bet on the price of the stock without actually owning it. Whereas in the market you must generally have the funds to purchase the shares you wish to speculate with, in futures trading you are merely making an educated guess about what is going to happen next. If you guess right, you make money and if you guess wrong you lose money. By taking stock ownership out of the equation, the transaction becomes one of either total profit or total loss.

As with any security or investment vehicle, you need to be sure that you understand the implications of online stock future trading. You also need to be sure that future trading is right for your needs. Talk to an investment professional or look online for guidance. Futures trading is risky, but there are great rewards to be had by those who take the time to learn. Remember, you cannot make money in the market if you never invest it but, as always, proceed with caution.

How To Trade Stock Online For Beginners

How To Trade Stock Online For Beginners

If you are wondering how to trade stock online, you are not alone. This is a short tutorial on some of the absolutely necessary steps you must take to make your trading safe, low stress, and profitable. By following these few key steps you can trade hassle free, and know that you are making the right decisions with your money. If you are nervous about online stock trading then this short tutorial should instill some confidence in your ability to take matters into your own hands. To get started, read on.


Trading Stock Online

Learning how to trade stock online need not be a painful process. It is neither as hard nor as time consuming as most make it out to be. In fact, you have already taken the first step by reading this article. Your next step should be simple also. You need to research. Pick a few of the top named trading companies and look into their performance history and there customer reviews. You can tell a lot about a company by what its customers say. Be sure to read a large selection of reviews, as there are always a few horrible and a few stellar ones for every service. Look for patterns of complaints about the same problem from many different customers. This is a red flag.

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How To Trade Stock Online – Apple Computer Price Chart (Flickr.com)

Stock Market Research

The next step after choosing an online trading house is to research how to trade stock online. With all the tools available to today’s investors, you need to get the basics down before you get started.

A good stock trading tip is to learn about the different trade types such as stop orders, limit orders, and timed orders. Also, learn the basics of how the markets work. An understanding of why stock prices move the way they do will help you in the long run.


On top of these areas of research, you need to add the research into the company or companies in which you wish to invest. Knowing how to trade stocks online does not guarantee success. By performing proper research, you can increase your odds of making the big score a hundred fold. Do not rely on others to do your research for you unless you know that they know the market as good as or better than you yourself do. Just be sure to use a reliable source for your information like StockOptionSystem.Com. As always, be sure that you can emotionally and monetarily handle the fluctuations in the market before beginning a new investing program.

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How To Trade Stock Online

 

 

Easy Online Stock Trading: Make a Fortune in the Market

To learn the basics of easy online stock trading, you have to look no further than the internet. You obviously have access to a computer or you would not be considering online trading in the first place. There are literally a millions of pages of information at your fingertips. By building a foundation of knowledge over the course of a few weeks, you will get a jump-start on correct trading practices.

To assure that easy online stock trading does not turn into hard trading, make sure that you do not invest funds that you cannot afford to lose. There is no worse feeling than watching your child’s college fund go down the tubes with the latest market fluctuation. By investing only money that can be traded without fear of loss, you are free to make the hard decisions sometimes necessary to keep making money in the market. Also, be sure to invest to your tolerance level. Futures trading and options trading may be the fastest way to make tons of money, but they are definitely not for the weak of heart. The fluctuations of the market are magnified tenfold in these types of securities.

A good internet connection is also a must in easy online stock trading. Insuring that you can make trades when you need to should be a top priority with any self-lead investor. In the markets as in life, timing is everything. If you cannot be sure of getting online when the market calls, starting an online brokerage account is an invitation to disaster. A high-speed connection like a cable modem or dedicated service line (DSL) is highly recommended. By having a backup line or system you doubly insure the reliability of your connection.

The quickest way to turn easy online stock trading into a profitable venture is to slow down. Most people dive in with both feet and before they know it they are loosing money faster than they are earning it. By taking your time and learning all that you can before you get started, you can enter the market with confidence and poise. Start with small trades to get used to your service, and then move to more substantial action once you feel you are ready.