John Brasher: Educate Yourself About High Probability Options Trading
Like anything in life to become good at something requires study and practice. Options are no different. Most traders new and seasoned will dismiss options because they simple never got a proper education in just how powerful this most misunderstood of trading strategies really is. Please don’t make that same mistake. Read the article below then look over my review at John Brasher.
It’s true that options trading has the potential to generate great profits, but this potential comes at significant risk. Therefore, understanding the basics is essential before you even consider trading live because otherwise you won’t have the necessary foundation to succeed.
Essentially, an option is a contractual agreement between two parties, giving one party the right – but not the obligation – to buy or sell the underlying asset, which can be stocks, commodities, indices and more. The key is that you freeze the price by gaining the right to purchase the asset at a future date but at today’s price. The price at which you will be making the purchase or the sale is known as the strike or exercise price, while the date is known as the expiry or maturity date. Once the maturity date has been reached, you will have to exercise your right, or the option no longer exists, meaning that you lose your money. However, when you buy an option, you will only be paying the cost of the option and not of the underlying security.
Most trader’s don’t take the time to educate themselves. Options open a new horizontal in a trader’s outlook on the markets. Prior to this moment you trade with the the flock of blind traders. Further your education, read this review on John Brasher.
Good risk management is vital to all forms of financial trading and that includes options trading. In fact, risk management is essential to trading because without it, you will net greater losses than gains. An essential part of any risk management approach is the trading plan which should include information such as the underlying security, the type of option you want to trade, how you will enter and exit the market and what trading approach you will be using. If you don’t want to lose money by trading on what you hope the market will do rather than what it is actually doing, then you need to stick to your plan like glue. On the other hand, if you have a good trading plan with methods to mitigate risk for trades that turn against you, then you will likely make a pretty profit.
Simply learning the mechanics of trading is not enough to succeed, as another essential component is discipline. Even a financial guru can lose money on the markets if they lack the discipline to be objective and act according to market conditions, exiting trades that are clearly not going well. A disciplined trader will devise a trading plan that is then thoroughly back-tested to ensure effectiveness and then follows it to the letter. Most traders can’t do this, and that is why so many people fail and aren’t able to make money trading the markets. However, if you are able to manage your emotions and become disciplined, you will find that you can make a nice profit.
Clearly, the first step to becoming a profitable options trader is gain a good understanding of how these derivatives work. Despite the introduction of a few key concepts, it is critical that you do more research because the subject is extensive. Due to the potential for losses, it is imperative that you never rush in to trading without a good foundation of knowledge.
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