Trading is really both an art and science. Options itself is already several over 1000-page books. After which there is the political and economic factors, technical analysis, fundamental analysis, sector rotation, charting, candlesticks, emotion and money management etc…What makes it worst is there are some different schools of thoughts that I have come across which tend to confuse amateurs like myself.
Dr Clemen Chiang says technical analysis works because everyone is looking at the same charts, the same candlesticks, the same pattern and the same indicators. So choosing the most popular indicators will allow us to see what the professionals are seeing and retail investors like us can trade alongside them. Then Dr Alexandra Elder came along and said that we can find our edge in trading by using unique indicators. Best is to derive our own. That’s the reason behind the birth of the Elder Ray and the Force Index. In his book, he also said that he was always trying to design new indicators to sharpen his edge in trading. Hence, revealing them in his books is immaterial.
Dr Clemen Chiang don’t believe in Option Greeks or any other metrics derived from Options for that matter. Reason is because he believes stock price determines Option price and not the other way round (since Options is a derivative of stocks). So looking at stock-related metrics is more reasonable. Another popular Options learning institute advocates looking at Options Greeks to determine the probability of winning, for instance.
Then there is this notion of trading in a group is better then trading individually. Reason is because one can tap on the collective knowledge of the rest in the group and make better trading decisions. Another school advocates that trading in a group subject a person to a lot of noise especially if the traders in the group have varying trading experience and trading styles. Although his analysis maybe thorough but ultimately, the trading decision may be influenced by the rest in the group. I personally have experienced this before.
Finally, there are many Options trading seminars out there that say that those who don’t have prior experience with stock investment can pick up Options trading. Dr Alexandra Elder think other wise. He recommends trading stocks for beginners before moving on to Options and Futures that involve other specialized knowledge.
I have some of the answers to the above personally. But I hope to rally seniors out there to comment. I thank you for your guidance in advance.
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Thanks for your advice. Will keep that in mind. I am totally convinced that basic trading is the way to begin. I feel there is a chicken and egg issue though with regards to finding which instrument (or even trading system) suits best. For me, I had to actually trade before finding out whether the particular instrument (or trading system) suits my lifestyle. Books may not provide so much insight. At least not for the inexperienced. But then again, how to find time to try out soooo many systems out there?
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The only way to be truely satisfied is to do what you believe is great work and the only way to do great work is to love what you do… - Steve Jobs
I totally agree that learning to trade or learning the skills of basic trading should be utmost in anyone’s start out. Books are always the best place to start.
But because the world is so diversified, there will be those who won’t or can’t learn from a book and would rather learn from someone, be it a mentor, a group or a friend.
The important thing about self-education is knowing what and where to start. My advise is to keep it simple; start with the most basics of basics because there is so much to trading that the little things can and probably will kill you.
Have an idea of what you want to gain from trading and find out which instrument suits you best with regard to your pocket depth and lifestyle. Set an objective or goal and then be absolutely honest with yourself. You’ll be surprise how much your psychology will either screw you up or strengthen you and it all begins with being honest with yourself.
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