There are any number of reasons why a trader hesitates before a trade.  The main one is lack of planning.  Without a plan, there is no degree of confidence a trade will be successful, it’s all wishful thinking. Unless they are outright gamblers, traders usually have a strong need to protect their assets and avoid risk. This is especially true for beginning traders. It can take a long time to build up sufficient capital for serious trading. By that I mean sufficient capital to be able to trade for a living. It is quite understandable to fear losing all or part of your initial capital. Beginners tend to seek absolute certainty before taking a risk, and gaining true confidence in you ability to trade successfully can take time. Unscrupulous marketers of mechanical trading systems and methods take advantage of the beginners fears and lack of confidence by advertising “sure-fire” “magic” ways to trade, instead of revealing the truth about the difficulties in becoming a consistently successful trader.

When it comes to short term trading, there isn’t very much time for long deliberations. Market conditions are in continuous flux. Decisions need to be made relatively quickly, and if one waits too long to execute a trade, he or she may miss a significant opportunity. The reasons for hesitation are everywhere, and traders must be aware of them, and create a plan to prevent them.  Let’s look at a few of the things that cause traders to hesitate:

The complex charting software available these days tends to increase hesitation.  Traders think that the more confirmation they can get from indicators, the more certain they can be that a trade will be successful.  However, all indicators lag the market. The notion that an indicator can somehow predict what will happen once a trade is entered is nothing more than wishful thinking. An indicator may give some degree of confidence about entering a trade, but the indicator cannot trade the trade, only the trader can do that. Once a trade is entered, it becomes entirely a process of management. It’s tempting to look at as many indicators and signals as possible. Doing so, however, can be very time consuming. That’s why seasoned traders advise looking at only a few if any key indicators.

Hesitation is often related to a lack of confidence in the trader’s trading strategy or trading ability. There are numerous reasons for such lack of confidence. Some of the reasons are shallow and mostly on the surface, like being distracted by watching financial TV while trading.  Other reasons are more deep-seated, and actually reflect psychological problems dating all the way back to early childhood.  A trader may not believe that his or her trading plan is adequately developed.  Nevertheless, they are determined to trade, so they muster up their courage and finally jump into a trade almost guaranteeing that the outcome will be a matter of pure chance.  Some traders may question their trading plan because they know that they did not spend enough time preparing it. Sometimes hesitation is intuitive, warning the trader to avoid the trade. All too often, traders are not tuned into their own intuitive feelings.  In the case of intuition, hesitation can act as a motivator. If the trader feels the hesitation is because of lack of adequate preparation, then that trader must learn to spend more time preparing for trades. By studying the markets a trader can come to see new higher probability setups, thereby reducing doubt and indecision, and in turn stop the hesitation because of more adequate preparation.

Hesitation sometimes reflects a deep desire to be right and a fear of being wrong. It has been our experience that many of the people who are attracted to trading fit into this category.  Great care must be taken by physicians, engineers, scientific types, and mathematicians, who seem to be the most prone to this type of hesitation. They are often perfectionists afraid to face their inadequacies. By putting off a decision, they don’t have to face their limitations, and can pretend they are better traders than they really are. If I had the time and space, I could give you dozens of examples of this kind of hesitation.  The perfectionist’s reality states that everything must be in order and follow rules.  They think strictly inside the box.  They want everything to be perfect, so they continually second guess and doubt themselves and what they are doing. They believe that they cannot cope with being wrong. This occurs in trading decisions as well as other life decisions. Extreme perfectionists often think that once they make a bad trade, it will be the start of a downward spiral and a complete blowout of their trading account.

Hesitation very often relates to low self-esteem or other deep-rooted psychological issues. We see these more times than we would like to.  Traders with low self-esteem usually lack confidence, not only in trading, but other areas of life. Beneath it all, they doubt their ability to trade, and hesitate making a trade until they the guilt of not doing so overcomes their fear.  At that point in time, they enter a trade out of pure compulsion driven by guilt.  This exposes them to a trade with no real plan to support it.  They become victims of pure chance.  We also find that traders who hesitate may have a conflict regarding their success. They can actually fear success.  They have been told by parents or others that they were no good, that they would never amount to anything, that they were “bad.” These people strive for success at one level of their consciousness, but at a deeper level, they secretly believe they cannot attain it, or do not deserve it.

