Statistics show that in a bull market about 75% of the stocks will follow the general trend and go up, and in a bear market 75% will also go down. Trading with the trend is the best way to trade as 8 out of 12 stocks will follow the trend and give you the best chance of making gains on your stock purchases.

The most important thing that you can do is learn to trade from a good trading mentor, and also learn about other startegies such as swing trading.

But what if you have some good stocks and don’t want to sell when the market is clearly going down, or about to go down?. There are a couple of tactics that you can consider, both of which involve the use of options, CALL options and PUT options. There is the widely known strategy called Covered Calls, and the much lesser known one called the Married Put.

If you are going to trade options it is important that before you start trading you get the best option trading education that you can. You should also practise until you are comfortable with the process. This is a very important point that must be taken seriously, if you don’t understand the terminology and theory then you should not be trading options. If Put option, Call option, Married Put and Covered Call are new to you then don’t trade until you have studied sufficiently.

Selling call options against your stock in 100 share increments is the basis of the covered call strategy and it can provide about a 2-7% buffer against the loss in stock price. However a bigger drop in the stock price will not be compensated for using the covered call strategy, in general.

Stocks in a bear market, and even in a bull market, can drop quickly on news or earnings releases, as much as 15 to 40% within a month. Using covered calls to protect your stocks will only provide limited protection of less than 7% at best and so will not save you if the stock takes a 40% tumble.

The better solution to providing down-side stock protection is the option strategy called the Married Put. As the name suggests the PUT that you buy is used to provide protection when the stock goes down because Put options will increase in value when the stock decreases in value. The term married is used because the option that is selected has to be very compatible with the stock, in other words a good match, if the strategy is to work.

The selection of which is the best Put option is not straight forward and involves several criteria which are listed below:

1. The strike price of the option

2. The current stock price

3. Choice of options, in or out of the money

4. Put expiration time

Even though the married Put protection only has a limited life span if offers much more protection than the covered call. It can provide as much as 90-95% loss recovery in the event of a significant drop in the stock price.

The downside of the good protection is that you have buy the Put which is a debit whereas the covered call is a credit. But there are ways of offsetting this expense and there is much more to this strategy when executed correctly. The Married Put can be made to pay for itself and used to generate very good gains if the market, or stock to be specific, moves a lot.

The basic idea of the Collar Trade is to combine the covered call and married Put strategy into one, this is what is called the Collar Trade. In effect you put a collar around the stock, sell a call and buy a PUT. If you do this correctly most of the cost of the Put can be offset by the credit from the covered call so you can protect your valuable stock at almost no cost. Yes this is a great strategy which the general public is unfortunately ignorant of, and most brokers don’t understand.

The strategy that I have outlined above is unknown to the average stock market trader but is one of the best trading systems you could have, along with momentum trading.

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In the USA stock market there are 3 major indexes which are each made up of a basket of stocks, they are the S and P 500 (also known as the S&P500), the DOW 30 and the Nadaq 100. These indexes generally only contain major blue chip  stocks, as long as you buy from these 3 groups you will at least know that you are getting a well known solid stock.

For example the DOW30 contains major industrials and large multinational stocks such as Home Depot (HD) and Johnson and Johnson (JNJ) whereas the Nasdaq 100 mainly contains techical companies such as Apple (AAPL) and Miscrosoft (MSFT).

Always buy a stock that is liquid, this means that it is a highly traded stock, this will enable you to quickly buy and sell at the price you want without having a delay. You will also get a smaller spread, thats the difference between the BID and ASK price of the stock. For a stock to be considered highly liquid it should trade at least 500,000 shares per day, ideally even more.

It is best to avoid stocks that are bellow $10 as this usually means the company is in trouble, although with the bear market of 2008 there have been a lot of good stocks at bargin prices between $5 and $10. Avoid buying a stock below $5 at anytime.

Another consideration is options, does the stock has options?, this will be important if you want to trade options around your stock, such as a covered call, or you may want to buy a PUT option in order to protect your stock.

