This person does not know what he is doing. Tried to tell him a few times, but is too self-convinced to learn.
Before you consider asking someone to mentor you, be sure they know what they're doing based on live calls of their trades, be sure they exercise strong risk management, and be sure the way they trade is compatible with your trading personality (such as if you're used to trading mellow SPY options with their .01 cent spread, you might become a deer in the headlights trading GOOG or BIDU options). Anyone can post great trades after the fact. When I first started day trading in summer 2008 I dropped in on a trading chat room and found a guy making live calls all day and making money hand over fist. I could bring up a chart of the stock he was watching, then trading, and follow his trades in real time. I combined what he was doing with what I had learned in my paper trading and live trading, extracted the things that were compatible with my style and very occasionally I would mirror one of his trades. I began having consistent profitable days, day after day. I became complacent and expected that this style of trading would ALWAYS work. Until it didn't. I learned some hard lessons when I forgot MY risk management rules and ended up with some comparatively large losses as a result. Suddenly my confidence was dented and I had to start over psychologically last year. What will make you successful is learning about strategies, testing them out either in a simulated account or small size in your live account, keeping a detailed journal about what went right, what went wrong, and then actually learning from your mistakes not to repeat them (that's one of hardest parts of trading as Neke's journal post yesterday demonstrates). Risk management is paramount. Read the first few chapters of Josh Lukeman's book, The Market Maker's Edge. He (rightly) starts his book with detailed risk management and position sizing rules. To learn about simple and complex option strategies check the Options Industry Council site: http://www.888options.com/default.jsp They explain how graphs of profit&loss work: http://www.optionseducation.org/resources/literature/files/understanding_profit_loss_graphs.pdf And they have a great guide to various strategies showing the graphs: http://www.optionseducation.org/resources/literature/files/options_strategies_quick_guide.pdf They also provide free on-line classes, such as this one which explains butterflies for example: http://www.optionseducation.org/classes/syllabus_strategies_neutral_market.jsp Also you can call 1-888-OPTIONS and talk to experienced option traders with any questions you might have. I must've called them a dozen times when I first started trading.
Good post. I have also been blindsided by thinking a trading style I found would just keep on working forever. You can also get some good stuff from Van Tharp. I just started his latest book, Super Trader.
This is good advice for anyone who hopes to succeed at trading. AFAIK, risk management is the most important thing to learn and follow without fail.
CandleStick77, I would sign on every word from NoDoji post. There are a lot of very smart and experienced people on this forum who would do a better job. I started trading in 2003, but Iâm trading spreads less than a year. There is still a lot to learn for me. On scale of 1 to 10, I would define myself around 5-6. When TraderZones says that I donât know what Iâm doing, Iâm not sure if he means my latest trade or in general. He might be partially correct, but let me give you some backgraound. Few weeks ago I started a thread http://www.elitetrader.com/vb/showthread.php?s=&threadid=185375&highlight=akivak with intention to get some advise from people regarding those strategies. I claimed that by implementing those strategies you put the probability in your favor (compared to buying stocks which is 50/50 game or buying options when your expectancy is negative). I still think that once done correctly, you can make consistent and repeatable profit of 5-7% per month. I never claimed that this strategy will work all the time and you will be profitable every month. No strategy can achieve that. As an example, I gave a list of few advisory services that do it month after month, some of them for pretty long periods of time. Many people shared their experience with me and gave me some really good advice. Some people said I donât know what Iâm talking about. Others (TraderZones among them) claimed that I probably own all those websites (there was a list of about nine of them, I would be a very wealthy man if he was right) and have a vested interest of promoting them. Of course he can believe whatever he wants, I donât really care. Some people will be skeptical and suspicious no matter what. I came to this forum to learn from otherâs experience and share mine when I can. Going back to mentoring, Iâm a big believer in self education. I read a lot of books on investing. I go to CBOE website and listen to webinars. Dan Sheridan is a great teacher, a lot of very valuable information. I subscribed to few of those services that are mentioned in the linked thread. After following them for a while, I saw that there is more than one way of doing things. You can trade one month or three months IC. You can choose the strikes by std or by credit. You can open both sides at the same time or one by one. Now I know which way I want to trade my iron condors â I can share it with you, but only you must decide if this is the method that is suitable for you. If you donât know other methods, how can you decide? I truly believe that I can put about 40-50% of my capital into combination of iron condors, calendars, butterflies and naked puts and make very consistent returns every month. Iâm not claiming that I can turn 400k to 4 million. My goal is 50-70% per year on overall capital, year after year. I followed advisories and watched them doing it. Iâm not there yet, but I believe Iâm on the correct path. I think that 14% average return on iron condor is a good start. It was done during extreme bull market which is almost as bad for those strategies as extreme bear market.
Sorry I havn't replied for a while. I got very busy with work and family stuff. Very sound advice from all of you.
How do you use risk management (With stop losses) when trading options because of the magnitude of moves that they make? My friend put in stop losses with options and they went his direction but he got kicked out of all his trades and lost his money.
i believe you're referring to a "whipsaw" were the prices based on the options or the underlying? personally, i follow the underlying since option prices are subject to other risks. for example, if i rely on support, and it's broken, then i'll get out. But if my position loses 50%, but we're still at support, I'm still in the position. i'm interested to hear what others say.