The credit spread trade is a basic building block of many if not most other more complex option trading strategies such as the iron condor spread, the butterfly, and the double diagonal trade. For example, the butterfly is created using one credit spread and one debit spread, while the iron condor is made up from two credit spreads, one on either side of where the underlying is currently trading at.

Option traders love to trade this strategy because the way these trades are constructed can allow the trader to be wrong and still make money. If the trader creates a particular credit spread position, he or she can win if the stock or index being traded winds up doing three out of four possible scenarios. If the stock goes down, the trader makes money. If the stock goes nowhere the trader makes money. If the stock goes up a little, the trader makes money. The only way the trader can lose money if the stock goes up far enough to threaten the credit spread that has been sold. And even then, there are management and adjustment techniques that can be utilized to hedge against losses.

Let’s create an imaginary trading scenario to illustrate. Imagine that a trader believes that a particular stock will be heading down in the short term. Because he is bearish on this stock, he sells a bearish credit spread called a bear call spread which benefits from bearish move.

The only way this spread trade can lose money is if the stock winds up doing 1 out of 4 possible scenarios – giving our trader a three out of four likelihood of winning. If the stock moves down as our trader predicts he wins. If the stock stays stagnant and goes nowhere, he wins. In fact, even if the stock moves against our trader and heads upward he wins just so long as the underlying doesn’t move so far as to breach the spread sold. The only our trader loses is if the underlying moves far enough upwards passing the option strike price that was sold – which if it does, our trader could still salvage the position through appropriate management and adjustment methods

While credit spread trading can be a great way to generate passive income, of course like any investment method there are potential pitfalls one should be aware of before jumping in. To learn more about how to properly trade this option strategy, including how to correctly place, manage, and most importantly how to ADJUST them, visit our free video training website at Credit Spreads

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The trading of options involves risking only a fraction of the amount that you would have needed to buy the full-priced version of a stock or commodity. You can, as an example, often buy an option on a hundred stocks in a specific company while only risking one percent of the usual selling price.

This sounds too good to be true. In the investment world the principle involved is called ‘leverage’ and it can certainly make a lot of money for the experienced trader. It is not impossible to double your investment in a very short period of time.

This is, however, a double sided sword. It’s equally possible to lose your whole investment account in a very short time as well. That is why you should under no circumstances risk more than 5% of your trading account on any specific option. Do no let dreams of getting rick quickly cloud your common sense.

Should you ever risk your whole investment account on a specific options trade and things go wrong, you will end up in financial ruin. While the profits of a ‘good’ trade in this regard is very alluring, the risk associated with this is just too high.

Many people lose money while trading options because greed gets the upper hand and they stop using common sense. The prospect of doubling or trebling their money with a single trade is so enticing that they risk all their money on one trade, which an experienced trader would never do.

Like with most forms of trading or investment, diversification should no doubt be the name of the game when it comes to options trading. If you split your available money into ten different options, the profits from one or two winning trades could very well offset the losses from eight or nine bad ones.

During the process of diversification, you should not forget that if you buy options in for example 5 different gold mining stocks you are not truly diversifying your portfolio. Stocks that are in the same industry could easily all go down at the same time and you could still lose all your money. A balanced portfolio should therefore contain options on stocks from different industries, such as mining, manufacturing and electronics.

Option trading strategies should therefore always involve a good dose of common sense. Don’t ever let greed get the upper hand. Then you are no longer trading, you are gambling.

In order to get future options trading, you need to search for the correct website that gives the best options to strategies. You will search for that the option trading strategies can be seen on the net to help you.

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In some cases,a stock gets so much shorted that there are no more shares of that stock left for you or your broker to borrow anymore. Now, you cannot always short a stock instantly. Most of the investors work on rumors. In that case, you simple will have to cross your fingers and see how the other short sellers do on that stock while you search for another stock to short!

Now, day traders are not fundamental traders. Day traders are simply interested in the daily volatility in the stock. Most even don’t do any financial or fundamental analysis of the companies whose stocks they are trading. Almost all are technicians or what you call technical analysis experts. Now, shorting is one of the favorite strategies employed by day traders. A day trader may short stock on the mundane reason like its price had been going up for three days and it’s time to come down!

Now, you cannot straight away short a stock as there are mechanisms in place employed by msot of the stock exchanges that don’t want a massive shorting attack on a stock. There is the famous Uptick Rule that has been put in place to prevent that from happening. What the Uptick Rule means is that you cannot short a stock unless it moves up on the last trade. This rule has been placed to prevent a stock from being driven down to almost zero by short sellers. In simple words, once the stock starts to move down, you cannot short it. You will have to wait for its price to move up on the last trade, before your short selling order can be executed by the broker.