Be very cautious about buying a stock just before it’s earnings are released, stocks often drop significantly if they come out with a poor report. Earnings are released 4 times a year with one of them being the annual report.

If you are going to trade options make sure that you learn how to trade by getting some good education. There are many swing trading strategies that work well with stocks in todays volatile markets.

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You only have to think back to major stock market scams like Enron to know that it is almost impossible for the average, and even very sophisticated fund manager or hedge fund trader to really know what the real financial state of a company is.

Just by reading the balance sheet and other quaterly reports they release gives you a very poor insight into the real health of the company. Whereas the technical analysis charts of the company tend to give the real picture of what the market thinks of the value of the company. In the case of Enron even simple technical analysis told you to SELL when the stock was in the $80-90 range, this is why technical analysis of stocks is so popular.

So what are the secrets to technical analysis?, I’m about to tell you, here are my golden rules:

* Only use 3-5 simple technical analysis indicators

* Make sure that you understand how the indicators that you have selected work, what the parameter settings are and in what market conditions they are effective

* After selecting your indicators and parameter settings don’t mess with them.

The real secret to technical analysis is to get VERY familiar with your choosen indicators, and really this can only be done by watching and studying the market, so that you get to the point that you TRUST them.

The fact is that in any market, for each bar period, there are only 5 pieces of information, the open, close, high, low and volume, yet there are now hundreds of indicators. Most of these indicators are displaying much the same information and so are redundant.

For the record my set of indicators are:

* 4 Simple Moving Averages

* Bollinger Bands

* MACD

* Stochastics

But the way I use them is quite special, to learn more about how to become an expert at technical analysis visit:

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There’s also a lot of hype about how complicated it is to learn and why you need to spend thousands of dollars on options trading education before you get started. Needless to say this last statement usually comes from trading seminar companies trying to sell your their trading course on options.

Lets cover a few of the basics about options and set you straight about a few important points. Firstly yes it is true that you can make a lot of cash trading options, but of course you can also lose just as fast.

When trading stocks your leverage is 1:1, if you go full out on margin you get get 1:2 leverage, but thats about it. With options it is not as straight forward to calculate the leverage but generally speaking you can get between 1:5 and 1:10 when you buy an option on a stock, or ETF.

So with 1:10 leverage, when the stock increases by 5% your option can increase by approx 50%, and this can happen in just a few days, this is why swing trading strategies using options on stocks is so popular.

However the downside is that the reverse can happen, if the stock drops by 5% your option can also drop by 50%, at which point you may want to close the trade and save some of your option value, it really depends on what your stop loss and risk management plan is.

What I’ve described above is called directional option trading where you are betting on the getting the direction of the stock movement correct, this is highly speculative. Options can also be used in option strategies which are much more non-directional, such as covered call trades, credit spreads and Iron Condors. In these trades there is much less dependance on getting the stock direction correct, but it still matters.

So should you trade options?, in my opinion you should not do directional option trades until you become an expert stock trader 1st. This is because you really need to be very precise with your entry and exit strategy and trading plan, and be very good at technical analysis.

Whereas if you want to do non-directional option trades you don’t need to be such an experianced stock trader to be successful, but of course it does not hurt either.

Learning how to trade options is a very good skill to have, but don’t rush into it and blow out your account. Make sure that you get a good options trading education before you start, and also make sure that you have a very solid stock trading education as well, such one from Top Dog Trading Review.

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1. Scalping Trader, if you scalp the market this means that you are only looking for a few ticks profit per trade and you may only be in the trade for a few seconds or a minute at most. trading. Some people will also call this day trading but it’s really micro day trading, buying the bid and selling the offer, it’s high speed trading and you might end up doing 10-50 trades a day. This can be quite a stressful way of trading.

2. Day Trader, the true day trader opens and closes their trade within the same trading session, usually this mean the same day, but unlike a scalper the trade may be held for a few minutes up to several hours. Usually day traders make about 2-5 trades a day and most of them will be in the 5-30 minutes range. This is a less stressful way of trading than scalping but it requires a lot of attention and quick decision making.

