Category: Traders’ Secrets

Traders’ Secrets is something that everyone would like to know, right?
How is it possible that some traders are successful all the time while others fail to make a profit all the time?
That is exactly what Traders’ Secrets will show you.
Traders-Paradise’s team reveal all trading and investing secrets to you, our visitors.

What will you find here?

How to find, buy, trade stocks, currencies, cryptos. You’ll find here what are the best strategies you can use, all with full explanation and examples.
Traders-Paradise gives you, our readers, this unique chance to uncover and fully understand everything and anything about trading and investing. The material presented here is originated from the experience of many executed trades, many mistakes made by traders and investors but written on the way that teaches you how to avoid these mistakes.

Moreover, here you’ll find some rare techniques and strategies that are successful forever, for any market condition. Also, how to trade with a little money and gain consistent returns. By following these posts you’ll e able to trade with greater success. You’ll increase your profits and your wealth, of course.

The main secret of Traders’ Secrets is that there shouldn’t be any secret for traders and investors. Rise up your trade by reading these posts, articles, and analyses!

You’ll enjoy every word written here. Moreover, after all, your trading and investing knowledge will be more extensive and effective.

Traders’ Secrets will arm you with those skills, so you’ll never have a losing trade again.

What Are The Main Characteristics Of Call Options?

Ways to use call options trading to make money

By Guy Avtalyon

Call options represent a deal between a buyer and a seller to buy a stock at an accepted and agreed price. This agreement lasts up until a fixed expiration date. The buyer has the right, there is no obligation, to exercise the call and purchase the stock. The seller is obliged to deliver the stock if the option is exercised.

What are call options in stocks?

A trader would choose to buy a call option if expects the stock is going to rise in the near future. Some traders buy options rather than to buy a particular share because the options are cheaper than stocks.
Call options are limited by time, of course. They have an expiration date associated with them. The same comes with all options.
What are the main characteristics of call options?
No matter if the options is “call” or “put” the characteristics are the same. Both have three essential characteristics: exercise price, expiration date, and time to expiration.

Call options are a kind of a derivatives contract that gives the buyer the right to buy a stock at a specific price known as the strike price of the option and has to exercise it within a defined time frame. The seller has an obligation to sell the stocks to the buyer if the buyer chooses to exercise the option to make a purchase. There is one requirement that the buyer must fulfill – such has to exercise the option at any time but prior to a named expiration date. The expiration date depends on buyers and seller agreement and may vary from three months to even one year.

The seller will receive the buying price for the option, but the amount depends on how close the option strike price is to the price of the stock at the time the option is bought. Also, on how long is a period of time to the option’s expiry date.
To put a long story short, the options price will vary depending on how possible or not possible is for the buyer to profitably exercise the option before the expiry date.

What is the exercise price of stock options?

The exercise price is the price at which stock can be bought or sold when trading a call or put options.
For example, you own call options for ABC company with an exercise price of $50. The underlying stock is trading at $60. It indicates the call options are trading in the money by $10. So, the exercise price is lower than the current stock.

The call options will give you the right to buy the stock at $50 even it is trading at $60. That allows you to make $10 per share if exercise the option. Your profit would be $10 reduced by the premium or cost you paid to the seller for the option.
But if ABS company is trading at $60, and the strike price of your call option is $65, the situation is quite different. Your option is out of the money. You will not profit if exercise that option because why would you like to pay $65 by using the option if you can buy the stock at a lower price for $60.

How many options contracts you can buy?

Each option contract holds 100 shares of the underlying stock. Buying 2 call options contracts, for example, grants the owner the right, but not the obligation, to buy 200 shares (2 x 100 = 300).
Suppose you think ABC Company stock is going to rise over a specific period of time. You may consider buying as many call options as your budget allows you. In other words, consider the trade amount that your account can support. This means to decide the maximum amount of money you want to use to buy call options.

What is the expiration date?

Options do not last forever. They have an expiration date.

But if the stock closes below the strike price and a call option has not been exercised by the expiration date, it expires worthless. And the trader no longer has the right to buy the underlying asset and the trader loses the premium paid for the option. Most stocks have options contracts that last up to nine months. Traditional options contracts typically expire on the third Friday of each month.

What do we pay when trading the options?

When you buy the stock for the stock price, you buy options for what’s known as the premium.

Premium is the price to buy options. In 100 XY call options example, the premium might be $4 per contract. It means the total cost of buying one XY 100 call option contract would be $400 ($4 premium per contract x 100 shares that the options control x 1 contract = $400). If the premium were $6 per contract, instead of $4, the total cost of buying 2 contracts would be $1,200 ($6 per contract x 100 shares that the options control x 2 total contracts = $1,200).

What orders to use when trading options?

Options prices are constantly changing, like stocks.

So, you may choose the type of trading order with which to purchase some options contract. There are several types of orders, including market, limit, stop-loss, stop-limit, trailing-stop-loss, and trailing-stop-limit.

2nd September 2018
The Barriers to Learning About Stocks and how to avoid them

Be objective, don’t expect the success overnight, have reasonable expectations, think in all probabilities.

By Guy Avtalyon

First of all, never base your decisions on emotions, rumors, or rush to the next hot opportunity. This is one of the most influential barriers to learning about stocks.

You will end up losing money as a result. Some investors despite their problems, continue with the same actions and keep getting the same bad results.
Investors have to remove barriers on their path to success. Otherwise, success will never come. All investors must seek to continuously remove new barriers as they appear.

What kind of barriers to learning about stocks you may have?

Emotions

The fear and greed! Many investors experienced the obscure of ability to rationally consider through an investing opportunity. This leads to poor investment decisions and a loss of money.

For instance, it is in an investor’s best interest to sell high and buy low, investors hate to sell winners and are unwilling to buy out-of-favor stocks. Why so many investors hold winning investments too long? When they fall back, they continue to hold on to them, hoping they will return to their previous highs. They even lie that they will sell if the price returns to the level at which they bought it.

Also, there are investors who hold on to losing investments! Okay, they might be in love but why to hold for so long? They have some hope. If they wait and hold longer, their shares will recover. That might happen never.

They can sell to at least break even, very often such investors become losers. Because their capital is tied up in a losing investment and is unable to produce a return. This reduces account balances and expands stress levels.

