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The words above are powerful because they're approach-agnostic. It doesn't matter if you're an old-school pit trader who swigs grit instead of coffee before the opening bell, or a Gen Y technocrat who codes trend-detection algorithms.
All traders live and die by The Four Words. If you consistently buy low and sell high, then you will be profitable. Earnings crush is the fall in implied volatility after earnings is announced. Typically, earnings announcements cause the price of the stock to move more than normal.
The move will have more effect on short dated expirations since the day of earnings large move has more weight than the rest of the days with normal moves. In my previous article , I described a strategy of buying strangles a few days before earnings and selling them just before earnings.
In this article, I will show why it might be not a good idea to keep those strangles through earnings. According to experts, such nasty downturns are natural, and the crypto market may witness such downturns now and then. By Kim, April 7. Posted December 31, This is a great article, full of truths.
A popular cult like following of a guru who has considerable resources to host an internet show and following, spews the only way to be profitable in the long run is selling options. I have concluded that as a market maker for years, that is what they did. But imposing that theory in the retail world of mom and pop will eventually blow out accounts.
Trade small and trade often is great for the broker charging commissions. The only way to be profitable consistently is controlling your risk and preserving your capital. You can be wrong more than you are right, even with a modest gain if you control your downside risk.
It took me a long time to realize this after both buying and selling options and having lousy results both ways. And some "gurus" still continue blindly selling premium just because IV and IV percentile is high. They just ignore the fact that IV is high for a reason, and if the underlying moves, the fact that you get high premium doesn't exactly help you.
Posted January 4, edited. This was a wonderful article; I feel like finally someone is honest about the dangers of only selling options. The philosophy of selling when the VIX is high works until it doesn't, like in '08 when VIX was "extremely high" at 50 and the big marketers were selling premium like crazy which worked great, until VIX went to Posted January 5, I'm telling people the truth, not what they want to hear.
Blindly selling premium using all kinds of stereotypical slogans sell subscriptions well. It works well till it doesn't. I'm mentioning those services because they are out of business, there are dozens others whom I won't mention who still preach those "easy money" strategies.
Posted January 8, I think I listen in to those that Capt. Al is alluding to. For me it is quite educational as far as. But, when clients call in one can hear the pain in their voice seeking help. As you say, when they go against you losses.
You need to be a member in order to leave a comment. Sign up for a new account. It's easy and free! Reality SteadyOptions is an options trading forum where you can find solutions from top options traders. Sign in to follow this Followers 7. By Kim December 7, options selling Selling Options Premium refers to certain set of strategies that involve net selling of options, as opposed to buying premium where you are net buyer of options.
What is Selling Options Premium? Myths vs. Reality First, not all options selling strategies have high probability of success and high winning ratio. Reality This myth is an opposite of the previous one, used by options selling opponents. Reality This claim completely ignores Implied Volatility changes. Reality Higher positive theta comes with higher negative gamma.
Reality While this is true, it ignores the size of the winners in those three scenarios vs. Reality Yes, but those positions usually also have negative gamma and negative vega. Don't be attracted to high probability low delta options. Those trades might work well for many months or even years , but inevitable will eventually happen. They are a true definition of "picking up pennies in front of a steamroller".
Never underestimate the risks of leverage, especially when you sell naked options. This sounds obvious, but even experienced money managers with decades of experience often ignore this simple advice in pursuit of high returns. Yet, he blew up spectacularly in and Not once but twice. Be very careful with selling weekly options due to high negative gamma. Be aware that earnings are a binary event if you decide to sell options before earnings and hold them through the event.
Never sell naked options on individual stocks. Conclusion Selling Options Premium can work, and it should be part of well diversified options portfolio. What Is SteadyOptions? The Big Loss At his blog, Joey offers his perspective on the top reason that so many trader wannabes are not, and will not, become profitable traders.
ETF Vs. Considering Trading? Here Are Some Trading Options You Need To Know Whether you are considering dabbling in day trading or looking for a longer-term investment if you want to start trading it will serve you well to carry out a little due diligence in advance. Why Should You Paper Trade Options In my previous article I shared some thoughts why I believe traders should start with paper trading before committing real capital.
Post-Earnings Implied Volatility Crush Earnings crush is the fall in implied volatility after earnings is announced. Why Not to Hold Strangles Through Earnings In my previous article , I described a strategy of buying strangles a few days before earnings and selling them just before earnings. Go to articles Trading Blog. CaptainAl 0 Posted December 31, This article should be required reading Share this comment Link to comment Share on other sites. Kim 6, Posted December 31, Thank you.
They experience severe losses and then blame "challenging markets" for their losses. MikeCl 4 Posted January 4, edited. Thank you for the honesty and truth in this post! Edited January 4, by MikeCl. First of all, a trader must create or adjust their trading strategies to fit their personality, trading schedule, and risk appetite.