3. Swing Traders, swing trading usually means that a position is held for between 1 to 5-10 days, although some swing traders may keep a trade on for longer most are within this time period. For many this is the idea way to trade because it allows you to review your trade overnight, at the very least you have many hours to make your trading decisions.

4. Position Traders, this just means that you are going to hold onto your trade for longer than 5-10 days, maybe even as long as a few months.

If you are still working out how to day trade then it may be better to go with the longer time frames as it gives you more time to think.

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This article looks at the potential advantages and disadvantages of using options. Considering these are vital for investors and present an aspect to investors in inventing their option trading strategies.

What are the Advantages?

Options contracts provide a number of potential advantages to holders and writers:

Benefits for holders

Security

Call options provide those investors hoping to guard their current positions a means to guarantee that their underlying assets (e.g. stock) can be sold at a certain price within a given time frame.

Furthermore, put options potentially give investors a means of speculating whilst simultaneously limiting their losses: in terms of say an option to buy stock, the holder’s highest potential loss would be the price of the option (which would be realised in the case that he/she does not exercise the option); by contrast, were the investor to invest directly in the same stock, his/her potential loss would be the total value of the stock (e.g. if the stock became worthless).

In addition, as options impose a fixed obligation on writers independent of market changes, it also create the potential for those correctly positioned to generate profits even when the market is falling.

Power

Moreover, as put options holders, investors can most likely acquire “more bang for their money” (i.e. higher returns on their investments (ROI)) by managing further equity with their funds than would be the case if they were to acquire the important essential assets outright.

Advantages for writers

Options also present a number of probable pros to writers. For instance, in a “covered call” (i.e. where the option writer owns the property that is the subject of the option), the options premium in respect of that property can represent an additional source of income for the writer (without the writer having to dispose of that property) if the option expires before being exercised

General Pros

Also, the present market bid all investors, whether they hope to be holders or writers, with a broad collection of option contract models of varying complexity.

What are the Disadvantages?

There are several potential disadvantages which investors should bear in mind while designing their option trading strategies.

For instance, unused options are of no value once they have expired. Hence, if it has not been exercised prior to its expiration date, the holder will have effectively wasted the premium.

Furthermore, as noted above, options can be extremely complex and can require a good deal of market observation in order to be used effectively.

Advise for new investors

Neophyte investors considering of becoming holders should primarily think about their own risk profiles: they should make a decision whether they want to use options to influence their present capital, or to keep them from unwanted near-term market fluctuations (as above).

Investors must also consider brokerage fees when taking into account the cost of options contracts. Undeniably, the cost may be higher on a percentage basis than the cost of trading in the essential stock.

In addition there are a lot of approaches accessible to investors, some are more risky than others. The novice investor would be best off avoiding the high risk end of the spectrum (e.g. becoming a writer on an uncovered call, i.e. where the writer grants an option over property that he or she does not own – there is no theoretical limit on the losses that the writer may incur under such an arrangement).

All investors should understand the potential for options contracts to generate losses (e.g. where the size of the premium negates the profits made from the acquisition or disposal of the underlying asset).

Finally, it is much sensible for newbies who are looking to make money through stock options trading to primarily go into options contracts as holders, rather than writers (due to the larger possible risks facing writers).

The information presented in this article is by no means complete. Naturally, there are a lot more aspects one should think about in putting together effective option trading strategies prior to pitching into this potentially profitable venture and definitely, one would be sensible to completely comprehend the consequence beforehand.

Visit my blog on more information about how you can make money trading options and grab some free ebooks and e-courses along the way: http://www.savvyfinancialtraders.com

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The issue is that options are still inadequately understood and most individuals don’t understand how to utilize them correctly and because they are a leverage instrument, they’ll in actual fact cause issues for lots of traders.

The key to really understanding options and the way they’ll form a proper trading strategy or business, is through the correct instruction and training.

Lots of options training companies simply teach their clients established methods and then leave them to get on with things alone, within the markets.

This doesn’t offer traders the proper knowledge and ability to utilize the possible advantages of options. Traders really need to trade with successful traders, who can educate them how to find opportunities within the market that will really permit them to release the benefits that options can offer.