Most investors admit that holding investments too long is the mistake that was most detrimental to their success.

Less knowledge

Some investors think if you just buy and sell the right stock, you will always make money.

That’s wrong! Totally mistake! Barriers to learning about stocks!

Sometimes, investors can have less understanding of how markets work. That drives stock prices and successful investing performance.

Also, so many investors tend to overestimate their strength to beat the market. As a result, they take on unnecessary risks. People are often drawn to powerful performance, even when it’s not sustainable.

Many investors follow the hottest sector and don’t have a sufficient understanding of the risks involved.

For instance, investors realize they should not overweight their portfolios with too much money in one investment, but they continue to do so. It isn’t rare that people buy too much stock in the company where they are employed, because the company’s available retirement funds and use of options as a part of their compensation package makes this easy.

Barriers to learning about stocks may leave investors with a portfolio that lacks diversification.

Some other investors don’t understand how bonds work, and they avoid them. Few of them realize that bonds hold a preferred position should a company declare bankruptcy.

Many others don’t realize that when interest rates rise, bond prices go down. When it comes to understanding important concepts such as how a central bank sets interest rates and the yield curve, even fewer investors have sufficient knowledge to make rational decisions.

And more interesting, most investors do not know when to sell a stock that has substantially appreciated. They continue to hold the stock instead of selling part of their position.

In that way, they could capture some of the profit and make capital convenient and available for other investments. They can’t realize that as the price of the stock goes up their portfolio becomes even more unbalanced.

The market has the ability to balance portfolios for investors, sometimes to their astonishment. Many investors are confused by the idea that rebalancing entails selling some of the investments that have performed best and buying more quality stocks that have lagged.

Losing the Bigger Picture

Despite many investors like to say they invest with a long-term perspective, they continue to make decisions based on short-term movements and ideas. Most investors believe that setting long-term goals for such things as buying a home or providing for retirement are important. But still, they fail to establish viable financial plans to do so.

Without these plans, their decisions are decaying. Basing decisions on unpredictable market fluctuations can be very dangerous because there is a good chance that these investors will make the wrong decision. That can obstruct their ability to achieve their long-term goals.

When the investors realize that the market has risen, they pour cash into stocks and mutual funds, trying to grab part of the profit the professionals have realized. When the market puts in a decline, some investors panic and sell close the bottom. And very often, this pattern continues, causing such investors to lose much of their capital.

How to remove barriers to learning about stocks

No matter what your barriers are, it is important to put together and plan to remove them. Here are some steps you can take to eliminate these barriers to your investing success. Experts advise doing this.

* Learn to monitor your performance: Measuring your performance creates a record of what has worked and what has not. This can help you to recognize problems that you repeat. You should record the overall market trend, the sector trend, the reason for making the trade, the exit target, and the trailing stop. Do this for each trade no matter if you sell or buy. This record is very useful in evaluating your investing activities and can be used to identify what barriers you are meeting that obstruct your success.

* After you have measured your actions, you can identify what you have to change: Inspect your past tradings and find patterns that show to barriers to success. Maybe you impulsively buy the next stock without thinking? Does your explanation prove to be wrong most of the time? The key is to identify the investing behavior that inhibits your performance.

Stay focused and avoid barriers

* Stay focused on what you need to change. Like any effort to change behavior, you must remain focused on the actions you take to reinforce the investing behavior you wish to have. If you think you are not focused on how to change your behavior, then take a break from your investing until you recover your focus.

* Determine how you will understand your losses. Keep in mind that losses are part of investing. Learning how to deal with them is one of the most important pieces of successful investing behavior. You have to define what your loss looks like through your stop loss and reasons for the trade. You must accept the loss as part of the trading. Accepting a loss is a trading skill that is a crucial behavior. Making a losing trade ahs to be an acceptable process in your trading strategy, you’ll eliminate the emotion and fear that comes from a loss. You’ll jump to the next opportunity without fear.

* Become an expert at one investing strategy: There are many ways to evaluate the market and select stocks that offer good investment opportunities. Don’t try to understand every perspective on a stock. It is best to get to know one reliable investing strategy. In that way, you will gain confidence in your investing access. This knowledge will form a valid base for your investing. And when you become an expert you can expand your knowledge base by adding a new approach.

Think twice to avoid barriers

* Think in probabilities: The market is in permanent movement. It forces the investor to continually evaluate the risk-reward ratio of each opportunity. You can’t move the market, that’s why you need to rate what is the greatest possibility that will move the market, key sectors and the stocks you are watching. Evaluating what is most possible to happen in the sense of probabilities could help you to make a valid investing estimation.

* Learn how to be objective: Many investors want to believe that the market will do what they think it should do, rather than what it actually does. Any limits you place on the market will usually turn out to be wrong. The market does what the market does. Investors are best served if they maintain an objective perspective. If you are neutral, then you will not feel any pressure to move quickly. You will not be afraid to make an investment decision. And the most important, you will not force your opinion on the market, but rather sense what the market is trying to tell you.

Do not expect this to happen overnight. Removing the barrier is a long-term process. But if you have a defined plan, you will be able to create a program to remove the barriers that keep you from achieving success as an investor.

31st August 2018
How To Start Trading?
Trading the stock market is easy if you know how to start.

By Guy Avtalyon

How to start trading? First of all, never do it on your own. Ask to be advised by some experts. It is always best to access a financial advisor who will tell you how you should invest or trade, established in your financial situation, and risk appetite. Talk to others who invest.
Read books, journals, and newspapers for recommendations. You can talk to your stockbroker for advice but don’t listen to everything he says.
Always take a second opinion as brokers might have vested interests. In the beginning, it is best to go for known brands and big companies that have a good business status.

What do you need to know before you start trading?

Without knowledge, you may feel lost. Let’s make clear the basics because you’ve decided to join the crazy world of trading stocks and shares.
You have to know that shareholders usually have a right to vote at company conferences.

Of course, if you own just one of the three billion Facebook shares don’t expect Mark Zuckerberg to listen to your ideas!
Another thing you need to know is that a company’s shares are indivisible.

You cannot buy fewer than one share.

Shares were pieces of paper that shareholders kept in a safe but since the ‘90s, this all changed to virtual shares. Before you start trading stocks, you have to buy them! You can do this in many different but easy ways.

