Power Short-Term Trading

Using Options & Stocks to Quickly Grow Your Account

De: Ivaylo Ivanov

Narrado por: Virtual Voice

The purpose of short-term trading is to achieve substantial returns with a small drawdown through optimal utilization of your capital. You achieve that by being concentrated on the best setups and by constantly turning over your capital. The main idea is to put your capital at risk only when you have a strong setup with good risk-to-reward.

Short-term trading can compound your capital very quickly. If a stock goes up 100% in a few months, you could potentially generate double that by picking the right place to enter for a short-term swing. You can potentially make four times that or more if you add some aggressive intraday trades to your swings and use the power of options.

Options provide leverage. Leverage can be good or bad depending on your timing and risk management skills. When it works in your favor, it can magnify your returns substantially. A 5% daily move in a simple boring stock can mean a 100%-200% move in some of its weekly options. A 10-20% weekly move in a stock, can mean a 500-1000% return in some of its weekly options. High potential returns come at a cost. When you buy at-the-money or out-of-the-money calls or puts, you are basically risking the entire premium. Position-size wisely.

Profitable trading is 90% mental because it goes against normal human nature. We are wired to feel the pain of a loss much stronger than the pleasure of an equal in size win. This is why we tend to stay with our losers much longer, hoping that they will recover and we can exit at break-even. Many even stop looking at their accounts when having big losses, thinking that everything will magically disappear one day. We tend to exit our winning positions too quickly because we are afraid that the market will take our profit away. What is the end result? Most have bigger losses and smaller wins and lose money or underperform the market averages over time.

It takes a lot of hard work to build the proper skills to really make it in the trading world. Whether you want to turn trading into a full-time job, or part-time income or you are managing your retirement account, the principles and ideas in this book can enrich your arsenal and improve your chances.

I believe there are three important skills in the development of a trader and each builds on top of the previous:

1) Learning to keep losses small no matter what. Accept that you will be wrong in half of your trades but you can still be very profitable if you don’t put yourself in a situation where you have to take a huge loss.

2) Learning to let winners run longer. You need bigger wins to pay for the inevitable small losses.

3) Learning to add to winners in the right market environment. Be bigger when you are right and trade well. Be smaller when you are wrong and trade poorly.

How long it takes to build those skills depends on how hard and how smart you work on them. Some get stuck for many years; others never learn. I hope this book can be a stepping stone for you to move to a higher level. If you can’t do it yourself, consider finding people who can help you do it. Access to quality active managers and mentors has never been easier, more transparent, and cheaper.