Once traders are ready to spot these opportunities within the market, they’ll then learn the correct strategies to get the most out of every potential situation.

Following normal coaching strategies, traders are actually taught to run before they are able to walk and this is often why a lot of individuals run into issues, or merely do not reach their full potential in the options industry.

There are options firms that can provide traders the right type of education, as well as permitting them to trade and learn side by side with successful professional traders within the markets. If a trader is completely serious about being successful with options, using one of these organizations is absolutely vital to reaching their goals.

However, if you do decide to sign up with one of those firms it is completely vital that you stay committed to the program. It is simply not enough to only join up and scan the material or follow along with the lessons.

If a trader is going to reach their full potential, then they need to be ready to give  100% effort and accept that their will be a learning curve involved.

Having said that, the best training organizations will provide their traders all the help that they need to make sure that they are successful and get to their potential.

Using one of these organizations can permit anyone to attain their potential and to gain a full understanding, there are however, many firms that provide courses with some pretty amazing claims.

Any courses or organizations claiming enormous profits or fortunes to be made with simply a little effort, or in simply a a couple of minutes a day, ought to invariably be seen with a good deal of caution, because nothing good comes without putting in the proper level of work.

To see an independent review of the top organizations to learn How To Trade Options with, just Click Here.

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In fact Options are sometimes referred to as the only true method of hedging. While this can be correct, it’s just now that people are actually starting to understand the potential benefits of options, the problem is that they’re still poorly understood and largely utilized wrongly by traders in the market.

The method to make certain that a trader completely understands how to utilize options in a way to maximize profitability for his or her trading or business, is thru sensible education and training. This is the one most vital thing {that a} trader will do in their career.

But, there’s a common issue with this, in that the majority of the options trading companies teach options back to front. This is because they teach basic options strategies to their clients and then leave them to get on with trading live within the market.

This is where the Options University comes into its own. They have the philosophy that the real manner to be ready to trade options properly, is first by having the ability to find opportunities where Options will be used effectively.

They coach their students to be able to search out the opportunities and once a trader is comfortable in doing this, they then go on on to coach the most effective strategies and techniques for each different scenario.

Options University offers a full range of courses from the basic level right through to advanced and mastery programs.

Options Universtiy is run by successful options traders who trade full time in the markets. This means they have and expertise to correctly teach what traders need to know. They also have live trading conferences and seminars, where traders can be taught and make trades in live markets with successful traders.

No other options trading firm currently takes this approach, or offers these opportunities to trade and learn next to successful skilled traders.

But, if a trader is determined to understanding all of the potential of options then they must go further than simply visiting the options university.

To be a successful options trader a student must be prepared to be 100% committed to the program and training.

An example of what is possible when committed to the program was demonstrated 2 years ago when Ron Ianieri, one of the owners of Options University and an extremely well thought of options trader in the industry, took a group of 12 novice traders thru an full 12 week program which brought them by the hand and took them all through to a full options mastery level.

For more information on thisOptions University Reviews, just Follow the Link.

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Trading options is both similar to and different from trading stocks. There are many ways to make money trading stocks from going long to day trading.In this regard,options and stock trading, are similar.

When an options trader is first starting out, he or she  needs to understand the basic difference between an option and a stock. An option is merely the right to purchase a particular stock at a specific price over a specific period of time.Since we’re talking about stock prices here, there is volatility in their value over the option expiration interval.

Options, on the other hand, expire on a specific date, so you’ll need to exercise them on or before that date. And you don’t even have to exercise your option if you so choose. And you can purchase a stock for much less than it’s market price by purchasing an option.Options traders can leverage their trades.They can acquire the option to buy a 0 stock for only a fraction of that price.Hence, they can acquire options for more stocks than if they were actually purchasing the stocks outright.This ability to leverage your investment makes options very attrative.

There are several different types of options. “American” options can be exercised any time before their expiration date, while ”European” options can only be exercised on the expiration date itself.And to make matters even more complicated,these different types of options are not determined by “where” you purchase them.The “American” options tend to apply to stocks and bonds, while the “European” type applies more often to indexes. And most options expire the Saturday after the third Friday each month. But U.S. markets are closed on weekends, so “American” options expire on the third Friday of the month and ”European” options the following day.