Some companies allow you to buy their shares directly from them but If you can’t purchase the shares directly or you’re not sure which company to invest in, ask your bank. Also, banks offer an online trading service connected to your existing accounts.

Ask your bank to see if this option is possible. If your bank doesn’t offer a trading service, you can buy shares through a brokerage company. You can find many of trusty brokerages, just do a search. But be cautious. Never pick the first you find, read some reviews, ask around, visit forums.

Brokers buy and sell securities in exchange for a commission. You can set up a simple brokerage account online or hire a so-called ‘full-service broker’ who will trade stocks on your behalf. They can be a consultant or advisor for you. This will cost a little more but it is worth it because you know nothing about shares or stocks or trading or investing.

How to start trading?

So, you want to start trading stocks or CFDs, but you have always remembered three things:
1. Never invest more money than you can afford to lose. With shares and CFDs, there is a risk of losing all the money you have invested.
2. Follow your head, not your heart. Your heart will always pull you towards certain stocks. Stop and think. Only invest in companies that seem able to grow their profits, despite your emotions.
3. Never invest your savings in just one company. ‘Never put all your eggs in one basket,’ as the mantra goes. Place your investments across many different companies.
This way, you’ll significantly decrease the risk of loss, and increase the chance to multiply your investment.

When you set up your online broker account, simply take the leap and make your first trade.

Start with small, 1, 10, or 20 shares that will serve its purpose and bring you in the game.

If trading with real capital isn’t viable, start with a simulator for virtual trading. Numbers of different online brokers offer virtual trading for practicing and learning.

It’s too easy to lose money in a stock exchange, so start with a virtual where the money is virtual, but the stocks, stock prices, are real. Maybe the best way is to start your trading journey with virtual money, understand how they are performing, recognize when you can sell them, is it the right time, etc.

Before you start putting your real money, you would learn the tricks of the trade with virtual money. Take it slow. You’ll need time to understand everything. Not even the most experienced traders know everything. Most important for beginners in trading is to have a trading plan, trading strategy, and to stick to them. Also, never forget to keep up your trading journal. That is an amazing tool. Add to it all your entries, exits, price of assets you trade, at which price you bought it, and at which you sold it. That will provide you a full picture of how successful your trades were. Do it with virtual trading in a demo account, also.
28th August 2018
Call options -How to sell & write

4 min read

Call options are an investment contract in which a fee is paid for the right to buy or sell shares at a future date. When we are talking about writing a put or call option we are speaking about an investment contract in which a fee is paid for the right to buy or sell shares at a future date.

Put and call options for stocks are typically sold in lots of 100 shares.

A little review of history.

The origins of writing an option date back to ancient times. Don’t think it is something new. Aristotle, the Greek philosopher, recorded an early example of options trading in his ”Politics”.

The philosopher and mathematician Thales of Miletus studied astronomy as a way to predict olive harvests for his region. Thales believed there would be a coming bountiful olive harvest. But did not have the money to buy his own olive presses. So instead paid a fee for the right to access the olive presses of others.

Do you see? This was the first options contract.

So, writing a call option means that you are selling a call option. If you sell a call (also known as a “short call”) then you are obliged to sell stock at the strike price.

Typically, a call is sold against long stock.

When you buy some option $400 call option that you have the right to buy 100 shares of some company at $400.

And maybe you asked yourself the question “who exactly am I buying it from?”

To have the right to buy the stock at the strike price, somebody has had to take the other side of that transaction and agreed to give you the right to buy it.

The ones that take the opposite side of the call option buyer are the “call option sellers.” And sometimes they are known as “call option writers”.

When you BUY call options, you bought it from someone.

That means that someone is giving you the rights to buy the underlying stock at the strike price by selling you that option.

The act of CREATING and SELLING that call options contract to you by that person is the act of WRITING a call option.

In execution, this means opening a call options position using the SELL TO OPEN order.

When you do that, you create a new call options contract for trading in the options market and that is known as “Write” a call options contract because you are exactly “writing it up”.

Selling options, whether Calls or Puts, is a popular trading technique to increase the returns on the portfolio.

Selling Premium can prove successful when performed on a selective basis. But, if you don’t follow some specific guidelines, your long-term prospect of profitability is doubtful.

Selling options for Income can be debatable because you don’t know are you making money with your options trading. When you take a look in your overall portfolio it can be difficult to measure each transaction success.

But in this environment is yield-seeking, and selling options is a strategy designed to generate current income.

Selling options is a bit more complex than buying options.

That can involve extra risk. If sold options expire worthlessly, the seller gets to keep the money received for selling them.

To be clear with more details.

There are two types of call option selling.

If you bought a call option and the price has gone up you can always just sell the call on the open market. This type of transaction is called a “Sell to Close” transaction because you are selling a position that you currently have.

If you do not currently own the call option, but rather you are creating a new option contract and selling someone the right to buy the stock from you, then this is called “Sell to Open“, “Writing an Option“, or sometimes just “Selling an Option.”

Writing or selling a call option is when you give the buyer of the call option the right to buy a stock from you at a certain price by a certain date. Simpler, the seller (also known as the writer) of the call option can be forced to sell a stock at the strike price. The seller of the call receives the premium that the buyer of the call option pays. If the seller of the call owns the underlying stock, then it is called “writing a covered call.” If the seller of the call does NOT own the underlying stock, then it is called “writing a naked call.” A covered call enables you to own a stock with unlimited downside risk and collect a premium for the call you sold.

When you sell a covered call you are actually selling a synthetic put.

If you are not comfy selling naked puts, then you should not be comfy selling a covered call. It is exactly the same as selling a put.

If you are comfortable with the covered call, then there are numerous factors to analyze when entering any options position.

Now, it is convenient to look at what factors can make a trade more likely to be profitable than another.

At the top of any list is liquidity or the percentage of the difference between the bid and ask.
If you are giving away too great a percentage to the market-makers or algorithms, then the costs of entering the transaction are too high.

You should look to trade an options contract that has a bid/ask spread of less than 1.5%. Always consider that the more you give away to the bid/ask spread, not only entering but exiting the transaction.

Well, this may prove difficult at times, but it isn’t easy to make money.