If you are wrong in your short selling decision, your loss can be catastrophic.How much risky short selling can be? Well, in theory there is no stopping a stock price to reach the sky. But don’t worry, short sellers also use stop loss so if the price starts to move up, your position will get closed automatically by the stop loss order.

Now, don’t get caught in the market with short selling when good news spreads about the stock that you had shorted driving its price up. This is known as Short Squeeze. Once that happens, almost all short sellers get desperate to dump their stocks and exit but when they try to buy back the stock, they get more hurt as the prices go even higher and higher on rising demand for the stock in the market.

As said before, companies, investors and many brokers hate short sellers. They think that short sellers had intentionally driven down the stock prices. So sometimes, they will spread rumors of good news to create a momentary short squeeze. Sometimes, a campaign will be started by the owners of a particular stock instructing their brokers not to loan out their stocks to short sellers. So if you have already shorted that stock, you might get a call from your broker to return that stock immediately. In such a case, you will have to immediately return the stock even if it doesn’t make any sense to you!

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The first question. How do you identify whether this is a Hanging Man or a Hammer? Hammer and the Hanging Man both have a very small candle body accompanied by a long wick either on the bottom. If this type of pattern appears at the top of an uptrend with the long wick at the bottom, it is a Hanging Man. And if it appears at the bottom of an downtrend it is a Hammer.

Now, in most of the cases, you will also find a small wick on the top of the candle body. Now suppose, you find the Hammer or the Hanging Man. What you need is to look for the confirmation the next day!

If you think that you have spotted a Hanging Man appear on the top of an uptrend, wait for the next day’s opening price. If the opening day is lower than the last day’s close, you have spotted a true Hanging Man.

A Hammer should have a very small candle body with a long wick at the bottom. Similarly suppose, you think that you have correctly spotted the Hammer in a downtrend. You should confirm this with the opening price on the next day. If the opening price is higher than the closing price the previous day, you have a true Hammer. If the opening price is not higher than the closing price the last day, it is not a true Hammer!

When you trade candlestick patterns, you need to look for the confirmation on the following day to confirm that the candlestick pattern formed was indeed true. Once you have the confirmation signal, you can safely trade on that candlestick pattern. If you cannot get the confirmation, you should ignore that pattern considering it to be false. Most of these candlestick patterns are ideally suited for the daily charts.

Spinning Top is just like the Hanging Man and the Hammer. Spinning Top is a signal that the battle between the bulls and the bears ended in a draw. It will start next day again with ony side giving in. What this means is that an explosive move in the price action can take place the following day.

Spinning tops appear much more frequently and are very easy to spot with a very small body in the middle of the candlestick and almost equal wicks on the two sides. A spinning top is a nice indication that the trend is about to change direction. Knowing about a trend change early is a highly profitable trading signal.

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Investors in theory can wait for a long time to see their stock pick to play out. A company’s stock may be ridiculously cheap. But it may stay like that for a long time before it catches everyone else’s attention and the price is bid up. It might be good for investors to learn a few tricks from traders especially day trading that can help them make a few quick bucks.

Successful day trading requires an innate sense of discipline. Successful day trading requires the sense when to commit money to a trade and when to cut the losses and run. However, if you are an investor who has never day traded, you might have done so much research and committed so much time waiting for a position to work out that you might forget the cardinal rule of traders: The market doesn’t know you are in it.

When, there is momentum behind a security, it means that it’s price will continue to icnrease as long as it has got momentum. This way by investing in stocks having momentum behind them, you avoid the risk of getting stuck in stocks that might not move for months and months.

One of the tricks that you can learn from day traders is momentum investing. In momentum investing, you look for securities that are expected to go up in prices accompanied by the underlying momentum. When investing, you try to buy low and sell high. In momentum investing, you buy high and sell even higher!

Now most serious momentum investors are infact swing traders who hold positions for a few weeks or a few months. Most of them employ some sort of momentum indicators to help them identify when it is good time to buy a stock. Some of the indicators that can be used is the Relative Strength Index (RSI), Moving Average Convergence and Divergence (MACD) and the Stochastic Index.

Momentum investing can also lead to bubbles like that happened in the dot com bubble in the last few years of 1990s. It is always a good idea to do some fundamental research on the companies before doing momentum investing.

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A bullish Harami is formed in a downtrend when the first day candle is very bearish. But on the second day, the bulls come into play and beat the bears out of the market by taking the prices higher. However, the bulls are not completely successful and the second day is still lower than the first day open and the first day high is not crossed. But this is an important signal that bulls are now active and trying to take hold of the market. This means that the downtrend will be soon over and an uptrend is about to start.