Identifying, directly facing, and eventually eliminating a problem of hesitation is the only way to truly deal with it. Chronic hesitation will eventually destroy the confidence a trader needs for success. If the problem is not dealt with and the traders continues to hesitate, miss important market moves, and see his or her equity begin to dwindle, that trader runs the risk of becoming a phantom trader, a pretender, becoming convinced that the imaginary trades being made are real. If you are prone to hesitation, it’s vital that you deal with this problem early in your trading endeavors. Identify the reasons for it, confront the problem, and make changes as soon as possible. These are changes you have to make within yourself.  If you will truly engage in self-examination with the object of eliminating hesitation, you can trade become consistent and successful in trading profitably.

The only consistent notion about stocks is that they are inconsistent. Investors that make decisions based entirely on emotional ‘gut feelings’ or make decisions based on desperation will only do about as well as they will at the casino. Planned, precise, and well thought out decisions make for strong trades. Online stock trading need not be a random roll of the dice.

Regardless of any pre-planned strategy with which an investor approaches the online trading world, there are two basic facets of any strategy. All trading is based on maximizing the profits while minimizing the risks. These two factors also tend to cancel each other out. The greatest risks usually turn the greatest profits while the smallest risks typically turn tiny but long term profits. This means that an individual investor needs to find their individual risk tolerance while building their strategy.

There will be losses. There’s no strategy in the world that can guarantee online stock trading without loss. Loss is part of the game no matter how serious the player. The most successful online stock traders in the world have one basic rule implemented into their trading strategy. They all have their stock portfolio divided into percentages. They have a predetermined percentage seeking high risk / high return stocks, a predetermined percentage seeking medium risk / medium return stocks, and a predetermined percentage seeking low risk / low return stocks. The predetermined percentages vary from investor to investor and some have the bulk of their percentages in low risk while others have the bulk in medium risk. Placing the bulk of the available funds in high risk stocks is a sign of either gambling or desperation, neither of which can be considered a very sound strategy.

The reason that these percentages are predetermined for the vast majority of successful online investors is to help maintain unemotional investing. If there is a set proportion of the available funds doing predetermined job, then the emotional highs and lows will not deflect the investor from their pre-determined strategy. Online stock trading can become emotional, and without discipline traders start making bad decisions based on their emotions. Keeping the emotion-led trading to a minimum is very difficult for many online traders, but it is a discipline that must be acquired.

Every individual investor’s strategy will vary to suit their needs, their risk tolerance, and their individual style. However, having a basic strategy before the account is even opened is a vital key to online stock trading. Investors without a strategy tend to lose more often than they succeed. Every individual investor’s emotional strings are different, and some will need firmer, more complicated rules before setting off into the online investment world. Others will do fine with a basic outline. While learning the ropes, it is best to dabble with small sums of money rather than place large chunks of money into any stock, no matter how good it seems. One of the most significant pros to online stock trading is the investor’s ability to go through the motions on paper without ever spending a dime while they keep an eye on the stocks they believe they are interested in. Over time, online stock trading can become a very healthy form of secondary or even primary income, but the investor has to start with a plan.

Bill Stewart is a work-at-home geek specialising in online options trading. For more information visit his website Online Trading Stock And Option

Most traders don’t consider selling options, as they see it as too risky – but the odds of success are high, and if you do it correctly, you can reduce risk, and make huge profits over time, with the odds firmly on your side.

How to Sell Options

Selling options offers unlimited risk, with limited profit – and that’s why many people don’t like selling options. There’s a high amount of risk for a low reward – but to balance this, the odds of success are high – very high!

Options buyers think they have a great deal – with unlimited profits, and limited risk – but the odds are simply not in their favor. This is very similar to the losing gambler, who backs the outsider – sure, the rewards are fantastic – but the chances of winning are slim.

The key to option selling, is that you’re trading with the odds firmly on your side – and you can improve your chances of success, by following these five tips:

1. Let time decay work in your favor – the less time an option has to expiry, the more time decay will hit value – increasing your odds of success.

2. Sell into price spikes, when markets move quickly, sell premium. Great markets are those that have had unsustainable price moves that are due a pullback.

Great markets to sell options in are ones driven by greed and fear.

