Category: day trading

Should You Let Your Profits Run?

Knowing when to accept your profits is key to successful day trading. However, many people often think that you can earn more by letting your profits run. This strategy almost always fails, and it is why I find that setting profit targets is one of the few ways to guarantee that you turn a market gain into a monetary gain.

The main principle behind using profit targets is that it helps you to control your emotions. When people exit a trade, they are usually too early or too late. Most people cannot pick tops and bottoms, or at least not consistently. What often happens, then, is that people get out too early, see the market continue to move in their direction, and feel tempted to re-enter. They often grow angry at themselves for leaving too early and want revenge. So they enter again. But now, of course, it is too late, and the trend is already exhausted. As soon as they enter, prices move against them, and they realize a loss.

In this situation, regret, revenge, and greed take over and end up costing someone money. But the same thing can happen when people get out too late. Let's assume a trader was right about the direction of the market and saw $500 in profits. He haven't taken any, since he wants to let his profits run. But now the market retraces, and his unrealized profits decrease to $400. He now thinks to himself, "This is a normal retracement, and I'm sure the market will continue in my direction very soon."

But it doesn't. His unrealized profits shrink to $300, and now he comes up with a plan: "As soon as the market recovers and I see $500 in profits again, I exit". And it really happens. The market bounces back and he sees $400 in unrealized profits. But then the market retraces again, and his profits shrink to $200. He wonders if this is a "normal" retracement or if the trend is exhausted. At this point he is uncertain when to exit, and this indecision paralyses him. He sits and waits, hoping that the market moves again in his direction.

But, still, it never happens. Prices are now hovering around his entry price, but since he has already seen $500 in (unrealized) profits, he doesn't want to exit at break-even. He thinks, "The market will come back, the trend looks still strong", and starts justifying his position. He is desperately looking for clues that the market will continue to move in the right direction, and he might plot more indicators on the chart or even change to a different time frame.

With all this additional information, he now feels more confident that this is only a retracement, and that the market will bounce back shortly. But doubt remains, and he decides to take profits as soon as he sees $250 in unrealized profits. He is so focused on "being right" that he doesn't realize how he is fooling and defeating himself. The market continues to go against him, and, instead of getting out of the trade, he looks at more indicators, more timeframes, more information. But all he has really done is to let a winning trade turn into a losing trade.

Profit targets can eliminate this kind of problem. Use a profit target and a stop loss, and put the trade on autopilot. Then, if the market moves beyond your profit target, leave it alone. Be happy and contend with your profits. After all, you realized profits. The key to trading success is to be right about the direction of the market, and then to realize the profits. Paper-profits are not worth anything. Take your money off the table as long as it is there!

Trading Rules Are The Base For Intraday Trading

In trading, its very important to have a specific set of rules that you follow religiously. Frankly speaking, trading really doesn't have any rules. You can either get in or get out of the Intraday trading whenever you want.

Trading is the only business which has too much freedom. Freedom is good, but you need to have a structured freedom. If you decide to trade without any rules, then definitely you will not be successful. Now what does structured freedom means? It means that you can trade whenever you want, but that trade should fall under your set of rules. Rules will help you to be more consistent with your trading. These rules will help you that can drain your account.

Once in every six months, write a new set of trading rules for yourself. These rules will help you to be structured with your Intraday trading. The problem is most people don't want to make up their own rules, because that would make them to take responsibility for their results. Most people don't want to take responsibility for their action. But only by taking 100% responsibility, you can be successful in trading.

Common Rules to be followed in trading:

1) Never place a trade without a stop order. It would be like swimming without a life jacket.

2) If you lose 3 trades in one day, stop trading. Avoid digging yourself in a huge hole.

3) If you earn decent amount of money in a trade, then don't allow yourself to lose money on that trade.

4) Always use a chart formation or technical reason to get into Stock market. Only use a signal to get into the Stock market. Don't just take a shot. You will usually get yourself in trouble if you take a shot.

5) Use the value area. It will help you to stay on the right side of the Stock market. Consistently trade on long side above value and the short side below value.

6) Always act with your best interest in mind. Try and do this with each and every trade you put on.

7) Relax with your trades. If you don't enjoy your trade then you will not be successful.

8) You don't have to trade everyday. Sometimes, just leave the Stock market alone and forget about it for a day. It usually refreshes you.

These are some of the common rules which have to be followed. But its advisable to come up with the own set of rules and follow it religiously. Your ability to follow the rules is a direct reflection of how much money you will make with your Intraday trading. It also reflects your survival in Stock market. The more you follow them, the better you trade.

Even if you take the Intraday tips from the stock advisory company, you have to follow your set of rules while placing a trade. Otherwise, it becomes very difficult to survive in the Intraday trading and ultimately you will leave the Stock market with bitter experience.