Besides this, all trade evaluations must consider the cost of commissions. While all of these costs make profitable trading that much more difficult, they must be included in your analysis.

You should consider the relative strength index of the underlying, extreme conditions tend to provide more interesting trading opportunities.

A seller is obligated to buy or sell an underlying security at a specified strike price if the buyer chooses to exercise the option.

There must be a seller for every option buyer.

There are several resolutions that must be made before selling options:

1) What security to sell options on
2) The type of option (call or put)
3) The type of order (market, limit, stop-loss, stop-limit, trailing-stop-loss, or trailing-stop-limit)
4) Trade amount that can be supported
5) The number of options to sell
6) The expiration month

When all this information is collected, a trader goes into the brokerage account, select security and go to an options chain. Once an option has been selected, the trader goes to the options trade ticket. Then enter a sell to open order to sell options and makes the appropriate selections to place the order.

Here are the key things you should remember with respect to buying and selling call options.

You buy a call option only when you are bullish about the underlying asset.

Upon expiry, the call option will be profitable only if the underlying has moved over and above the strike price. Buying a call option is also referred to as ‘Long on a Call Option’ or simply ‘Long Call’. To buy a call option you need to pay a premium to the option writer.

The call option buyer has a limited risk (to the extent of the premium paid) and a potential to make an unlimited profit. The breakeven point is the point at which the call option buyer neither makes money nor experiences a loss.

P&L = Max [0, (Spot Price – Strike Price)] – Premium Paid
Breakeven point = Strike Price + Premium Paid
When you sell a call option (also called option writing) only when you believe that upon expiry, the underlying asset will not increase beyond the strike price.

Selling a call option is also called ‘Shorting a call option’ or simply ‘Short Call’.

When you sell a call option you receive the premium amount. The profit of an option seller is restricted to the premium he receives, however his loss is potentially unlimited.

The breakdown point is the point at which the call option seller gives up all the premium he has made, which means he is neither making money nor is losing money.

Since short option position carries unlimited risk, he is required to deposit margin. Margins in case of short options are similar to futures margin.

P&L = Premium – Max [0, (Spot Price – Strike Price)]
Breakdown point = Strike Price + Premium Received
When you are bullish on a stock you can either buy the stock in the spot, buy its futures, or buy a call option.

When you are bearish on a stock you can either sell the stock in the spot (although on an intraday basis), short futures, or short a call option.

The calculation of the intrinsic value for the call option is standard, it does not change based on whether you are an option buyer/ seller.

You sell a call option when you are bearish on a stock.

When you sell a call option you receive a premium.

Selling a call option requires you to deposit a margin.

When you sell a call option your profit is limited to the extent of the premium you receive and your loss can potentially be unlimited.

Nothing more, nothing less.

Risk Disclosure (read carefully!)

27th August 2018
Trade in Indian stock market and win in the markets
To trade in India, you must have an exit strategy. And hesitancy isn’t helpful.

By Guy Avtalyon

To start trade in Indian stock market, you’ll need :

1. trading account
2. demat account
3. savings account

Trading and demat accounts are combinedly created which are then linked to your savings account.

A trading account is used to buy or sell the shares while a demat account is used to store the shares.

A great help when creating these accounts may come from the broker for a minimum charge. We would suggest you find a flat broker as the brokerage is less.

In India, the broker must be SEBI certified.

The markets are a mind game and to win this game, you will need a good plan and education.

You have to think before you do anything. It is necessary to measure every move because it will have an influence on your next moves. You must have a strategy in mind to modify in case things do n’t correspond with your plan.

The most important thing will be to follow the plan consistently. Actually, there is no sure-shot formula for success in the stock market. Just like any other skills, a new investor can learn stock with trial and error coupled with patience, discipline, research, and a sound understanding of the market.

What should your plan have?

How to trade in the Indian stock market?

You have to define a logical expectation of return from your capital. How much capital to be put? There are some examples.

Rs 25000/- is just a suggestive minimum, but depending on your strategy you have to find what is convenient capital requirement build on your style of investing or trading. To win this game, you have to decide the right mix of players which means, you have to work out a list of stocks, indices, options, that work for you in order to score your return objectives.

So, the most important is to design a strategy to pick stocks/contracts to trade/invest in. You have to define a clear risk management strategy. If some stock is having a bad day on the market, you have to formulate a strategy, how much diversified the portfolio should be in order to cut losers and hold on to winners. This means a clear well-defined risk management strategy.

You have to have well-defined rules when entering the basic factors. For example, results, sales growth, or technical factors like breakout along with a clear exit strategy. This means you have to have some entry and exit strategy.

HOW TO MAKE YOUR RISK MANAGEMENT

Risk Rules: The first step is to define how much to risk or how much to lose on one single trade.

Just on the available trading or investing capital, you should decide reasonable limits you are comfortable losing. This is important because if you know the loss taking capacity, then trades will be done without fear of losing. And when fear is not disturbing, you can make a decision without any emotions in your mind. Fear of loss is the biggest barrier in trading and investing and the only way to overcome is pre-defining the risk rules in the form of loss-limits.

Size of the trade: Don’t bet everything on one trade and go broke. Or bet too little and disable full profits to stay in the business.

Both of these will drive you off the markets. In the first case, there is too many emotions or greed. When the trade goes against, it will be hard to press the exit button and you go broke because the position was large. The right side of the trade is such that which limits the losses to 1% or max 2% of the trading capital.

Why trade in the Indian stock market

There are some examples, for the people in India especially. On a trading capital e.g. Rs 2 lac, you can afford to lose max Rs 4000. Therefore actually trading is at 3000. And stop-loss is put in 2800, hence maximum loss per share would be 200.

But 4000 is the maximum loss defined, as per strategy, therefore 4000/200 = 20 share can be bought at 3000 entailing a total investment of Rs. 60,000 (3000*20). With max risk at Rs. 4000 on this trade. Similarly, for investments, you should not invest more than 10% of the capital in any single stock. For the capital of Rs.2 lac, max Rs. 20,000 can be invested in a single stock, thereby creating a portfolio of 20 stocks.

These rules are not mathematical rules of exactness, they are suggestive and followed hence as best practices.

