Saturday, August 13, 2011

Advantages of Options over day trading.

I was thinking of high probability trades.

1. The first thing to do when using options is to fine a pattern graph like a wave formation on the upside or the downside.

2. the good thing about options is that when you do it on high probability trades, then I can be very profitable with minimum upfront money.

3. When Netflix was around 300 dollars I knew it would fall down. That is how the graph pattern was indicating. Since it was above the 30 day moving average on the peak, I did not take any action to short the stock. But If the stock has been showing consistent repetitive pattern, then it was worth a try to short the stock. But to short requires a lot of money.

4. So with mininum risk, buying 1 or 2 contracts and waiting for stock to fall down 20-30 percent would have been like 50-60  or more profit on the puts side.

5. With options one has to buy Stock that trade in high volume. Those are the only ones one should enter and also buy AT THE MONEY options, NEVER out of money  and NEVER NEVER far out of money options.

6. It is a very good strategy. Day trading is not suitable for me because of the time consumed and also the day to day stress to take the right decision. I cannot take the right decision always on that time scale. It is easier for me to take the right decision from the 1 year graph, on the long side or the short side. Buying calls or puts, once or twice a month depending on the graph is a high probability trade.

7. Its good to read about day trading but if you are experimenting it is better to do it with less money. The same also goes with Options. But options are a better way to make money and there is a time from after which you have to sell it off. There is the time decay. So the rule in the book TREND TRADING  are good for OPTION trading.

8. If one can make a only make those high probability trades once a week may be and just wait for the rest to enfold  in a month or two months time, then that is the best way to do it. Because on day to day basis the stock market is fluctuation on a number of factor but on a monthly basis, tit is based on Macro economic situation and also individual stock performance. So giving time for the stock to fluctuate for a couple of days and then the stock moves the way it should.

9. But in day to day trading that is not possible. Also there are chances of taking too much risk. What I am using for a trading system is not enough for day trading. There are too many things to learn to perform well in day trading according to the book MASTERING THE TRADE. It has it own indicators one has to first of all have a plan and understand of the market is going to be choppy or it is going to be in one direction. Without that one can mess up. And there are too many trades involved rising the cost of trades too much.

10. That is the reason why Stock Brokers promote these software so that you can do many trades and make money for them. But the more number of trades you do them more probability of mistakes. And that time frame of one hour or less than that it is high probable to make mistakes. It is not for everyone it is only for a minority.

11. I would still give a big appreciation for SECRETS OF PROFITING IN BULL AND BEAR MARKETS.  Using the 30 day moving average and finding patterns to either short or long is the best way to deal with market trend. Day trading is too risky and time consuming and not worth it, even if one puts the effort to learn the trading system and indicator to show how the day is going to be.

12. I  would just buy it and leave if for a couple of weeks. But again Options can be dangerous if one takes risk and does low probability trades. One should remember that if one does that I money is lost with out a question. there is no arguing about it or turning around of luck. 

13. One should accept what one cannot do and capitalize on stuff one can do well. Trying to do things that one is cannot do if fine with less money but not with a lot of money. Its not worth the time and also the money loss and everything. I have wasted time on day trading and also all my profits. I have realized its not for me. 

14. i am deleting all the day trading software from my computer. the google graph should be enough for making the purchases. 

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