If you’re stock day trading out of addiction, you’re unintentionally flushing your money down the toilet. You mightn’t realize it, rationalizing your ‘investment’ options as you watch your wealth dwindle with each trade.
Regardless of your investment style, you must rein in emotion if you expect long-term profitability in investments.
Casting about for a way to make up big losses, the two hit upon a strategy often considered the purview of Wall Street insiders: They could trade options. Brisley began with the basics, buying and selling ‘puts’ -contracts that convey the right to sell a stock – to earn a little bit extra and protect the family portfolio from another debacle. Initially, he didn’t dabble in ‘calls’ – contracts that convey the right to buy a stock. Now, five years later, …
In this article, I’m going to share with you the similarities between typical addictions and stock market addictions. Recognizing these characteristics is your first step to conquering the addiction, and will result in greater profitability, addiction or not.
Typical options trading returns
The Forex Market, or FX Market as some term it, is one of those markets where you can make double digit gains. You can also make double digit gains in the Futures market as well. There are distinct differences among the two markets and you’ll want to see what they’re before you enter into either one.
Active trading has a higher level of perceived control than passive trading. This can be dangerous. It’s one of the arguments traders make against using mutual funds. The argument is that by active trading, one can nimbly trade around market circumstances that funds cannot. Forget that the fund manager is more qualified than the trader 99 times out of 100.
In the book’ The New Market Wizards’ written by Jack Schwager, concludes that no one can win without an edge, even you’ve got the world greatest discipline and money management skill. If you trade futures on the All Ordinaries Share Price Index (SPI), you’ve got to know exactly what is your trading edge; particularly, if you’re a professional floor trader. You should able to view the buy and sell orders that coming into the trading pit and also who is buyer and seller with the trading edge. Besides, the speed of execution of your orders and the transaction costs also should able to see. The popularity of the stocks, options and futures is increasing; therefore, many people trade these products. Only a small percentage of these traders apply a real trading edge. The main reasons for the unsuccessful of many private traders in the financial markets are due to the absence of a trading edge, poor risk management and insufficient capital. The key point here is to identify an edge, utilize it consistently and use the right risk and money management techniques. When the odds are in your favor, it is preferable that you learn how to trade options. It is also importantly when the odds aren’t in your favor, make sure you stand aside. You are doing yourself with the best chance of success if you doing so. Trading systems are as many as traders. We will not trade a system if it does not provide us with some kind of edge. If you have a system. This is in a position to give you an edge, why not further enhance your edge by trading options in a right circumstance. Before placing a trade, try to get as many factors that going in your favor as possible. You provide yourself with a far greater chance to success in the long term by practicing this.
This is similar to gambling where a gambler has control over each individual wager, rather than ownership in the casino.
Active trading is exciting. With great risk comes the potential for great reward. This reward is commonly met with the publication of the chemical dopamine in the trader’s brain. The presence of this chemical means that trading is more than a psychological addictionit can actually border on a physical one. These are the same characteristics of a gambler.
Another similar characteristic between trading and gambling is the possibility for a quick buck, or easy return of money. Exacerbating this is that it’s possible to accommodate a disproportionate amount of return involves the use of margin and leverage.
Another problem with addictions like trading and gambling is perpetuation, a form of passive enablement. With each passing trade, the addiction is reinforced, irrespective of whether the trade was a failure or success. A successful trade brings about the will of a repeat performance, while a failed trade brings about the necessity for redemption or to make back that lost amount.
Let’s not overlook the fact of our goals. Trading is about making money, plain and simple. But to make money, you are required to realize the distinction between when you’re trading and when you’re gambling.
If you can successfully master that psychological stumbling block, you’ll most definitely become a better trader.