Your Questions About Successful Trading

Ken asks…

What is the difference between investing and trading/speculating?

I’m interested in stocks and want to just dip my toe into the water to see how it is. I’m not looking to make millions or thousands of dollars. $100 a month is more than enough. I was doing a research in stock market and there is an overwhelming amount of info out there. So I have a basic question?

What is the difference between investing and trading/speculating?
How do they each make profit and how long does it take to make a profit?

John answers:

Investing is based on you committing your capital for realization of gains.. An example of an investor is Warren Buffett who invests his money in companies for a long time in order for his original capital to grow.. Think of it as a business.. If you bought into a coffee house and the sales were going down.. If you were an investor you would stick with it and wait it out.. If you are a speculator you would sell because the sales are going down. A speculator sells quickly and looks at charts for ins-and-outs.

Warren Buffett the worlds greatest investor has returned around 20% in his lifetime.. He has the most successful track record for returns. So in the end what i’m trying to say is you shouldn’t expect to double your money every year for the next 30 years..
Good luck..

Richard asks…

What do you think a successful business person is?

Also, please include factors needed to be a successful business person. – and try to include why and as much detail as possible.

Please do not just copy and paste from the internet. (because I could just do that myself) I hope you could help me. Thank you in advance. 🙂

John answers:

Statistics indicate that of all the new businesses that start up in any one year some 50% will have ceased trading in the first two years; 75% by year 5 and that at the end of the tenth year approximately 5% will still be in business. The greatest reason for failure of a business is the lack of cash flow. This would indicate that a successful business person must be one who is capable of running a business in such a manner that the cash flow into the business is greater than the cash flow out of the business in the longer term.

This means that the business person needs:
a) planning, organising, controlling and leading abilities.
B) have knowledge of management, marketing, and customer relations;
c) the ability to delegate responsibilities, and to make decisions on the spot when necessary;
d) to know when a decision has not been made correctly and to modify it to suit the circumstances;
e) the sense to adapt as required to changing trends and technology;
f) to be able to make more right decisions than wrong ones; and
above all, to know the difference and learn by mistakes.

Joseph asks…

What are some strategies for trading stock options?

I need some strategies for trading stock options. right now I am just trading stock options and losing money. any help?

John answers:

Can stock options be risky investments? Yes, they can be if you do not know how to properly trade them. This includes understanding all the available strategies option traders can use, which stocks simply cannot provide.

For the past seven years, I have been a full-time options trader. This is how I make my living. This is easier said than done. However, by reading and actually trading you will learn how to be successful. The key is to find how you like to trade options and to stay consistent.

In this article, I will mention the many successes and pitfalls that I have had trading options and what I have learned over the years, but also the mistakes I have seen others make. While my trading style may not suit everyone, my hope is that it may provide some clarity about options and the many different strategies they offer traders.

One of the most important aspects to being a successful options trader is finding a strategy and method that fits your expectations and style of trading. This can take a long time for beginners to figure out. I do recommend “virtual trading,” to test out different strategies. The list of available option strategies is vast. Here are some of my personal favorites:

Buying long calls
Buying long puts
Iron condors
Reverse iron condors
Butterfly spreads (long put butterfly)
Weekly options strategies
My daily options trading strategy
Often times, a beginning options trader is bouncing around from different strategy to different strategy. One of the first things I tell a new options trader is to focus on a select number of stocks initially. If you are interested in technology, then following Apple (AAPL), Google (GOOG), Intel (INTC), Research In Motion (RIMM), and others in the same sector is a great start. Understanding how a stock moves is beyond important.

One of the key aspects with my daily options strategy that I developed over seven years ago is that I mainly focus on nine stocks exclusively. Every single day, I have the same stocks up on my grid chart.