The open is higher than the close of the last day on the signal day. However, the bulls close the day higher than the open.On the second day when the Harami is formed, the bears are still slightly ahead of the bulls at the start of trading.

Bulls and bears are always fighting with each other for the control of the market. When a bullish Harami is formed what this means is that the bulls are still cautious about their success and fear that the bears might return to take the prices lower again. However, when this does not happen, it gives confidence to the bulls encouraging more buying in the market and the reversal of the trend.

What this means is that you need to confirm it with the price action on the following day. Now, like most of the candlestick patterns, a Harami can fail. Always place the stop loss first when you trade. When you spot a Harami, place the stop loss near the open of the second day.

Harami pattern has got few variations. On of them is the Bullish Harami Cross Pattern. The first day in case of a Bullish Harami Cross is a bearish candle. The signal day or the second day is a Bullish Doji with an open higher than the close of the first day and the close lower than the open of the first day. Now,a Bullish Harami Cross is not formed very frequently. But when it does form, it means an sudden trend reversal. So you should act immediatetly when you spot it.

The bearish Harami Pattern is the other way around. The first day candle is bullish but the second day candle is bearish with the open lower than the close of the first day and the close higher than the open of the first day. But this means is that bears have taken over the market and soon a new downtrend is going to develop.

Mr. Ahmad Hassam has done Masters from Harvard University. Get these Forex Scalping Cheatsheets FREE! Master these Candlestick Patterns with this FREE 82 page PDF Candlestick Guide!

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An Inverted Hammer is a quite rare pattern as the price action needed to produce it does not takes place frequently. But if it does, it is an important signal that you shouldn’t ignore. Now an inverted hammer can get formed in a downtrend as well as an uptrend. In a downtrend, the first day is a bearish candle signalling that the bears are still in control of the market.

An inverted hammer has a very small body at the bottom with a long wick at the top. As the high is way above the body, most of the trading took place near the small area close to the low. This low serves as the support for the upcoming days.

Now, if you find the open of the next day higher than the low of the previous day, the inverted hammer pattern formed last day was a true pattern. Before trading on an inverted hammer signal, you need for the confirmation on the following day. You can now trade this inverted hammer pattern by placing a stop close to the open of the day.

Now, let’s talk about an uptrend. Identifying an Inverted Hammer in an uptrend is almost similar to a downtrend. When an inverted hammer is formed in an uptrend, it means that the uptrend is about to reverse itself into a downtrend. On the first day, you will find the usual bullish candle signalling that the bulls are in control of the market. This is followed by a gap opening and more buying.

But soon the bears start to take control of the market and push the prices down. The close of the day is equal to or close to the low of the day. When you idenfity a bearish inverted hammer pattern, you can safely go short by putting a stop near the open of the signal day or the day when inverted hammer was formed.

Once, you have placed the stop, you have limited your risk. In case, the market moves in the direction as anticipated, you make a nice profit. Placing a stop loss is very important in trading risk management. If the subsequent price movements do not confirm the inverted hammer, the stop loss comes into action and takes you out of the market at an acceptable loss. If you are an aggressive trader, you can place the stop loss close to the high of the inverted hammer.

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The most important difference is that Index Options are cash settled on expiry while the ETF Options are settled with the underlying instruments that is shares of that ETF. Since with an ETF Options, you can also own the underlying security, you can use various combination strategies.

Stocks have dividends that are paid out periodically to the stock holders. Dividends are an important part of the return that a stock gives over a certain period of time. Now when you are trading index options or ETF options both of them get affected by the dividend payments on the underlying stocks. You need to take this fact into account when calculating the values of puts and calls with an Options Calculator otherwise your investment returns may not be what you have been anticipating.

Now, ETF Options are more flexible than the Index Options as you can use the underlying ETF as well in your options strategies. If you have already traded stock options, ETF options should not be difficult for you. You can hedge your ETF position with an option on the ETF.

Now when trading ETF Options, you can use the famous Protective Put Strategy by combining long ETF with a long put. This way you can hedge against the downside risk with a small increased cost to the ETF. A Protective Put will limit the downside risk to the put strike price.

Similarly, you can use a Covered Call on ETF. A Covered Call is formed by taking combining long ETF with a short call on that ETF. The short call will give you some income in the shape of a premium and reduce the cost of the position. This will also slightly reduce the risk of the position. But on the other hand, a covered call will limit the upside profit potential. Your max profit now will only be limited to the call strike price.

