My first guess would be that 90% of investors in commodities know almost nothing about it and consequently function below effectiveness. Being smart and a successful investor requires time and dedication.
If you are going to function at all well in the stock market, you must first acquire strategies that are in line with your desires and ultimately what you want from the market. Success is attained through fundamental analysis.

Investing in stocks is a lonely endeavour, it is by general rule something you undertake by yourself with perhaps the help of a broker; some of us don’t use them, with the help of online trading platforms.

To be successful in stock trading you must at all times control your behaviour and the information you are dealing with. There is no way to control the stock market so you must control yourself. All you information should be viewed objectively and you need to ensure that you behave accordingly, thereby promoting your best interests.
You must learn to create rules in how to trade wisely and you must strictly adhere to those rules.

As previously mentioned most stock traders find it very hard to follow rules in order to achieve success. By nature some people also resist societal rules, it could be that it is innate in humans to resist rules, but if you want to be accepted in society then you must adhere to the rules of society, it is no different when trading stock on the market.

If you decide that the stock market is for you then you will enjoy unlimited freedom when it comes to choosing the stocks you want to trade, but you must follow some rules and realize the boundaries.

If you know any stock traders or know of some of the more famous stock traders, you will find that they are consistent, organized and at all times stick to certain guidelines in order to generate the profits they do.
Once you have conditioned yourself to follow the rules and guidelines, it is not beyond you to attain some of that success for your self.

If you are one of those people inclined to resist the rules of life you will surely find it hard to follow the rules needed to attain success in this business. It is not unknown for some to fail and lose huge money trading the stock market. You must take your time and know more about the stock you want to risk your money on. If others can make money and achieve success, so can you.

At Expandingwealth we are about helping you learn, if you are unsure of yourself find a good broker to start with, they can help you understand the market, but it is essential to learn for yourself. Learn the rules and stick  to them.

Invest with knowledge

MR (ed)

“Trading options for profit” is among the most complicated and if you ask any trader, the riskiest type of trading available to you.
However there are some who make lots of money trading this way; to join them you must first do your study and learn the technique.
Option trading usually selects it’s own type of trader, usually the risk takers in the market.

It requires skills and thinking unique only to people who could handle extreme risks. The risk to capital is only as great as the rewards.
By nature, it is also speculative. So if you are a person who doesn’t want to speculate too much, you might as well find another type of
security, which will work best for you. However, rejecting the idea of entering this type of trading right away is as risky as not knowing
anything about it.

It carries with it risks, that’s true, but it is also a very, very, profitable venture. You might as well try to learn something of it, such that you
could decide whether to try you luck on options trading or not.
Though risky , option trading also offers advantages that may not be had with other types of trades. The most primary of these advantages
 is the flexibility it lends its investors. Each lender has the option to trade at a specific price within a predetermined period. So what is an option?
An option is a type of security, perhaps closely comparable to bonds and stocks. It is, in itself, a binding contract, that is monitored by
and through strict terms and conditions. In gist, options are contracts that owners could buy or sell at a certain price prior to or on a specific date.
 An option is typically an added price tag to a certain asset or item because it is a reservation for the purchase or sale of a certain asset.
Options are also sometimes called derivatives. This is due to the fact that the value of an option is derived from the value of the underlying asset.

To give light on this topic, consider the example below: Say you have considered buying a real estate property which is worth several hundred thousand
dollars. However, when you first negotiated with the owner, you did not have sufficient money to purchase the property right there and then.
So you made a deal with the owner to pay an extra $5, 000 to reserve the deal for you for the duration of two months. The extra money you
put in is called the options. In case you don’t want to pursue with the sale, the owner of the real estate can neither force you to buy the property
 nor can the law impose the sale on you. However, you would still have to pay the price of the option.

Having said all that, if a friend of yours offered to teach you how to trade options on the stock market and make money not matter if the market
went up down or sideways, do you think you would be interested?
MR (ed)
www.expandingwealth.com

IMPORTANT OPTION TRADING TERMINOLOGIES.

Forget that there are hundreds of terms that the financial sector uses, all beginners hat to understand first are the most importand commonly used words.

OPTION : This is the right of the buyer to either buy or sell the underlying asset at a fixed price and fixed date. At the end of the contract, the owner of the option can choose to either buy or sell the option at the strike price. Though the owner has the right to pursue the contract he or she is not obligeated to do so.

CALL OPTION: The right to buy the underlying asset.

PUT OPTION : The right to sell the undeerlying asset

EXERCISE : The action where the owner has the choice to buy (if it is a call option) or sell (if it is a put option) the underlying asset or, to ignore the contract and let it expire. If the owner chooses to pursue the contract, they must send an exercise notice to the seller.

EXPIRATION: Is the date where the contract ends. If at expiration the owner does not exercise the rights, then the contract is terminated.

IN-THE-MONEY :  Where an option has an intrinsic value. If the underling asset is higher than the strike price, it is said to be in-the-money. Whereas a Put Option is in-the-money if the underlying asset is lower than the strike price.

OUT-OF-THE-MONEY: If an option is O-O-T-M it has no intrinsic value. The call option is out-of-the-money if the tradin price is lower than the strike price. The Put Option is out-of-the-money if the trading price is higher than the strike price.

OFFSETTING :  Is the act by which the owner of the option exercises his right to buy or sell the underelying asset any time before the end of the contract. This is done if the owner feels that the profitability of the stock has reached its peak within the date of the contract.

WRITER (Option Seller. The writer is the seller of the underlying asset or the option.

OPTION BUYER: Is the person who acquires the rights to convey the option.