Every strategy should be historically back-tested before use, and its average effectiveness should also be measured. You must be aware that historic performance is not an accurate representation of future performance, and therefore does not guarantee anything. Secondly, a trader must develop a certain mentality to be able to follow his or her strategy consistently. This second part will be the prevailing topic of this article, because failing to understand it is the very reason that so many beginner traders quit Forex and CFD trading after losing their funds.
Some people can obsess over profits, which can ultimately lead to their downfall. Chasing money is one of the main obstacles in learning how to be consistently profitable in Forex and CFD trading. To avoid this, a good place to start is to forget any unrealistic goals and targets.
The notion of making large amounts of money off a few swift trades is extremely unlikely. Trading too flippantly and over-confidently can be what causes you to lose your initial investment. Intraday novice traders who follow short-term price action are exposed to this way of thinking. The turnover in this group of traders is high, and they can lose their capital in a matter of a few months or even less. Many veteran traders live with the sentiment of "to make money you need to forget about making money".
By setting the money goal high, a trader places themself under a lot of emotional pressure, which results in one of the biggest mistakes possible — overtrading. As an alternative to focussing on making profit, try focussing on learning trading strategies, and research which trading tools are available to you. See which techniques seem to have sound logic, and think about how they can be used in your own strategy.
You should also invest your time into studying how markets behave, and learning how the industry functions — this is crucial. The biggest takeaway from this article should be to never stop learning, because there are always new strategies and techniques emerging, new concepts and more that you can benefit from and use to your advantage.
The markets are constantly changing, and if you want consistency, you need to be able to keep up and adapt to these changes. Overtrading is another word for curve bending or market chasing, and it's caused by a faulty mindset, as described above. Overtrading is a result of recognising opportunities on the market not because they are actually there, but because a trader wants them to be there.
Traders may or may not realise this and that is where the deception comes into play. There are two kinds of overtrading — trading too often and trading too much. First, let's deal with trading too often:. In his speech titled How to stay out of debt , Warren Buffett stated that you need discipline when investing:. In baseball, you have to swing at pitches you don't necessarily like. In business you don't have to swing at anything.
You can just sit there… and if you don't like the prices you don't have to swing day after day, after day, after day, and there are no called strikes. You can simply wait for that one time in a month when you like the price, when you really know what you are doing, and then you swing.
Although Warren Buffett was referring to long-term investing such as stocks , If you apply that same principle to Forex and CFD trading, it is still sound. The bottom line is this: the trader doesn't need to make a lot of trades, just making the right ones is enough. By the time you decide start trading with a live account , you should have a strategy with preset specific conditions for entering trades. Simply follow your own strategy — and don't trade when you shouldn't.
The other part of overtrading is trading too much. A lot of people say that frivolous leveraging is to blame. Well, is it? Forex and CFD brokers often offer significant leverage on their trading accounts. In theory, this was originally to provide traders with the chance to make reasonable profits from small investments, thus enabling more people to see the value in trading, and use it as a service that brokers provide. In practice, however, taking high leverage is still common for beginner traders who are tempted by maximising their potential profits, but instead maximise their actual loss.
Yet the devil is in the detail. High leverage is not intrinsically a bad thing. It allows a trader to deal with larger volumes, which results in them having less free margin to use in the case of a drawdown. Higher volumes mean more pip value — the engine of profit and loss. However, it is the trader's choice to trade an unreasonably high volume that makes an account more susceptible to margin calls.
As for the leverage itself — if anything, it's there to help a trader who should already understand how leverage works and respect it. Professional traders that choose Admiral Markets will be pleased to know that they can trade completely risk-free with a FREE demo trading account. Instead of heading straight to the live markets and putting your capital at risk, you can avoid the risk altogether and simply practice until you are ready to transition to live trading.
Take control of your trading experience, click the banner below to open your FREE demo account today! How does a Forex and CFD trader achieve profits consistently? Truth be told, it can't be done. Closing every trade in profit is simply a trading urban myth. If we are talking about how to be consistently profitable in Forex and CFD trading in the long-term, some professional intraday traders may be consistently profitable on a daily basis, but not even they can present a trading report that that doesn't include regular losses as well.
If you experience difficulty with taking losses, you may struggle with Forex and CFD trading. The trick is that those that are profitable yield enough to cover the losses and make profit. Keep in mind that this is common for long-term, trend-following traders.
One of the biggest myths related to the forex trading market is that. Whether you're a seasoned trader or new to the forex market, the myths about forex trading are always swirling around you. These erroneous ideas can. Myth #1: Forex is a short term strategy · Myth #2: Your forecast is the way to win · Myth #3: The forex market is really risky · Myth #4: Risk.