Now, you can also use a Collared Position as well by combining a long ETF with a long put and a short call. This combination limits the downside risk to the put strike price with a slight increase in the cost of the ETF. This net increase in cost by taking a long put is offset with the premium brought in by the short call. On the other hand, the limited but high risk is turned into limited risk only.

Whatever options strategies you use with the ETF, you should first paper trade those strategies and instruments. This is an inexpensive way of test these strategies and can be a good lesson in unexpected risk of either of these securities.

An important fact that you need to know is that not all ETFs have options written on them. This should not surprise you as there are many stocks that don’t have options written on them. Another important fact that you should know is that ETF Options are always American Style. American Style options can be excercised anytime before expiry. You can even trade LEAP Options on ETFs. LEAP Options are long term options having expiry of more than nine months to less than two and a half years.

Mr. Ahmad Hassam has done Masters from Harvard University. Read this 49 page Quantum Swing Trading FREE Report. Get this 40 page shocking FRWC Brutal Truth FREE Report that exposed everything about trading robots!

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People come to the forex market to exchange currency of one country for the currency of another country. As forex trading is 24 hours and billions of dollars are traded, it is no doubt the largest and most active financial markets.

As internet and technology become more popular, automated forex trading systems has become quite common. Anyone who has a computer, internet connection, a forex brokerage account can participate in the forex market.

Trading forex requires constant monitoring due to the fact that the market does not close. But with an automated forex trading system, you can specify in advance your entry and exit price. Together with a small seed amount and with the help of a broker, your trading orders will be executed instantly.

With an automated trading system, you can trade profitably even without becoming an expert in trading. In automated trading through a managed account, it is the trading program that will executes the trades for you.

One attractive point about automated trading is you do not need to do the actual trading. This will free up your time for other things. But if you do watch the market constantly, you can then manage multiple accounts from your trading platform simultaneously. Previously with manual trading, this is not possible. With the introduction of automated trading system, it allows you to trade multiple systems and multiple markets.

An automatic and automated forex trading allow your trades to be made at any time of the day or night, regardless of your presence. You do not miss a single profitable trade even if you are not present in front of your computer terminal.

Using an automated forex trading system helps you to take advantage of various forex strategies and systems. As different systems are designed to be triggered by different trade indicators, you can lower your risk.

By using an automated system, it can eliminates your human emotions and psychology. This is important as those can often affect you in making proper and profitable trading decisions. Also only with the automatic system, you will be capable of monitoring a few currency pairs at a time and execute all of the trading signals.

Even though the automated trading system will trade for you, it is good to learn some basics on forex trading. Learn more about fundamental and technical analysis and some popular indicators.

Just being automated, the trading system never guarantees you success as the market is influenced by many variables and parameters. The forex automated system is not just mechanical, but is fully programmable and you can customize them according to your needs.

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In fact Options are sometimes known as the only true way of hedging. While this can be true, it is only now that individuals are really beginning to appreciate the potential advantages of options, the issue is that they are still poorly understood and mostly utilized wrongly by traders in the marketplace.

The manner to make certain that a trader fully understands how to utilize options in a way to maximize profitability for his or her trades or business, is through smart education and coaching. This is the one most vital factor that a trader will do in their trading career.

But, there is a common issue with this, in that almost all of the options trading companies teach options the wrong way round. This means that they teach basic options methods to their clients and then just leave them to get on with trading live within the marketplace.

This is when the Options University comes into its own. They have the philosophy that the only manner to be in a position to trade options correctly, is 1st by being able to find opportunities where Options can be utilized effectively.

They coach their students to be ready to search out these opportunities and once a trader is comfortable in doing this, they then go on on to coach the most effective methods and techniques for every different situation.

Options University offers a complete range of courses from the basic level right through to advanced and mastery courses.

The company is run by experienced options traders who trade full time in the marketplace. This means they possess the abilities and experience to effectively teach what they know. They also offer live trading conferences and seminars, where traders can be trained and trade in real time with their coaches.

No other options trading firm currently takes the same approach, or offers the same opportunities to trade and be trained next to successful skilled traders.

However, if a trader is committed to understanding the full potential of options then they must go further than simply signing up with the options university.

To be a successful options trader an individual must be prepared to be one hundred% committed to the program and training.

An example of what is attainable when committed to the program was shown 2 years ago when Ron Ianieri, one of the founders of Options University and an extremely well thought of options trader within the market, took a group of twelve inexperienced traders thru an intensive twelve week course which took them by the hand and took them thru to a full options mastery level.

For more info on theOptions University Reviews, just Follow Through.

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