Exit strategy: In trading, you must have an exit strategy. It is important to know when to get out and mark profits or losses.

What can help you to trade in the Indian market?

Hesitance isn’t helpful when trade in the Indian stock market.

Some traders in India have a pre-defined profit target of three times risk. If risk per trade is estimated at Rs. 4000 then the profit will be registered when Rs.12000 profits are achieved.

The other exit strategy is when prices fall 10% from the top value. In that case and only then, the trader will square a long position. There are different ways of exiting the trade, it is crucial to have the exit strategy in place before entering the combat zone called the stock market.

Stop-loss strategy: No matter what strategy you adopt, 90% of trades is how to control the losses. Portfolio returns often look bad because of a few trades went wrong where the exit stop loss wasn’t defined or activate.

Because leverage is used this is more important in trading.

You generally keep a stop exit when price adversely moves beyond, say 2 times average true range (ATR) or crosses key support or resistance field.

Some prefer to keep the stop at 8% of the purchase price when we are speaking about investing. Whatever your strategies are, it is a must to exit a losing trade.

Trading vs Investing

Both require a different set of skills, mental attitudes, and different rules.

The important decision-making points wherein strategy differs are Stop Loss or Hold On, long term or short term, analyzing price or analyzing the value, to follow the market or to predict are some of the contrasting and opposite action points which need to be applied to either investing or trading to the exclusion of each other. Doesn’t matter whether you are a trader or investor.

Markets swing both ways, the bear market is going to follow the bull market.

That means you should not have a prejudice towards long trades, selling short should also be done with the same comfort.

By refusing to sell short you forgo huge opportunity to make money when the markets are in bear zone.
Keep in mind, money can be made in 2 ways when trading:
1. Buying Low and Selling High!
2. Selling High and Buying Low!
The hardest thing in the financial markets is the ability to consistently execute the plan with strong discipline.

This rarely happens and that is why the results are so poor. The majority of the traders do not make money, because they lack discipline. To control over self all the time is really hard, but stay disciplined all the time is the most important ingredient for success.

Whoever does it has wealth.

Trading and Investing are essentially connected with human emotions.

Basically, the human being makes the decision but the emotions act as barriers that impede good decisions. Sometimes the biggest battle is inside your own mind. To be a successful trader or investor you need to understand your own temperament. Whether you are patient or impatient, fearful, or fearless. A slow decision-maker or fast decision-maker, emotional or unemotional.

Identify your psychological outlook and select the style which suits you the best, and you can have sustained success in trading and investing. Any money-making skills have to be self-acquired. You can’t postpone efforts to self-learn the art of making money through hard work and education. There is nothing that can substitute self-acquired knowledge and experience. You will have to write your own test in the markets.
No copying or cheating will help you to pass the test! So, don’t listen to too many forecasters or advisers!

What is the math of profit

It is very easy when trade in the Indian stock market.

Reduce costs, profits will automatically increase.

Businesses are becoming digital driving down their cost of operations dramatically.
Every trader and investor must act in order to reduce costs and increase profits dramatically.

And you have to go with the trend.

Once the phase of the market is identified as a bull or bear, then one should trade or invest in that direction.

Also, it is not necessary to trade obsessively. Unfortunately, more tradings don’t mean more returns. Contrary, as investors’ motion increases, return decreases. Sometimes if there is no clear trend in the markets, it might be better to be an observer than be a compulsory participant. Both, in life simple things are more effective and in trading or investing. The strategy should be simple and easily understood too.

The key to success is to stick to your rules of entry/exit points, to have solid risk management, self-control to stick to the plan. Also, the ability to control your emotions is the key to success. There is no other mystery to success in the markets.

And read about the best Indian investors.
19th August 2018
Market Dictionary And Jargon In Trading Options

All the phrases that you’ll meet in the stock, Forex, and currency markets are explained. Especially for the options trading.

By Guy Avtalyon

Market dictionary and jargon can be confusing for people that just enter any market. Here you’ll find the meaning of most used terms. Each area has its own specific vocabulary and jargon.

If you want to participate in the stock market, you should also know some basic terms and jargon. In front of you is the short market dictionary and jargon.

Of course, in order to understand better what they are talking about. So, here you can find a Market dictionary with basic terms

LONG – meaning in the market dictionary

Describes a position (in stock and/or options) in which you have purchased and own that security in your brokerage account. Let me explain, if you have to buy the right to buy 100 shares of a stock, and are holding that right in your account, you are long a call contract.

If you have to buy the right to sell 100 shares of a stock and are holding that right in your account, you are long a put contract. Say, you have purchased 1,000 shares of stock and are holding that stock in your brokerage account, or elsewhere, you are long 1,000 shares of stock.

When you are long an option contract: you have the right to exercise that option at any time prior to its expiration and your potential loss is limited to the amount you paid for the options contract.

SHORT

Describes a position in options in which you have written a contract (sold one that you did not own). In return, you now have the obligations in terms of that option contract. If the owner exercises the option, you have an obligation to meet. And you have sold the right to buy 100 shares of stock to someone else, you are short a call contract.

But, if you have sold the right to sell 100 shares of stock to someone else, you are short a put contract.

What else our Market dictionary can say about this? When you write an option contract you are creating it. The writer collects and keeps the premium received from its initial sale.

If you are short you are the writer of an option contract and you can be assigned an exercise notice at any time during the life of the option contract. All option writers should be informed that assignment prior to expiration is a distinct possibility and your potential loss on a short call is theoretically unlimited.

This means the risk of loss is limited by the fact that the stock cannot fall below zero in price. Although technically limited, this potential loss could still be very large if the underlying stock declines in price.

OPEN – meaning in the Market dictionary

The opening transaction is what adds to, or creates a new trading position. It can be a purchase or a sale.

Opening purchase – a transaction in which the purchaser’s intention is to create or increase a long position in a given series of options.

Opening sale – a transaction in which the seller’s intention is to create or increase a short position in a given series of options

CLOSE

A closing transaction is reducing or eliminating an existing position by an offsetting purchase or sale. The closing purchase is a transaction in which the purchaser’s intention is to reduce or eliminate a short position in the series of options.

This transaction is known as “covering” a short position. The Closing sale is a transaction in which the seller’s intention is to lessen or eliminate a long position in the series of options.

