Self-discipline – The tool to success in options trading
I would like to mention the essence of self-discipline in options trading.
Stock markets, on a day-to-day basis, are governed predominantly by the greed and fear of individuals. This is evidenced by market movements, i.e., gaining hundreds of points one day, and losing hundreds of points the following day. Sometimes we happen to see such volatility all on the same day. It is absolutely impossible to predict market movements.
I feel most people fail, as they do not pay the required attention to this aspect while trading in options. Lack of self–discipline is a major reason people lose money in options trading. Even though investors set goals, make plans and apply their knowledge, it will be a futile exercise if they fail to apply self-discipline.
During the process of teaching you different trading strategies, I am bound to be wrong, not once, but many times on a short term basis. The reason is very simple.
Short term market movements tend to behave in a very illogical manner. On a short term basis the market is governed by psychological forces. We have yet to come up with an instrument that can predict or measure human psychology. Hence, the wrong options strategies are bound to work many times. If you have made money this way, you become a victim of your own wrong doings. At one time or another, you’ll end up losing all your gains, and more.
I noticed that finance and management graduates know a lot about trading in stocks. However, they possess very little knowledge of options trading. Providing them with the intellectual knowledge required for options’ trading is easy for me, however, it’s difficult to teach self-discipline.. One should have self-discipline while choosing options trading strategies. Remember, this is the quality which every options trader needs to have.
The bizarre twists of the mind – relationship with broker, for example, may stop a trader from making money. One can choose to focus on the market instead of relying on the relationship with broker. The so called market gurus, friends circle, other acquaintances and stock brokers can influence you in one way or the other. A stock broker may get someone excited with a phone call saying, the stock market is going up or going down. The fact is this statement is wrong to begin with. The stock broker should only be saying whether the stock market has gone up or down. We don’t know what is going to happen to the market after broker gets off the phone.
One must overcome one’s ego to become a successful trader. The hardest part in this game of trading is to kill your ego. Your ego is the biggest negative force and may lead to disasters. Before placing an order for a trade, you have to convince yourself that the market may lead your stock in the opposite direction and you don’t know the direction of the market. You are bound to be right at some time or another. Once you are right, you tend to forget the number of times you were wrong. This is simply human nature and it is difficult to fight against it.
Be greedy. Buy when most people are selling. Also, be fearful. Sell when most people are buying. I do not mean that you always buy when market is falling down or sell when market is going up. You must still stick to the fundamental principles of trading. Your moods and daily life should not be governed by the graphs of Dow Jones. Emotions are the enemies of traders. One must overcome natural impulses driven by fear and greed. Do not always think that trading is a means of making or losing money. Think of trading as your education and learn something new every day. Identify what you learnt after you exit a position.
Most losses occur because of the silly mistakes of traders, such as forgetting to put in the stop loss order, for example. One should take care of such mistakes before a trade is initiated. Traders often have second thoughts about a trade when prices come close. This happens to people who do not have proper trade plan.
Trust me, if you don’t have self-discipline, don’t trade in the stock market. Have fun in a casino and satisfy your gambling instincts there. Losing in casinos may be much cheaper than losing your hard earned savings in the stock market.
I know it is easier said than done, but you have to develop self-discipline whereby you control your greed and fear. Spiritual strength can help to build up self–discipline. I have made an attempt to teach self-discipline in my book, “26 Steps To Spiritual & Financial Riches – How Spirituality Led To A $7 Million Gain”. We will be happy to mail you a free copy of this book. We will even pay for the shipping and handling charges if you live within USA. There is absolutely no obligation on your part. Please send us an e mail at info@DrSinghOptions.com.
All subscribers can download my book, “Stock Options – Work ½ Hour A Day” (valued at $19.95) for free from the website www.DrSinghOptions.com . This book is an essence of my 35 years of research and experience of trading 28 strategies of options.
About the author:
Dr. Harsimran Singh was awarded a Ph.D. by a California University for his research work in options trading strategies and he authored 12 books. He traded stock options for 35 years. At times, he traded over a $100 million in a month in his personal account. His research work in options trading has been filed for patent with The US Patent Office under Application # 61/999,957.