Hi again all,
It is already understood that options will be dissallowed; however, I'm hoping that we might have provided you with some more information and/or points of views regarding ever letting them back in to competitions or whether there should be seperate competitions.
I suppose it depends on your trading strategy. People can have many different strategies, all of which can be effective. The point I'm trying to get across is that it's important above all to be trading with a strategy or not at all.
For instance, you could start by trading in stocks only, and take your 3% profits and then begin to trade only those gains into more agressive growth funds, stocks, or commodities. This does two things:
-you will not trade your higher risk positions emotionally, knowing how you came about your capital set aside for higher risk trades and
-you will still be fine should the worst happen with your high-risk trades, since you will still have your initial capital still making 3% returns in stocks. This way you can keep on investing again and again, until one of your high-risk trades finally goes right! If you put all of your money into options right away, it only takes a single trade to go wrong and you might never be able to get out of the hole which you have dug for yourself. Also, 3% returns can be higher with a margin account and even higher if you trade with borrowed money from friends, family, associates, co-workers, colleagues, etc... (I suppose options give the same effect,) just don't over-do it, especially at the beginning. It's better to miss out on a gain, then to experience a loss. If you lose 50% then you'll have to make a 100% return just to break even.
I believe that a proper trading plan should provide the investor little or even NO choices. Every step should be laid out with all possible scenarios including entry-price, exit-price, stop-losses, limit-orders, timing to get into a trade, whether or not to increase or decrease the amount of shares in a trade, at what price to execute such increases/decreases, and many others.
As you can see, with a proper plan, you can eliminate any choices that must be made by the investor. This helps to eliminate any emotional investing.
To be effective, any trading plan should be WRITTEN and never "mental."
A written trading plan helps keep you from making poorly conceived, spontaneous, thoughtless, and emotional trades. An unwritten or mental plan can easily be changed depending on the mood of the trader.
You need a written trading plans and DISCIPLINE to follow them.
A written plan keeps you from many trading pitfalls: greed, fear, boredom, a need to be right, a need to be a victim, and masochism.
Plans should not just be for one or two trades. Your plan should include your timeframe for trading. You must approach the markets with an idea of how long you are going to trade (weeks, months, years,) and how much money you are going to commit to trading. Again, you must know:
-your risk/reward ratio
-where you are going to get in and out
-ahead of time how much money you are going to risk
-where you are going to place your stops
-when or if you are going to add to a winning position or liquidate all or part of a losing position or a winning position for that matter.
You must have a profit objective for each trade and for your entire account for the week, for the month, and for the year. (You must have a mini-plan for each individual trade as well as an overall long-term plan.)
You must analyze the impact that commissions and fees have on your trading. Are you overtrading? You must know when and how much time you are going to spend:
-studying the markets
-examining your statements
-analyzing winning and losing trades
-evaluating your open positions
-reading the research
-charting and trading
Keep a DIARY of trades, especially mistakes, or you are bound to repeat them. Diaries help to limit losses.
Most traders think best when they are NOT in the market. Being in the market, whether your winning or losing, can affect your judgement and cause you to trade with your emotions rather than with your intellect.
If you like I can provide more input regarding discipline; however, I have already written a lot. I hope some people might find this post useful. Always a pleasure to help others, and good-luck with your trading.
Robert_Patyk@hotmail.com
BillionDollarBlueprint@hotmail.com
Stocks vs. Options
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