What are LEVERAGE AND RISK in the Market dictionary

Options can provide leverage. That means an option buyer can pay a small premium for market exposure in relation to the contract value (usually 100 shares of the underlying stock).

The investor may have a large percentage of gains from comparatively small, favorable percentage moves in the underlying equity. Leverage also has downside consequences.

If the underlying stock price does not rise or fall as anticipated, leverage can increase the investment’s percentage loss.

Options offer their owners a predetermined, set risk.

But, if the owner’s options expire with no value, this loss can be the entire amount of the premium paid for the option. An uncovered option writer may have unlimited risk.

What is the strike price

In trading, options determine whether that contract is in-the-money, at-the-money, or out-of-the-money.

Say the strike price of a call option is less than the current market price of the underlying security.

Then say, the call means to be in-the-money. Because the holder of this call has the right to buy the stock at a price which is less than the price he would have to pay to buy the stock in the stock market.

If the strike price equals the current market price, the option is said to be at-the-money.

What is Intrinsic value

It is the amount by which an option, call or put, is in-the-money at any given moment.
By definition, an at-the-money or out-of-the-money option has no intrinsic value; the time value is the total option premium.
This does not mean that you can get these options at no cost.

The amount by which an option’s total premium exceeds intrinsic value is called the time value portion of the premium. It is the time value portion of an option’s premium that is affected by fluctuations in volatility, dividend amounts, interest rates, the motions in time.

There are various factors that give options value and affecting the premium at which they are traded. Altogether, these factors determine time value.

These are certainly not the only so-called professional terms on the stock market. This Trading dictionary is just a collection of basic terms. Very soon you will have the opportunity to read the Great Trading

Dictionary, that Traders Paradise is preparing for our readers. But they are some of the most common ones you will meet when you step into this world.

17th August 2018
How To Learn About Trading and Master it?

1 min read

How to learn about trading or investing? First of all, don’t worry, you are not alone.

I’ll start by telling you, there are a lot of people who are trying to make money online. You can find a very good way to make money online and for free.

To be honest, I am not a fan of pay-to-be-rich-quick scams online. In other words, I think trading or investing is permanent learning. And life goal is to be successful in this field for a long time.

For new investors wanting to take their first steps, I offer great answers to the simple question.

“How do I get started? How can I learn about trading?”

The first step on how to learn about trading

Your first step should have multiple sources of a good education. Trying and errors combined with the ability to continue will finally lead to success.

Read books, read articles, find a mentor or advisor, study the greats. Also, read and follow the market, consider paid subscriptions and be careful.

For some starting level investor, the stock market can be a lot difficult to understand. Without a good knowledge, no one is capable to dive into it.

There are two main schools of thought regarding how to choose stocks.

The first called fundamental analysis and second called technical analysis.

The first refers to the use of a company’s financial reports and public statements to analyze the strength of the business. Balance sheets, income statements, yearly and quarterly earnings, and news releases are all important tools for fundamental analysis. You can find those reports online, as are tutorials on how to read them.

The second refers that swings in stock prices follow sample that traders can learn to detect and profit from.

Technical analysis

Technical analysis is not as widely accepted or practiced as fundamental analysis. Therefore many traders use a combination of the two techniques to choose stocks.

Choosing a company with healthy fundamentals and then from time to time trading on a technical indicator is a safer strategy than relying only on technical indicators.

Before you decide to buy or sell any stock, you should completely research the company, its leadership, and its competition. There are various sites which offer excellent compilations of news stories, financial statements, and stock price charts. Stock sites also show professional analysts’ ratings of a given stock, which indicates whether that analyst advises a trader to buy, hold or sell a stock.

Before you enter the trade

Before you begin buying and selling stocks, you have to decide which online trading service you want to use, firstly.

Choosing your brokerage partner carefully can directly affect your bottom line.

The best advice I got as an online trader is to choose my brokerage partner with open eyes.

What you have to do, how to learn about trading:

Practice with an online stock simulator: Using these allows you to practice your skills with zero risks. Many come with tutorials and forums to discuss investing strategies.

However, keep in mind that simulators don’t reflect the real emotions of trading and consequently are best used to test theoretical trading systems.

Trade penny stocks: You can find companies offer stocks that are traded for a very low cost. This wonderful opportunity to practice leveraging the market without a lot of risks.

Trading penny stocks mean trading outside the major stock exchanges. You can trade them on the over-the-counter-bulletin-board (OTCBB) or through daily publications called pink sheets.

The bottom line

In conclusion, educate yourself about financial performance indicators.

Read the news and financial websites. Listen to podcasts or watch online investment courses.

Join a local investment club to learn from more experienced investors.

Books provide a wealth of information and are inexpensive compared to the costs of classes, seminars, and educational DVDs sold across the web.

Risk Disclosure (read carefully!)

16th August 2018
What are the basic types of Forex trading?

Whatever measure, guide, or indicator you are looking for, whatever the time frame, there are 3 basic types of trades.

Guy Avtalyon

In this post, I’ll explain the basic types of Forex trading. What caused this subject?
Regardless of personal experience in trading, conversations, and exchange of views with other traders are valuable. In one of such conversations, the topic was the types of tradings. After many hours and a lot of coffee, we had one conclusion: There are 3 types of trading.

I need your attention for a minute. Let me explain this.

True is, whatever measure, guide, or indicator you are looking for, whatever the time frame, there are only 3 types of trades.

I meet a lot of people thinking they’ve mastered trading. The problem is they didn’t understand the differences between the trades they took.

Sure thing is, it will be easier for you if you know the ultimate goal and what can you expect from the trade you took. And it is possible if you know the type of trade you just implemented. This is very important because your knowledge is what determines where to place your stop loss and your take profit.

When a professional trader enters a trade, he knows exactly what he’s trading.

And my trading friends and me, we can recognize 3 types of trading.

Reversal trade
Breakout trade
Pullback trade

Each of those trades has some special characteristics. I’ll tell you more about each of them. Depending on the market you’re trading, the success of each type of trades may be different.

What are the basic types of Forex trading?

Some traders are attracted to trade all of those types for a limited number of currency pairs. But others are specialized in only one of those trades.

When a professional trader enters some trade, he must know what he is trading.