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Why Some Have More Luck In Options Than Others

Why do some people have more 'luck' when buying options than others?

Better yet, why do some people have better luck with stocks than with options?

I believe a lot of that has to do with fully understanding how options work.

Believe me, options are not rocket science. But there are a few more things to consider than when buying a stock.

For example: Delta. This is the percentage the option will increase or decrease in value in relation to the underlying price movement of the stock. The delta gets bigger as it gets closer to being in-the-money or goes further in-the-money. The delta gets smaller as the option gets further out-of-the-money.

For example: let's say you bought an out-of-the-money option on stock XYZ for $500 with 2 months of time until expiration. Let's also say the option had a delta of .5, which means it'll move 50% of the underlying stock's movement, or in other words, it'll move 50 cents for every $1 the stock moves.

Now let's say the stock goes down -$3. That option will likely decrease by -$1.50. (50% of the $3 move.)

However, that option's delta will also now have fallen. Let's say that option now has a delta of .40.

If that stock went back up $3, that option will now only have increased by $1.20. (40% of $3 is $1.20.)

So the stock is essentially where it was when it started. But the option that was worth $500 is now off by -$30 or -6% from its original value when you bought it.

If that move happened over a course of weeks or more, the loss in the option would likely be even greater as the option would have experienced a larger amount of time decay.

Moreover, if the movement in the stock was slow and incremental over time, volatility would likely have decreased as well in the option, which means it would have reduced the delta even more, thus limiting your ability to 'make it back'.

And if your option is fully out-of-the money -- since your option has no intrinsic value but instead only time value, the less time you have left on your option, the less value that option will have.

Getting back to our example, let's say that option now has only a few weeks left until expiration and it's still out-of-the-money. That option could literally be worth only $20 or $30 (or less) � which is far from the $500 that you originally paid. And this is true even if the stock stayed the same or was even higher than when you bought the option.

And that's the point I want to make.

You cannot trade options solely based on the underlying stock.

If you buy a stock and it goes down, and then meanders about for a while before going back to where you bought it, your gain or loss is zero. You haven't made anything or lost anything. If you wanted to sell it for what you bought it for, you could.

With options though, you have to look at the option's delta, as well as the volatility (as this will impact the delta), and also how much time you have left on the option before it expires.

The option traders who consistently lose are the ones who forget about these simple things.

If you find yourself saying, "I might as well hang onto the option since it's fallen this far and since I still have time", you'll likely be the guy who turns a loss of some of his option premium into a loss of all of his option premium.

Now this article isn't meant to 'neg' anybody out on options. On the contrary, it's meant to empower someone to take decisive action and to cut their losses when the trade is not working out. Because while options provide great leverage with a small amount of money and a guaranteed limited risk � you do not have all the time in the world as you do with as stock.

If what you were expecting to see happen isn't happening, cut your losses and rethink your strategy before time runs out and you lose what you put in.

Nothing will 'neg-out' a new options trader quicker than losing his entire premium. And the way that happens is by not understanding an option's limitations in addition to its advantages.

So pay attention to the option's delta, time value/decay and volatility. And remember, when you're trading options, there's more to winning in options than just the underlying stock movement.

You can learn more about different option strategies by downloading our free options booklet: 3 Smart Ways to Make Money with Options (Two of Which You Probably Never Heard About).

And be sure to check out our new Zacks Options Trader

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

3 Deadly Mistakes to be Avoided in Intraday Trading

Intraday traders fail in stock market due to various reasons. Intraday trading is not a rocket science, but nearly 90% of the Intraday traders fail, because of the following 3 common mistakes they conduct while doing Intraday trading. If the Intraday traders try to avoid these mistakes, then they will be in the track of earning the consistent gains in the Stock market.

a) Lack of Stock market knowledge: It has been observed that most of the traders enter into Stock market either based on a very little knowledge about the Stock market or based on hot tips. This is not a healthy practice. Its very important for the trader to gain the knowledge about the Stock market. Without the knowledge of domestic news/updates, international markets, its not possible to earn consistent gains in Stock market. If you are newbie, then spend atleast 2 to 3 hours analyzing the markets, studying the company fundamentals etc. After doing all the above things for couple of months, then you will start understanding the market and then you can proceed doing the paper trading in order to gain the confidence. Once you start earning profits on paper trading, then you can start real trading. If you jump into trading without having a proper knowledge about the Stock market, then you will end up losing money.

b) Greed: Greed is the factor which can turn the profitable trade into the losing trade. Profit generation in Stock market totally depends upon the Stock market direction. You have to listen to the market and if you think that trading is not possible on that particular day then stay away from it. In Intraday trading it is advisable for the trader to book small profits and do multiple trades, because in Intraday trading, its very difficult to judge the Stock move. Don't convert your profits into losses by becoming greedy.

c) Impatience: You have to be patient while doing Intraday trading. You should not panic when you incur the losses. If you become impatient, it will provoke you to take wrong decisions.