I currently use the following stocks for the daily options trading strategy:

Main Stocks

CF Industries (CF)
Wynn Resorts (WYNN)
F5 Networks (FFIV)
Intuitive Surgical (ISRG)
Chipotle Mexican Grill (CMG)
VMware (VMW)
Baidu (BIDU)
Salesforce (CRM)
Supplemental Stocks

Las Vegas Sands (LVS)
Direxion Financial Bull 3X (FAS)
Direxion Financial Bear 3X (FAZ)
EMC Corp. (EMC)
Marvell Technology (MRVL)
MGM Resorts (MGM)
Alcoa (AA)
Citigroup (C)
Nvidia (NVDA)
SanDisk (SNDK)
Research In Motion
AK Steel (AKS)
The point here is that after watching these stocks on a daily basis for such a long time-frame, it is easy for me to spot when a particular stock has bottomed or topped daily while also using the technical indicators. If I were to put a stock on that list tomorrow that I was not familiar with, I definitely would not be comfortable making a trade as quickly as I would with the stocks I do follow. This applies to all trading. It is never a good idea to try to catch a upward or downward trend with unfamiliar stocks. The chances are high that by the time you are in the trade, it has already topped or bottomed. Stick to what you follow.

If you have not read any of my daily options trading strategy articles, I highly recommend that you do. There are literally hundreds of comments on those articles and I have answered just about every question asked. It is really a great strategy. One of the reasons I wanted to share it with the public is because I knew how successful it would be for so many traders. Here are the links to all five of the articles in the series:

Part 1:
Part 2:
Part 3:
Part 4:
Part 5:

Carol asks…

How to make more trades a day without waiting 3 business days?

I’m sort of a beginner at investing in stocks. I just started investing roughly about a year ago and I have been investing around $12,000. I would like to make more trades per a day but I can’t because I have to wait three business days, I’m currently using Scottrade. Is there a company that would let me buy and sell all day? If someone can help me out, just give me so info. that would be great.

John answers:

You need 25k in your account.

It’s a FICA regulation or something.

Also, be very careful not to overtrade.

That’s a (costly) mistake many beginners make.

Successful traders trade much less often than you think.

Good trading, my friend, is boring.

Ruth asks…

What is the best online stock broker with a minimum deposit of $500 and an unlimited trades per day amount?

I am interested in trading as a beginner. I prefer not to be limited on the amount of trading per day I can do. I would also prefer the broker be “legit” as well as make tax related things easier. Thank you for any help.
Also not interested in advertising and shady links. Thank you.
I do need to do some reading, thank you for the insight.

John answers:

All major brokerage firms provide their clients with on-line services, including trading platforms, latest market & financial news and research.

Customer need to select the site that is best for them. Traders have requirements in a site, while investors have other requirements. I use Scottrade for trading equities, Thinkorswim for trading options and Fidelity for investments.

Although most sites are geared to general securities and commodities, however customers may have special needs for the types of products they trade, and the markets in which they trade.

It seems that the most popular firms for on-line investing all of which provide excellent platforms and services are; Scottrade; Chas.Schwab; TDAmeritrade; Fidelity; E-Trade and Thinkorswim.

No firm “limits” the amount of trading a person can do as long as they have sufficient capital deposited to cover all their transactions.

All major firms are “Legit” especially those that are members of major exchanges.

HOWEVER, before you spend $0.01 you should do some studying especially if you want to “trade”. Judging by the wording of your question you have no idea about trading, especially if you are concerned about a minimum deposit of $500.

Before you enter any orders it would be in your best interest to know what you’re doing, why you’re doing it, how to do it and know the rules that govern what you’re doing. And it appears you’re not there yet.

Here’s some books that can get you going in the right direction
Investing for Dummies by Eric Tyson
Beating the Street by Peter Lynch
Common Stocks, Uncommon Profits, by Philip A. Fisher
How to Make Money in Stocks” by William O’Neil
Millionaire Traders, Lein & Schlosberg
One Up on Wall Street by Peter Lynch
Trading for a Living, by Alexander Elder
What Works on Wall Street by James O’Shaunessey

To be a successful trader, you must be willing to work at it, and commit yourself to studying and never stop studying.

Good luck

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