STRIKE PRICE : This is the price at which you must sell the underlying stock if the contract is exercised. The strike price is always clearly stated in the contract. As the buyer of the option, to make a profit, the strike price must be lower than the current trading price of the stock.
An example.. if the contract states that the strike price of a certain stock is say $20 and the current trading price at the end of the contract is $25, the buyer can exercise his or her rights to pursue the contract, thus earning $5 per stock.

OPTION PREMIUM : The amount of the contract which must be paid by the buyer to the writer(or Seller). The option premium amount is determined by factors such as the type (call or put), the current strike price of the option, the volatility of the stock and very important, the time remaining until expiration and the price of the underlying asset to date. Taking all these factors into account, the total amount of the option premium is number of option contracts, multiplied by contract multiplier. Example, If you are buying 1 option contract (equivalent to 100 shares lots) at $2..5 per share, you must pay a total amount of $250 as the option premium. That is 1 option contract x 100 shares x$2.50 per share = $250

www.stockmarketoptiontrading.com

Let us talk about the hardest form of making money investing: Stock Market Option Trading.

 If you have any experience in the Stock Market you undoubtedly have heard of Options. But what exactly are options; simply put options are an agreement between two parties to buy or sell shares at a pre-defined date and price. Commonly called ‘CALLS’ when you sell an option for someone to buy your shares, and “PUTS” when you sell an option for someone to buy your shares. From there it gets very complicated and this is where lots of eager option traders come unstuck.

 If you are contemplating trading options or even if you have had some experience trading options you should be warned that there absolutes in what you should or should not do.  There are many advantages that option trading has over other forms of investing. Option contracts can give you the flexibility to take a bet on individual market outcomes. And that bet can be placed for an event 6 months into the future.

 In Option Trading we talk about things such as “Long Straddle and Long Strangles”. Then there are things like leverage and what about this one “Your Theta” or another “The Greeks” Confused yet?

 The confusion of terms and techniques associated with Option Trading can make this a dangerous business. On the other hand Option trading can make you huge amounts of money and if you don’t know what you are doing it can loose you the same amounts of money.

 MR (ed)

www.expandingwealth.com

 

Well we are almost half way through this year and of course the question is “Where do we go from here?” If you have been at this game for a while, like some of us have, you would have seen set backs before. However if you are new to market trading and have just discovered it, it probably has you thinking, I don’t want a bar of this, and who would blame your.

Alas a lot of us are in this for the long haul and a lot of us just now are looking at loses in a magnitude never seen before. I know some of you like me have seen lots of down turns, but we just haven’t seen this before and we haven’t seen anything happen as quickly as this came upon us. We all know that gloom follows boom, but until now we have been led into it in a gentle and kindly manner, not like this kicking and screaming and asking where our money went. Well let me tell you, I intend getting mine back and then some.

I turned adversity into profit back in the eighties, yes I was investing then, and I will be in this game for as long as I live, the highs are worth the lows in my opinion. After every downturn of the stock market, things happen that you can turn into profit; you just have to know your oats and learn from your mistakes.

Things have changed in our investment world. The high flyers have had their wings cut; those who took risks with someone else’s money have been hauled in. Those of us who let them have some of our money to play with, are shaking their heads and telling themselves that they could have lost it just as easily themselves and had more fun in doing it.

I will say to you all, learn how to look after your own money. How many times have you seen people in tears on the nightly news, telling about how they trusted someone because they thought they were honest and now they don’t know where that person is or which country they are in and “they trusted him with $500,000 it was all the money they had in the world,” you hear them say.

Come on, get real and learn. No one is going to turn your money into a fortune overnight, and if they are so cleaver, ask them what they want your money for.

Yes you are going to have to do some work to get back to where you were before the bust, but it should be work you enjoy. If you aren’t getting a buzz out of this, take stock and ask yourself if you might not be better off doing something else. Personally I have a few dollars to get back, but I must confess they were dollars that I had already won even so I was quite attached to them.

So lets have a look at what is going on in the world just now.

 

1.

     We have a new President in the White House in the USofA. That’s good for a few good points.

2.

     The price of oil has plunged; that should be good for a few more.

3.

     We are starting again in a depressed market, and that is definitely good.

On the other hand we have,

·

       Lots of people are losing their homes and their jobs and that is tragic. No matter what the reason I could not imagine what it would be like to have to give up your home, or to be told that you no longer have a job. I have never had either experience so I can’t say I know how you feel and if this has happened to any of my readers, I feel so deeply for you.

·

       Some of the world’s biggest corporations are in deep trouble. That too is not good. My feelings on why this has happened could fill a hardback novel. I expounded my ideas on this about thirty years ago when I saw the first Datsun car imported into my country and selling for hundreds of dollars cheaper than the locally produced cars. Yes I know what the governments say about free trade, I wonder do they still feel the same way.

·

       Growth rate in the world economy has slowed, is this good I hear you ask? Well for a few years now certain countries have been sucking up huge amounts of the world’s resources and turning them into plastic trinkets and plasma screen TV’s. Has it made your life any better? Yes I know those power tools I have to buy are cheap but boy, I wish I had a choice, and I know all my clothes are old because they were all made in this country.

·

       Yes I know a lot of workers in the mining industries and the mining companies made a lot of money, yes me too trading in their stock. This allowed lots of people investing in housing and not just buying a home, to pay way above value of what the houses were really worth, forcing the prices to untold highs. I don’t think that was too good.

I could go on a lot longer but you probably have more important things to do. Now is the time to take action, now is the time to learn, and be ready to take the opportunities as they present themselves. The world stock markets will rise again, they always do.

I’ll leave you with this thought.

A pertinent historic quote is from John Maynard Keynes in 1920: “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some … The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.”

MR (ed)

http://www.expandingwealth.com

 

Posted 12 February 2009