What is REVERSAL TRADE?

A lot of traders think that implementing Reversal trades is composed of “calling a top” or “calling a bottom”.
However, this isn’t quite true. Actually, the entry price of a reversal trade is often in a previous zone of support or resistance.

Reversal trades are among the most popular basic types of Forex trading because of their ability to be easily spotted. They take place in a ranging market.

As you can see the buyers were very aggressive on the chart above because they pushed the price up all the way to point 1 from an original support zone. But, once the price hit a resistance zone (marked as 1), buyers started to take profit. And several traders began to short the currency pair and got more aggressive.

They took control of the market. This had for the result to create a strong rapid decrease in price.

At point 2, the same result came, which was a good opportunity to enter a Reversal trade. The sellers placed their orders at that level and the buyers began to take profit because they knew the price had reversed in the past at the same level.

The stop loss should be placed above the highest point (A) and the take profit someplace below the resistance zone. It is okay to expect a risk-to-reward of 1:2.

BREAKOUT TRADE is one of the basic types of Forex trading

Breakouts trades are usually made by a strong continuous movement in a direction. Therefore, some traders call it an acceleration because the movement is fast.

This is a typical example of the Breakout trade. Take a look!

The bulls were confident and kept pushing the price higher and higher to point 1. At that price, the sellers became more aggressive and took control of the market until the buyers showed even more power.

The level pointed with a 2 shows a price at which bears are known to get more aggressive in the market. But, they were not aggressive when the price reached that level.

Because there were no traders wanting to sell the currency pair aggressively, more and more traders went long, thus pushing the price higher and breaking through the resistance level.

The stop loss on that trade should be somewhat below the resistance zone that was broken. So, the take profit level is above the zone. It is okay to expect a risk-to-reward of 1:2.

PULLBACK TRADE

Pullback trades are usually more solid because the retracement back to a previous price level represents a certain confirmation.

(Retracement is the temporary reversal in the direction of a stock’s price that goes against the prevailing trend. But remember, a retracement does not signify a change in the larger trend.)

As you can see, a pullback trade is characterized by a retracement, often to the previous support or resistance zone.

Take a look at the chart above!

The price kept ranging between a support and resistance zone. At point 2, no one was aggressive enough to move the price significantly higher or lower. Once the price broke above the resistance zone at point 3, several traders began to feel excited about their profit so far.

Most of them thought that this high price might be a good opportunity to take a profit. But, as more and more people took profit on long trades, the price slowly decreased. When the price got back to the previous resistance zone, some traders began to feel that this price was too low.

The traders then bought the currency pair again (at point 4) to force the price up.

The stop loss on that trade should be somewhat below the resistance zone that was broken. The take profit point should be someplace above the zone. It is okay to expect a risk-to-reward of 1:2.

How to use the basic types of Forex trading

Look at the top of this post.

When a professional trader enters a trade, he knows exactly what he’s trading. But do you know too?

Study your previous trades and recognize the types of trades you were entering. Then ask yourself this simple question:

”Did I make this as well as I could?”

If you get YES as an answer, you are a very good trader. But if your answer is NO this will help you to make progress.

15th August 2018
Options – What Are Options and How To Use Them

2 min read

Contracts that grant the right but not the obligation, to buy or sale of the underlying asset to which they relate at the price indicated in the option contract until a certain date.

They can be issued on the basis of other financial instruments, financial non-material or real property. But behind each option must stand the asset to which the option is related.

The historical findings

There are historical findings that confirm their use during the Antiquity period. (The first options were used in ancient Greece to speculate on the olive harvest.)

But the fact is, trade options made great prosper in the last 50 years.

The most significant event that enabled their popularization was the establishment of the first arranged stock exchange option in Chicago in the year 1973. And under the name of the Chicago Board of Options.

Since then, a number of stock options have been established in the US and around the world.

Options are a very useful financial instrument because of their characteristics.

They offer investors a range of options. Traders and investors can use options as an instrument for speculation, Also for the protection and management of market risks (hedging) or for arbitration.

In this way to any investor in accordance with its goal of trading, current market position, expectations, and preferences.

According to the risk and personal preferences, options can create the desired position.

The right to buy is a call option and the right to sell is a put option.

Once again, options are the type of derivative. People a bit familiar with derivatives may not see an evident difference between this definition and what a future or forward contract does.

To clarify this thing. Futures or forwards confer both the right and obligation to buy or sell at some point in the future. For example, somebody short a futures contract for corn and has an obligation to deliver real corn to a buyer unless they close out their positions before expiration. An options contract does not carry the same obligation, which is precisely why it is called an “option.”

Once again, options are a great way to add flexibility to your portfolio since they can be used for both hedging risk and speculation.

Learn more to understand the World of Options

The benefits of options

The benefits that options offer are high profitability, risk limitation, financial leverage, flexibility. And, which is important too, the ability to stay on the market without the need to own a marketable asset.

Unfortunately, the general public knows little about these instruments. So, part of the investors is not able to trade options because of ignorance about their use.

The options, like all derivative instruments, are complex in nature. And we have to know their capabilities and limitations. So that we can effectively use them for the stated purposes.

Trading with options is also specific and differs from trading with conventional financial instruments. That’s why the investor needs to be well aware of trading rules with options.

The brief review of options basics:

1) An option is a contract which brings to its holder the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) shares of the underlying security at a specified price (the strike price) on or before a given date (expiration day).

After this given date, the option ceases to exist.

The seller of an option is, in turn, obligated to sell (in the case a call) or buy (in the case of a put) the shares to (or from) the buyer of the option at the specified price upon the buyer’s request.

Option contracts usually represent 100 shares of the underlying stock.

2) Strike prices or exercise prices. These are the stated price per share for which the underlying security may be purchased in the case of a call or sold in the case of a put. By the option holder upon exercise of the option contract. The strike price, a fixed specification of an option contract, should not be confused with the premium. That is the price at which the contract trades, which fluctuates daily.

Equity option strike prices are listed in increments of 21/2, 5, or 10 points, depending on their price level.

3) Regulation to an option contract size or strike price may be created to account for stock splits, mergers or other corporate actions. Overall, at any given time a particular option can be bought with one of four expiration dates.

4) Option holders do not enjoy the rights due to stockholders.

