April 17th, 2009 by Damian Papworth

One of the things I have noticed during the 20 years I have spent either actively investing in various strategies, or trialing them, is that the ones which make logical sense usually are the ones which work best in real life.

There are so many strategies I’ve tried, I have lost count. And there are at least as many which I’ve let go without trying. There are just too many. I found a quick fire way though which helps disregard the strategies which are useless, so you can trial the ones which are worth trialing. Its logic. Look at the logic of your trading strategy and see if there are holes in it. You’ll be amazed by the number of strategies with big logical holes.

Its quite possible that these strategies, in their wholeness work quite well. But the problem is that if you are trading a strategy which has holes in it, at some stage you’ll come up against a real life situation where the strategy has no answer. Then you’ll be on your own and you’ll need to make a decision outside the strategy. This can be an educated guess, to an intuitive judgment call, to a flip of a coin.

Personally I think that making decisions like this, decisions which are outside the logic of an investment or trading strategy, is gambling. Its not a good situation. Sure you may make money with this gamble, but you could lose it too. Its no different than blackjack. A robust and complete trading strategy should take these gambles away from you. There should be no guesses. You should just plan the trade and then trade the plan.

Also, the point about trialing a strategy is that you are finding out whether it will make consistent returns over the fullness of time. The point about trading a strategy is that you know it makes consistent returns over the fullness of time. If you have had a guess mid way through the strategy, you cannot be confident its the strategy or your guess which is making the money. You will need to start again.

So if you have a new strategy which looks promising, apply your logic to it first. Try to understand all the trading scenarios you may face and ensure the strategy stands up to all of them and deals with them. This simple piece of advice could save you thousands.

And once you have covered off every situation you can think of, always remember to execute a preliminary trading exercise without putting money down. Spend a few months running the strategy in spreadsheets before you trade with money. You’ll be amazed at the real life situations which come your way which you’d never have dreamed of. And you will thank your stars you resolved these issues when you had nothing on the line.

Business, business;finance, Finance, foreign exchange, FOREX Trading, investing, investment, investment strategies, Investments, money, money management, stock market trading, stocks, trading, trading strategies

March 8th, 2009 by Mike Stason

In the stock market industry, the trade for stocks and stock options are often interchanged and many may be confused between the concepts behind these types of trades. However, what you should know is that these two have very different characteristics from each other, and using them interchangeably can be very lethal if you want to engage in the stock trading game.

Being aware of the difference of these can help you to not make terrible trading errors, but you could learn to make smart business choices on the trade that you want to make your investments.

Stocks are shares of a company that is sold or bought by an investor. If you have a stock from a company, you have rights which may include a profit from the earnings. You also have the right to sell the stock if you do not want it anymore.

The stock option is not the stock or share of a compnay, it is the rights of the stock. You can sell or purchase the stock at a predetermined price with a time frame, but you do not get the profit from the company.

Take note that in doing transactions for stock options, there will always be a buyer and a seller, and this may not always hold true when compared to stocks. When you sell stock options, you are actually creating a certain degree of security for the company as well as for yourself. In this way, the parties involved can make sure that money is actually made to the frequent trade that happens.

However, the same results might not be expected if you are only a beginner.In comparing the benefits of trading stocks and stock options, many experts would claim that stock options might be a promising gamble for companies and individuals, especially if you have adequate experience in the trading game and can substantially use very good strategies to survive.

What makes a lot of experts prefer options trading is usually because in this particular trade, no matter what would happen to the underlying security, an option buyer cannot lose to more than that of the initial price paid for the rights. Therefore in trading options, there are fewer risks involved on the part of the buyer, especially when it comes to the possibility of losing a lot of money. And it may even give promises of profitable gains.

Also though, the seller has more risk. There is a chance that you would have to deliver or take deliverie of the stock shares. But if there is a different option, the seller could have a much bigger loss than the stock option’s beginning cost.

Then the best way for you to play the stocks trading game is to stick with the more traditional trading of stocks as this can be easier,and so, if you are not well skilled and knowledgeable about how you can prevent severe losses.

Just make sure that you take the time to understand concepts and strategies behind stock options before you actually start trading.However, if you do believe that you can manage then options trading may give you many promising positive results.

day trading, economy, fianance, Finance and Money Management, money, options, stocks, trading