Watch the papers and newswires for markets that have heavy public participation – and there are “sure fire” reasons the move will go on forever. You know the move won’t go on forever, and a pullback will occur – and you can collect sizeable premiums from the inexperienced traders, who believe the hype.

3. Diversify your selling across a number of uncorrelated markets – keep in mind that you have unlimited risk, so don’t have all your eggs in one basket.

Not every trade will go in your favor, and there will be moves that see prices spike, to trade in the money against you – make sure you have a wide enough spread to cover losses.

4. If in doubt get out – if the option you have trades in the money, get out and cover – to succeed in options selling requires great discipline in these situations.

5. Ensure you have adequate capitalization – to hold your positions to expiry.

In the short term the value of your portfolio will fluctuate so have enough reserves.

90% Odds of Success – but a Warning!

Option selling is for experienced traders only – those who have discipline, a sound method, and have the capital to diversify.

While the odds of success are high, before you start, make sure you approach option selling with the right mindset.

Take Advantage of the Buyers, and Collect their Premiums!

A long-term strategy, can and will make you huge profits over time. The odds of success are great – and there are plenty of inexperienced traders, buying options on broker recommendations, greed, and fear – which can, and will provide you with fantastic long-term gains.

Option selling is more lucrative than option buying – and this is not just a view – it’s a fact.

To make money in options, learn how to sell correctly – and you’re on the way to huge consistent profits.

However, very few of us get to start full time investing right away – we just don’t have the capital. So, what to do? You need to develop your own long term Investment Plan – one that will allow you make changes in your circumstances and lifestyle. Every plan must be different, and your plan needs to be flexible. Here are some principles that you can use to develop your own plan:

Remember: those who fail to plan plan to fail. The cliche is old, but truth remains!

To learn more about developing your own investment plan, have a look at this page.

Properly executed, these strategies have the advantage of minimal expenses – something everyone can appreciate during these troubled times. The following example will demonstrate how this is done.

Technical Tip: The seller of a Put Option is obligating himself to buy the stock at the striking price. For assuming this obligation, he receives the Put Option premium. For the more technical readers we have provided an in-depth article link at the bottom of this article.

On August 21, 2009, the day your August Put Option expires, two scenarios are possible: Either the stock price is greater than or equal to $50, or it is less than $50. Let’s evaluate both scenarios.

Scenario 1: The stock trades at $50 or above: in this case the Put Option will expire worthless and you get to keep the $400 that you received earlier. You can now repeat the strategy month after month. When carefully executed, you would have earned around $7,200 in 18 months without ever paying a dime and without even owning the stock.

Let’s assume the share price for the stock has gone up 41% to $72 over the course of those 18 months. If you now purchase the 100 shares of XYZ Corp., the cost of ownership to you is ZERO, as you would have offset the $7,200 required for that purchase by your strategy earnings. You are now the proud owner of 100 shares XYZ Corp. at no cost to you.

Scenario 2: The stock trades below $50, say at $48 (a drop of 11% from $54). In this case the August Put Options will be In-The-Money (ITM) and now you need to buy 100 shares of XYZ Corp. at the strike price of $50. But here is the best part: You get to keep the $400 that you earned earlier selling the Put Option. Your effective cost for this trade is $4,600 after adjusting for $400.

Compare this with someone who bought 100 shares at $54. Share traders ended up with a loss of $600 while you had a modest profit of $200 instead. Well not as good as Scenario 1, but not bad either!

The strategy acts like a low-cost replacement for actual stock ownership, BUT you must be prepared to take ownership of the shares under Scenario 2 circumstances. Keep in mind that this is a long-term strategy.

There are many different ways to construct these strategies – conservatively or aggressively. Just like regular investing, different people have different levels of risk tolerance. If you want higher profits, you’ll have to be willing to take higher risks.

At TradeGreeks we avoid high risks that MIGHT hit the big jackpot. Our focus is on conservative strategies with medium to long-term consistent, predictable returns. This will ensure great profits that beat anything else you might try in this market – sometimes well over 100% per annum. What’s even more important: Our strategies ensure peace of mind!

This is an article from the TradeGreeks’ “Tactical Series”

More in-depth explanations of this strategy can be found in our article “Uncovered Put Writing – Insider’s Guide”. We invite you to visit http://www.tradegreeks.com/ and register for free no obligation membership. This will allow you access to the article and many other educational resources regarding trading of Options.