Trading Options, Strategies, and Tools!

If you were asked whether you would like to make money on your own terms, working your own hours, and get to work anywhere and anytime, it seems safe to say you would accept those terms. Well, this is possible through investing.

What type of job is it?

Investing is making favorable trades. This is simply saying you will earn more than you spend and thus be profitable. Around fifty years ago, you could only trade if you were standing close to your broker and developing plans daily. Now, however, if you have an e-mail, bank account, some capital and a basic understanding of the market, you are ready!

What routes are there?

Before you decide to jump into this industry head-first, you must learn different types of trades that exist. To find what best suits you, know the answers to these questions:

  • Do you like risk?
  • Do you want your money fast?
  • Are there companies you know about?
  • Do you need a broker?
  • Have you done your research?

The importance of these questions may seem minimum, but it is far from that. For example, if you want to get fast returns and are open to risky endeavors, you should look into stocks. On the other hand, if you do not mind waiting for some years under low risk, bonds might be the better method of trading.

The most common types of trading are usually done with stocks, bonds, options, and currencies. Each of these is based on the same principle of buying something for less money than you sell it for or getting a return over the course of that asset’s life.

Stocks are pieces of a company that make you an owner of that company when you purchase them. You then get your money back through dividends or further sales to other bidders. Options are a little different as they just hold terms to purchasing some stock. If you hold an option on 100 stocks of Company X per se, you will have the right to buy these stocks at the agreed-upon price regardless of the market price. Meaning, the stock might be trading at $100 yet your option allows you to buy it for $20. You then sell it and make the difference.

Currency works a little different as it has its own market, Forex, where it is daily traded. You buy other countries money and wait for inflation and fluctuations to weaken or strengthen other currencies so you can trade positively.

Strategy and the Beginning

Answering the aforementioned list of questions is how you develop your strategy. You must have a clear-cut plan on what you are willing to do. This will lead to the hardest move of your trading career which is the very first trade. You should avoid putting a lot of capital in a single asset as that is the most common mistake of beginners. Once you purchase your first asset, you can use tools like trading algorithms and bots to further your portfolio. These are all technology-based tools that essentially make a decision for you based on a set of predetermined inputs. Meaning, if you express favoritism towards low-risk assets, a tool such as a stock screener can find many hidden stocks that match this criterion. Then, trading bots and algorithms can execute the trade on your behalf even if you are not monitoring your computer screen.

You should always stay up to date with what is going on in the market through outlets such as social trading. This will help you avoid common mistakes of inconsistent trading strategies and lack of diversifications due to bad planning. The other ins and outs of the industry come as you get experienced!