July 1, 2007

How I trade options - A personal Journey

The email below was an email I wrote to a forum whereby the participants are all students of a option trading course. I sort of summarised my personal journey in option trading so far. Hope it help others that are seeking some advise.

Hi Everybody,

After reading the article in "Today" and the responds I saw in the
group forum, I thought of just sharing my experience with all of you
concerning trading and the courses offered.

I used to be a FX trader with a foreign bank before I left to join
the corporate, but I still do trading for my company. Year in and
year out, I make money for the company. But when I trade on my own
account, I lost quite a lot of money. Apparently, something is
wrong, why should I be making money for my company but not making
money for myself? This is when I think my trading style is not
suitable for trading small account, and of course, the emotion
aspect comes into play when trading own money.

I attended a course (I shall not mentioned the name of the trainer). My personal experience was that his method try to make money by buying options before earnings
announcement. This is precisely why he can advertise by claiming his
students can make 1,000% or make a few thousand US$ per night. It is
true, no doubt about it, but the problem is that that may be the only
trade of that student making that time of return. Out of 10 trades,
maybe only one trade make that type of money, the rest of the 9
trades may be looser. Therefore, be careful of those claims in the
advertisements. It may be true, but may not be the whole truth.

An excellent example was that I went to one of the students house.
At that time, there was an ads claiming that he make something like
over $20k in one night. When I was there, I asked him about it, and
he confirmed it is true, but he also told me that his other trades
are losing big time, and overall, he is about break even. How do I
know what he said is true? He showed me his IB account. So to me,
this method looks abit like "ti kum ti kum".

Therefore, it seems to me that the trainer is more of a marketing guy
who really package his course. Also, he employed alot of
motivational techniques in his seminar to motivate the students into
believing in themselves and that it is possible to become millionair.
While this is important, but after striping out the motivational
speech and one thinks about it, the actual content in trading has
been watered down somewhat.

I attended another trainer's course later. This other trainer's method is a more technical approach, which suits me better. However, I still did not make
money. I stopped trading for a while to review where I went wrong.
Finally, I decided to modify the "TAB" method to accomodate my
situation and my personality. Well, it works so far and I am
consistantly making about 2-3% return per month (or 20-30% per
year). Now, I do not need to monitor the market every nite, I place
my order in the morning when I reach office and can forget it.
Sometimes, I still need to monitor the market in the evening if the
my position is not in good shape. But by and large, my current
method suits me fine.

Therefore, for those who thinking of attending other courses like
those by Clement or other trainers, you may want to consider if their method suits your own situation and personality. What works for them may not work
for you.


No comments: