Trading Rules

If you ask me what is the major difference between a novice and a professional trader, the difference is whether he or she set the trading rules and follow the rules. There are thousands set of trading rules that you can create or follow, what I recommend is that you do not need to create a certain of trading rules, you can just follow them which came from the famous investor and traders.

One of the famous investor that I admire and respect a lot is Warren Buffet. In his world, rules are more important than anything. His famous quote is as follow:
Rule 1: never lose money
Rule 2: never forget rule no 1
Funny enough? But the fact is, many people understand the importance of setting rules but never learn to follow the rules.

For part 1, I would like to share the rules that I follow before I enter the market.

Rule 1 - Always do market research before market open:

Open your CNBC or any finance website to get the latest update, understand what’s happening in the market right now. Either is it oil price drop, or some where having a war, focus on news that may be making any impact to the US market and the stock you are trading. After learning the news, try to figure out the market sentiment, for example, is oil inventory going lower a good thing to the market? Certainly not! With the latest news in hand, it will help you to make a better decision when entering the trade.

Rule 2 - Limit your trading size:

Do not over trade, always make sure you have enough money to play for the next game. Thumb of rule is always using 1/20 of your total money for each trade. If you have $5000, each trade is $250, in that case you can have 20 games to play.

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Trading Rules

Options/Stock Trading Resource

Investopedia is one of the best investing resource website that I love most, in fact, it has help me to grow in knowledge and strategy throughout the journey of investing and trading.

First it provides the best investment dictionary to explain each financial jargons, tradings/investment terms.

Secondly, it provides articles of different topic that would interest you to grow in your investment strategy, from beginer to active traders level. The most important thing is all these good articles are free. It will updates the latest topic from time to time, therefore no matter you are beginner or mature traders, you can visit this site for latest information and revision.

Lastly, it provides tutorials for different level of traders, by going thru the tutorials, you will learn the topic faster.

With this resource, I am sure every one can grow from an Investment idiot to become a more experienced and advanced traders...all depends on your hardwork ...all the best!

please go to http://optionstradingacademy.blogspot.com/ to find out more informations.

Options/Stock Trading Resource

What is Options Trading ?

What is Options - a derivative from stock trading. The basic meaning of options is you have the right to buy or sell the stock at specific price at specific time frame, without the obligation.

An example, if you were to buy a house, you need 100K cash to buy it. Alternatively, you may draft out a contract with the owner so that you have the right to buy it any time from now until the contract expired (let's say 6 months). The contract worth 1K. You expect the house price will rise from 100K to 110K within 6 months. Therefore the overall cost you come out with is only 1K compare to 100K if you were really buy the house. If the house rise 10K as you expected, you can sell away the contract to someone at 1K + 10K (11K). On the other side, if the price drop to 90K, your contract will become worthless, and you only loss 1K instead of 10K if you have bought the house. That's call leverage.

How you gauge the market - you need to master both Fundamendal and Technical Analysis, microeconomic as well as macroeconomic to gauge the direction. Of course you will never know what is stock market direction 100%. First, you must know if the market got a trend - either bullish or bearish. Next what is the that particular industry or sector is still bullish or bearish?

Macroeconomic - to understand the US market economic like CPI,PPI, housing start, FOMC meeting, GDP, jobless claim, oil inventory and etc. Oil price is the determine factor for now.

Microeconomic (my way of explanation)- industry and sector which are the most bullish and most bearish at that time. Next to find out the most popular and the least popular company in that particular industry. Buy the rumor, sell the news.

Fundamental analysis - to drill into the company information, important ratios: P/E ratio, P/S ratio, EPS, operating profit margin, revenue and profit growth, EPS growth, book value. Besides, its position in the market like total revenue/profit compare to other company in the same sector. Reading financial report is a must, understand its income statement, balance sheet and cash flow.

Technical analysis - gauge the trend with charting like candlestick chart analysis: bullish engulfing, morning star, bullish harami, piercing line.etc. Moving average, slow stochatic, MACD, william, ROC, RSI, OBV, DI+&-, etc should be sufficient.

Please visit http://taacademy.blogspot.com/ and http://optionstradingacademy.blogspot.com to find out more information ....

What is Options Trading ?