They don’t have voting rights, regular cash or special dividends, etc. A call holder must exercise the option and take ownership of underlying shares to be eligible for these rights.

5) Sellers and buyers in the exchange markets, where all trading is conducted in the competitive manner of an auction market, set option prices.

Risk Disclosure (read carefully!)

12th August 2018
Successful Forex traders – What are the characteristics of them?

2 min read

As we know almost 95% of Forex traders fails. But 5% have success.

So what is it that puts these traders in the top 5 percent?

Typical reasons such as experience, discipline, and fortitude?

We’ve all heard about that. But what is it that really makes them spot?

In this article, I’m going to analyze lesser-known characteristics that successful Forex traders have in common.

When I say successful Forex traders I mean consistently profitable.

Let me be crystal clear.

So many people talk about whether anyone can consistently profit from trading Forex.

I know because I made big research for finding proof on the internet. I found articles, testimonials, videos… And what I found is that is the truth.

Anyone can make consistent profit trading Forex and don’t ever let anyone tell you something different.

And what did I find?

What’s the secret to success?

I have to say, the only secret is that there is no secret.

But there is a piece of advice that will fully determine whether or not you are profitable. It’s a kind of habit.

Every single successful Forex trader has it in common, and it’s not something you can negotiate.

Successful traders never give up!

I know because I found the stories.

The ones about how some man tried for 3 years to make this Forex thing work, but with poor result. And he thought he just wasn’t for it. He failed because he didn’t recognize that his breakthrough moment was waiting for him just around the corner.

That is the problem.

There are so many traders who were fighting for years and suddenly took a break just before they made progress.

I know, they were exhausted by a large number of failures. But if they had a couple of trades more, they would have succeeded.

Never give up! This applies to all important things in life, but it’s never been truer than it is when it comes to becoming a successful Forex trader.

They don’t “lose”

Ok, every Forex trader has losses. That’s true.

But, there is some difference between how the novice trader loses and how the successful Forex trader loses. What makes this difference?

In one word – mindset.

Most novices in the Forex market view a loss as a bad thing.

Oh, no! It’s only one step on your way to winning.

The successful trader doesn’t view it as bad or wrong. It’s not a penalty because the Forex market isn’t able to do such things.

Forex market doesn’t know where you entered the market or where your stop loss was.

So, where you find a possibility to be punished? Nowhere, it is completely impossible.

Yes, I know! Making money is much more enjoyable than losing money.

If your trade doesn’t go your way doesn’t mean you should take it personally or emotionally. Stop to think like this and prevent this hole to be deeper! The successful Forex trader has the mindset that a loss is simply feedback.

Losses are useful, they are very good teachers, they can be a powerful way to learn. Even a trade that ends up as a loss can be the right decision. How is that possible? If you’ve defined your edge, and the setup met all of your criteria to enter the market, then you did all you can do. The rest is up to the market. But some days the market just doesn’t play along. It isn’t your fault.

Instead of giving up, you should ask yourself “would I take this same setup again next week if it presented itself?”

If your answer is YES you are on the right path. But every time your answer is NO, you need to take a step back, figure out where something went wrong and correct it for the next trade.

Each loss is an investment in your trading education. This is a constructive way of spending your own money. It is an investment with the best Forex trainer in the world – the market.

They use price action

Actually, they are using some form of price action as part of their trading strategy. Because price action plays a major role in any strategy.

It can develop and make stronger any trading strategy by providing areas to watch for potential entries as well as profit targets.

A successful Forex trader has defined edge.

Why the edge is so important?

An edge is everything about the way you trade. An edge can help you to put the odds in your favor.

Edge is a combination of the time frame you trade, your risk to reward ratio, the key levels you’ve identified, the price action strategies you use, etc.

It is also important for your pre and post-trade routine. How do you handle losses or what do you do when you win? All of this, make up your trading edge.

You don’t have to master all of these factors that make up your edge at once or to start putting the odds in your favor.

It is better to master one set of factors and then leisurely expand to others to further clarify your edge.

This should be the favorite way to learn. Become a master of two or three factors. You’ll find much less stressful than trying to become good at twenty factors. When you’ve mastered three or four things, expand the others to put together the odds in your favor.

Successful Forex trader never tries too hard.

Because the successful forex traders know, trying hard is a sign that something isn’t right. Trying to force a trading strategy to work will only lead to destructive behavior, such as emotional trading.

I remember the story of my friend when he first started trading Forex. He was spending countless hours studying setups. He spent hours and days and weeks doing so, ending up taking a completely different trade setup only to watch the original setup move in the intended direction without him.

He was trying too hard to make it work. As soon as he stopped over-analyzing trade setups and trying to make them work, his profit curve started to rise.

Now he is spending 20 minutes per day looking at his charts.

They think in terms of money risked.

You’ve never met a successful Forex trader who didn’t know how much money they were risking on any given trade.

Surprising, the small number of traders don’t think about how much money is at risk before opening a trade. This is because they’re using an arbitrary percentage to calculate risk, such as one or two percent of their trading account balance.

The trader’s only interested in how much money is at risk – they could care less about the percentage. They always define their risk in terms of money.

They may use a percentage as an entrance of how much they’re allowed to risk, but when it comes to fully accept the risk before putting on the trade, they think only about money.

And successful Forex traders know when to walk away.

Walking away can be especially difficult after a trade. Our emotions are running wild and often take the best of us. Taking a break after a win will allow your emotions to settle. After the win, you may feel excited and proud of yourself.

Yeah, you have every right to be. But pride and excitement are inadmissible in the Forex market.

After a loss, you can go straight to the trap if try to go through the charts again looking for a new setup. Remember, your loss in some trade is just feedback. Take it as a signal to look at what you could have done differently. Successful Forex traders never do that.

The key to becoming successful isn’t about eliminating emotions after a loss, it’s about channeling them in a way that will make you a better trader.

And let’s go to the top of this article.

The only way you can fail at becoming a successful Forex trader\ is if you give up. The next time you lose a trade just remember that not giving up is the #1 key to becoming a successful Forex trader.

And you know what?

Becoming a successful Forex trader is a marathon, not a sprint. So, keep it in your mind!

Risk Disclosure (read carefully!)

8th August 2018