Here are some Trading &/or Investment Tools in Financial Markets each of which has certain pros & cons. Firstly, the definitions are provided, then I would like to introduce my own Trading/Investment Portfolio Management Plan.
1. What Is an Option?
Options are financial instruments that are derivatives based on the value of underlying securities such as stocks. An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset. Unlike futures, the holder is not required to buy or sell the asset if they choose not to. (www.investopedia.com/terms/o/option.asp)
Call options allow the holder to buy the asset at a stated price within a specific timeframe.
Put options allow the holder to sell the asset at a stated price within a specific timeframe.
Note 1: This is not a trade over anything. It is actually a Gamble to have certain time interval during which your option CAN be RIGHT or WRONG.
Note 2: Time plays a very important role in here. It has expiration date. Then, an "Optionist" needs not only to be Highly Skilled at Predicting Future Price Possibilities, but s/he has to be able so much to Manage the Capital devoted to each and every Forecast.
Note 3: Just how much of the total money devoted to Options Trading can be applied in a Call, or Put Option?!
- Well! It depends on several criteria:
1. Success rate of Previous Correctly Predicted Options:
- How many Consecutive Correct Forecasts have already happed during a certain period of time? (Quantity/Number of Correct Forecasts)
- Capital Growth Percentage: how much money has materialized during a given time period compared to the total capital?! (Amount of money earned/total money for Options Trading)
2. The two aforementioned metrics set the railroad for adjusting the amount of money on each forecast - if a specific Optionist fails to forecast 2 out of 10 Options, then approximate performance can be calculated 80%. Right? Another Optionist may fail 5 out of 10 forecasts. Then, to be able to take any actual profit the amount of money on each prediction needs to be applied much more rigorously.
2. What is a CFD?
A contract for difference (CFD) is a contract between a buyer and a seller that stipulates that the buyer must pay the seller the difference between the current value of an asset and its value at contract time. CFDs allow traders and investors an opportunity to profit from price movement without owning the underlying assets. The value of a CFD contract does not consider the asset's underlying value: only the price change between the trade entry and exit. (www.investopedia.com...s/09/trade-a-cfd.asp)
Here again no physical good or anything like that is traded. Only the Price Difference triggers Profit and/or Loss. This is advantageous compared to Binary Options since there not more than 100% on each prediction can be materialized and it has also no time limitation. FOREX and Fiat Currency Pairs can be considered all as CFD Trading options.
Note: CFDs can be Leveraged and if Trend is predicted correctly and the trade is closed just on time - depends on Traders' Chosen time frame, then much more profit can be taken.
Note: Leveraged trading on CFDs and Futures can be very lucrative and also can go to the other way. So, it is always very important not leverage too much which again depends on a specific Trader's Success Rate by Quantity & Amount the trades opened and closed during a given period of time.
3. Futures Trading;
What Is a Futures Market?
A futures market is an auction market in which participants buy and sell commodity and futures contracts for delivery on a specified future date. Futures are exchange-traded derivatives contracts that lock in future delivery of a commodity or security at a price set today. (www.investopedia.com.../f/futuresmarket.asp)
I do like to mention that Futures Trading does not necessarily mean that the trader needs to receive any physical product on a specified date. In such case, the trader just buy the future rise or fall either leveraged or not, and can take profit or identify loss due to wrong forecast.
This also has some positive and negative aspects to mention. The higher the Leverage the higher the profit and loss. They are twins in any business.
A question comes to mind then: Why on earth would anyone try aforementioned trading or forecasting options at all?!
Based on a study by JP Morgan during the last 100 years or so (www.arzdigital.com) the best strategy has been HOLD or HODL! If such study even exists, as a frequent trader I do believe in it let's say 80%. The 205 remaining depends on a trader's psychologicals and not trading skills only.
Another question: Which trading type, style, or tools is the best to choose?
Answer: "There is no one or two or so on number of Predetermined Trading &/or Investment Style or Market or time frame that yields the BEST Results and Outcomes. But, there are skill sets and knowledges to be used to achieve an Optimum Result during a certain time period.
Human being is a subject of Trading Style, Tools and Techniques. People vary very much on decisions that they make & then take on different occasions. Yet, Binary Option, CFDs, Futures and Spot Trading each can be applied in its own Framework and Time frame and Desired Results setting which totally varies in "Expected Profits" in the eyes of the beholders and not each and every person.
Depending on the time which can be considered as the most valuable asset Financial Markets can be of much help to individuals, companies and even countries to be able to Finance Their Available TIME INTERVAL during a given limited timeframe/timeline to future and finance some other causes and purposes out of which their achievement is not deemed possible in the future again during a certain period of time.
Some part of everybody's portfolio has to be HODL, while some other part for a mid-term trading and the remaining based on available time and actual and proven skills for intra-day or even scalping.
They are all fabrications of brilliant people who invented them! They are all useful and lucrative BUT:
90% of traders loose 90% of their capital during the very 1st 90 days!
So, we need to step in such markets only if we know "enough" not to loose money through:
- Technicals
- Fundamentals
- Psychologicals
Knowing the Knowledge, having Tools, and Skilled at each type or style's Techniques.
Hope this text helps you to reconsider the way you are trading.