If you think that if you have any of the above factor at extreme level, then try to overcome it in order to be successful in Intraday trading. If you don't overcome the above mistakes, then you cant earn profits from the stock market even if you take the Intraday tips from the reputed stock advisory company.

Just Get Forex

The word "FOREX" is the abbreviation of the "FOREIGN EXCHANGE". It is also known as FX. Forex allow you to enjoy the benefit of the currency value of the other nation as well as the currency of our own country. Forex trading refers to buying the currency of other country and sells this currency to another country. When someone go for the vacation, then he/she buy the currency of that country and then they return back to their country they change the foreign currency that they left. The problem is that they lose the money because they pay the high rate when they buy foreign currency and get a low rate when they sell. Forex rate is affected by the event occur in any country or anywhere in the world. This potential success in the field of forex sectors required experience, commitment, disciple and intelligence. Particularly for the private sector, forex trade also occurs online. Most private forex traders participate in the forex trade from home or offices over the internet connection. Infect internet explain the growth of foreign currency. Individual trader like a ordinary people all over the world can participate in this online market. Future of trade only occurred in established exchanges, where parties of these sectors can meet and agree to a trade. Afterward these exchanges become a subject to regulations to monitor and moderate activity. Forex is termed as "off-exchange trading" or" OTD" (over the counter) each party deal directly with each other as they want to be.

Learning forex trading (foreign currency exchange) is so easy for the beginner. It takes a little bit education. Getting an education on trading forex is a must. Learning forex strategies is essential before starting this venture. Taking any course related to trade or doing the self study is proved to be beneficial in the long run. Technical analysis should be compulsory while making the correct trading decision. You need to have some knowledge about the chart which will show the changes happening in the price of particular currencies. If you have a technical analysis skill than it will bring you far in this competition market. Including this skill the knowledge about the factor in the economy which directly affects the trading market or currency. This means that you have to know the amount of specific currency which is to be calculated on that specific time.

Trading forex is highly risky sectors. Every aspect has two side one is good and other is bad. If this trading sector give a big profit than it will also give you a big loss. Now to earn gain you have to know how to trade forex. Firstly, research for the best way to invest. Secondly, consult a trusted broker, you don't deal with a broker who against your trade. Thirdly, understand the currencies and there fluctuation. Fourth, get the chart pattern that tells you the alteration held in the price of currencies. Fifth, you decide which forex platform to use. Sixth, learn the system which gives you an information or indication when to enter and when to exit from the trade. Seventh, start using demo account of your chosen trade and not real money. Finally, enroll in your trading market.

Go For Forex Expert Advisor Builder to Have a Customized EA

If you're new to the forex system, you would in all probability be inquiring what a MetaTrader expert advisor is. Simply put, it's a program that runs on the MetaTrader 4 platform and contains the operations primarily based on the input you insert. Do you desire to either buy or sell when your Moving Average Convergence/Divergence (MACD) notifies you? You will have no troubles in performing these with the help of an EA. The sole drawback confronted by numerous traders is that they do not wish to forgo their time gaining knowledge of the MetaQuotes Language 4. Today, the bulk of forex scams offers some kinds of inadequate expert advisors on MetaTrader.

If you have utilized or been utilizing the MetaTrader, you might become skilled at the language of the application to come up with your own forex system. Although you are not using the program to carry out automated trading, it's an important learning gizmo to broaden your knowledge of the indictors. You will incur massive loss if you're incapable of understanding the code.

A typical expert advisor builder for MetaTrader 4 is intended for individuals who want to build their own forex system at nominal prices. On certain occasions, the service is completely free; however, the publisher might ask you donations since there is the need to create and update the system on a regular basis. Websites offering expert advisor builder software permit you to enter some specific logics, particular parameters, lot sizes and eventually download the program.

These websites are able to build a system in only a brief amount of time and it will instruct you to grasp the codes and the way to write down them. If you create your own foreign exchange system, you will enjoy total flexibility in trading. Having your own customized MetaTrader expert advisor gives you sufficient time since trading is conducted automatically and you will receive emails or news regarding your trades regardless of where you are.

If you have got web access through your phone, obtaining the message from your tailor-made advisor permits you to browse the internet and take quick decisions regarding the trading prospect. This is truly a way superior system since you can have the ultimate say in making profitable decisions. Therefore, make an attempt to visit all these websites in the quest to use their expert advisor builder programs and gain more knowledge of creating your own system. However, you will have to forever bear in mind that no advisor assures you a total profit.