An option is a contract that gives you the right to sell (a put option)a stock or buy (a call option) a stock on or before its expiration date.There are several strategic choices when you purchase an option. You can exercise it any time either before or on the expiration date.Or you decide not to exercise it and try to sell the option before the expiration date and recoup a portion of your investment. If you don’t exercise the option before it expires, you lose your investment.Let’s look at these situations more closely:

Let’s say you buy an option for Acme Chemicals Corp.for a share with a strike price of . Now most options contracts require a minimum purchase of 100 shares, so you’d have to pay 0 (for 100 shares) for the contract.Acme’s stock price rises to two weeks later and rather than waiting for the expiration date, you decide to take your profit and run. You exercise your option and buy the stock for , then you turn around and and sell right away it for .After you deduct the acquisition cost per share, you’re left with a profit, or 0 less brokerage commissions.That’s a conservative strategy, but a profitable one.And that’s good!

But consider the opposite scenario. And happens if Acme’s stock price goes down. What happens if the price of the stock falls below ? If you sold your options for half of what they cost you, in this example,you’d only be out 0. Bear in mind that owning an option does not require you to purchase the stock. In this case, you can sell your option and recoup a portion of your investment. This is better than acquiring 100 shares of Acme’s stock outright. You could exercise your option as soon as you can realize a profit or you could wait it out and try for a bigger profit any time before the expiration date. My personal recommendation is to take the conservative approach and you’ll more likely see consistently positive returns, but most likely not any big killings. But that’s just my personal investment strategy. Higher risk, higher returns. Greater profits. And, of course,potentially larger losses.And just like most other investments.

This is just a basic example of how options trading works. It is more complicated than this and you should really educate yourself before you commit much of your capital to it. The best options trading trading tutorial I know is the one taught by David Vallieres, which you can review here and the video above from the free demo video series he provides. This course is the best in my opinion because Mr. Vallieres not only teaches you the basics but also shares with you his money making guidance.

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When the postal mail became into common use you could then buy and sell stocks by mailing a letter to your broker, of course today nobody would think of doing either of these.

Today the most common form of trading uses either the telephone or stock trading online. When using the telephone to trade stocks you can still do it by speaking to a broker and giving them your clear instructions, or you can do it all yourself by using some form of menu system using the digital key pad.

But by far the most common form of trading is done online, so what do you need to know about stock trading online?, much more than you may think!

Here are some points that you may not have considered:

1. Virtually every broker can do stock trading but what about options, Forex and futures?. While you may not be interested in trading either Forex or futures it is quite likely that at some time you will want to trade options online, even if it is just covered calls. Make sure that your chosen broker allows you to trade all the markets that you want to.

2. Of course the fee’s charged by your online broker is an obvious point to check, the fee’s can vary a lot and if you are doing hundreds or thousands of trades a year it can add up to quite a lot of cash. Did you know that you can call up your online broker and ask for a reduced commission charge?, yes you can, I’ve done it. Of course they don’t advertise it but if you do a lot of business they will want to keep your account.

3. Have you planned what you will do if you are in a trade and your internet connection goes down for any reason, it could be a power failure, problems with the internet or your PC crashing?. If you are day trading you will want to telephone your broker and manage your trade, probably you will just want to close it. How will your broker deal with your call, will they answer quickly, will they look at the charts for you and describe what is going on?. Make sure that your broker provides good telephone support.

4. Are your trading accounts safe?, make sure that your broker is a member of SIPC, the Securities Investor Protection Corporation, which protects against losses caused by the financial failure of the broker-dealer, but not against losses resulting from the decrease in a security’s value. Usually accounts are protected by the Securities Investor Protection Corporation (SIPC), up to 0,000 (including up to 0,000 for cash claims).

Whatever you decide to do, before trading stocks, options or anything else make sure that you get a good trading education by reading the best trading books that you can.

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