This is not a financial advice. We share our ideas to learn from each other.
1. What Is an Option?
Options are financial instruments that are derivatives based on the value of underlying securities such as stocks. An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset. Unlike futures, the holder is not required to buy or sell the asset if they choose not to. (www.investopedia.com/terms/o/option.asp)
Call options allow the holder to buy the asset at a stated price within a specific timeframe.
Put options allow the holder to sell the asset at a stated price within a specific timeframe.
Note 1: This is not a trade over anything. It is actually a Gamble to have certain time interval during which your option CAN be RIGHT or WRONG.
Note 2: Time plays a very important role in here. It has expiration date. Then, an "Optionist" needs not only to be Highly Skilled at Predicting Future Price Possibilities, but s/he has to be able so much to Manage the Capital devoted to each and every Forecast.
Note 3: Just how much of the total money devoted to Options Trading can be applied in a Call, or Put Option?!
- Well! It depends on several criteria:
1. Success rate of Previous Correctly Predicted Options:
- How many Consecutive Correct Forecasts have already happed during a certain period of time? (Quantity/Number of Correct Forecasts)
- Capital Growth Percentage: how much money has materialized during a given time period compared to the total capital?! (Amount of money earned/total money for Options Trading)
2. The two aforementioned metrics set the railroad for adjusting the amount of money on each forecast - if a specific Optionist fails to forecast 2 out of 10 Options, then approximate performance can be calculated 80%. Right? Another Optionist may fail 5 out of 10 forecasts. Then, to be able to take any actual profit the amount of money on each prediction needs to be applied much more rigorously.
2. What is a CFD?
A contract for difference (CFD) is a contract between a buyer and a seller that stipulates that the buyer must pay the seller the difference between the current value of an asset and its value at contract time. CFDs allow traders and investors an opportunity to profit from price movement without owning the underlying assets. The value of a CFD contract does not consider the asset's underlying value: only the price change between the trade entry and exit. (www.investopedia.com...s/09/trade-a-cfd.asp)
Here again no physical good or anything like that is traded. Only the Price Difference triggers Profit and/or Loss. This is advantageous compared to Binary Options since there not more than 100% on each prediction can be materialized and it has also no time limitation. FOREX and Fiat Currency Pairs can be considered all as CFD Trading options.
Note: CFDs can be Leveraged and if Trend is predicted correctly and the trade is closed just on time - depends on Traders' Chosen time frame, then much more profit can be taken.
Note: Leveraged trading on CFDs and Futures can be very lucrative and also can go to the other way. So, it is always very important not leverage too much which again depends on a specific Trader's Success Rate by Quantity & Amount the trades opened and closed during a given period of time.
3. Futures Trading;
What Is a Futures Market?
A futures market is an auction market in which participants buy and sell commodity and futures contracts for delivery on a specified future date. Futures are exchange-traded derivatives contracts that lock in future delivery of a commodity or security at a price set today. (www.investopedia.com.../f/futuresmarket.asp)
I do like to mention that Futures Trading does not necessarily mean that the trader needs to receive any physical product on a specified date. In such case, the trader just buy the future rise or fall either leveraged or not, and can take profit or identify loss due to wrong forecast.
This also has some positive and negative aspects to mention. The higher the Leverage the higher the profit and loss. They are twins in any business.
A question comes to mind then: Why on earth would anyone try aforementioned trading or forecasting options at all?!
Based on a study by JP Morgan during the last 100 years or so (www.arzdigital.com) the best strategy has been HOLD or HODL! If such study even exists, as a frequent trader I do believe in it let's say 80%. The 205 remaining depends on a trader's psychologicals and not trading skills only.
Another question: Which trading type, style, or tools is the best to choose?
Answer: "There is no one or two or so on number of Predetermined Trading &/or Investment Style or Market or time frame that yields the BEST Results and Outcomes. But, there are skill sets and knowledges to be used to achieve an Optimum Result during a certain time period.
Human being is a subject of Trading Style, Tools and Techniques. People vary very much on decisions that they make & then take on different occasions. Yet, Binary Option, CFDs, Futures and Spot Trading each can be applied in its own Framework and Time frame and Desired Results setting which totally varies in "Expected Profits" in the eyes of the beholders and not each and every person.
Depending on the time which can be considered as the most valuable asset Financial Markets can be of much help to individuals, companies and even countries to be able to Finance Their Available TIME INTERVAL during a given limited timeframe/timeline to future and finance some other causes and purposes out of which their achievement is not deemed possible in the future again during a certain period of time.
Some part of everybody's portfolio has to be HODL, while some other part for a mid-term trading and the remaining based on available time and actual and proven skills for intra-day or even scalping.
They are all fabrications of brilliant people who invented them! They are all useful and lucrative BUT:
90% of traders loose 90% of their capital during the very 1st 90 days!
So, we need to step in such markets only if we know "enough" not to loose money through:
- Technicals
- Fundamentals
- Psychologicals
Knowing the Knowledge, having Tools, and Skilled at each type or style's Techniques.
Hope this text helps you to reconsider the way you are trading.
This is not a financial advice. We share our ideas to learn from each other.
Comment:
All targets nailed. :-)