We will now take a look at one of the most common strategies used to trade various indices, especially the QQQQ index and what strategy is best suited for trading this particular index.

There are dozens of different option trading strategies out there that you can use to tailor to the current situation of the stock market. Some are good when the market is trending strongly while others are designed for when the market is flat or experiencing low volatility. One of the most common option trading strategies used by many option traders who also offer newsletter subscription services to their subscribers, is the Iron Condor/ Credit Spread strategy.

Many option newsletter services almost use iron condor strategy exclusively. The single most important reason as to why this strategy is so popular is because due to it high probability of winning. If done correctly, you can generate consistent income month after month and it can be very lucrative as sometimes you could go on a long winning streak month after month without experiencing a losing month in a year.

However this strategy is not without its pitfall and dangers. The single most important drawback is it requires a high margin to establish the trade and when the trade does go against you; you could be looking to lose a significant portion of that capital.

What most traders aim to achieve is a 5% to 10% return on the capital that they put to risk, so for every $5,000.00 they risk, they aim to bring back a return about approximately $250 to $500. However if the index or stock gaps at the opening and continues in the direction, either up or down like what we experienced in the subprime crisis, you could end up losing up to 100% of your capital for that particular trade.

A lot of option traders tend to promote iron condor strategy as one which works in both trending market and sideway market, but the truth is it works best only in sideway market. When the market suddenly starts to trend strongly from a flat market, you could lose your shirt with this strategy.

The purpose of this article is to bring your attention to a completely different strategy based on hours of trial and error which is developed by a hedge fund manager who is actively using this strategy to trade his money and as well as his clients’ money.

This strategy is known as the Ride the flow system. It is a little known strategy which dynamically hedges its position accordingly based on the current movement in the QQQQ index, where you simply put on the trade and hold it month to month. It seeks to generate a 5% to 10% a month conservatively without requiring you to put up with a high margin. This is NOT your everyday Iron Condor or Credit Spread strategy as this strategy can really profit in up, down and sideway market so long you keep dynamically adjusting with the flow of QQQQ.

This is one of the best strategies out there in terms of risk and reward and as this is a self-developed, own proprietary strategy which you will never find anywhere else, so you can be sure that there wont be too many people using this same strategy as opposed to strategy like Iron Condor Spread strategy which is used many traders out there from novice traders to veterans. One problem with Iron Condor is that almost every option newsletter out there trades this strategy exclusively and nearly all of them tend to trade the same indices, such as SPX, RUT, SPY, etc. Now when too many people are trading the same vehicle, you are bound not to be able to get filled at the price that you want.

In addition this strategy doesn’t require day trading or daily monitoring so users do not need to be glued to the system every second. This is a conservative winning strategy which is good for people who are medium to long term trader.

This is a proprietary system developed by hedge fund manager Jason Ng, the founder of Masters O Equity Asset Management.

Due to its elegance and simplicity in execution, it is one of the most reliable and accurate swing/trend trading systems.  What you can expect from such simple system:

-          How to identify profitable entry trade right from the beginning

-          How to take profit once you are in the trade and how to maximize profit taking opportunities.

-          How to exit a trade to minimize your losses and how to protect your capital in volatile times.

-          A simple yet easy to understand software/system can identify certain pre-defined winning patterns in technical analysis and alert you automatically.

-          How you can set your parameters in the software to trade the style that you want

-          Detailed trading guide laying out all the groundbreaking trading rules that make the success of the system

-          30 day mentorship with the founder where you can get one on one coaching

These are just some of the benefits you can expect when you download this system.  This system is designed for traders all levels.

Due to its simplicity in execution, any novices or amateurs can easily master the system and be taught how to use the system to its full potential.

There are no limits to this system.  As you become more familiar with the software and more confident in your own style of trading, you can change the parameters to suit your trading style.

Learning how to trade options this way is the easiest to get started.  It can cut your learning curve by years because it is tried and tested.

Best of all, you can learn to paper trade first using the system before you commit any real money to it.  You simply open up a trading account with any of the option brokers such as optionxress.com, then apply the system and STICK to the trading for a period of time and you will soon see what results it can bring.

The key in this game is not about making a million bucks overnight, it is about learning how to use a robust proven trading system to make money consistently and learning how to trade options for a living.

The option market has grown dramatically over the past decade.  A lot of newbie and novices traders have entered the game because of its lucrative return that one can make should one succeed.

There are many advantages to trading options when compared to other investments such as stock trading.  One of the most attractive features that is inherited in option trading is it doesn’t require much capital to get started and that is exactly why everyone is getting into this game without giving it some serious thoughts before committing money to it.

It is absolutely crucial to know what you are investing into before taking the plunge.  Here are some serious option trading tips that you should consider before you commit your first trade:

1.  Research

The amount of research that you need to do when you start off is absolutely essential to your future success in learning how to trade options successfully.  Thanks to the advance of internet, there are vast amounts of information you can find on the internet these days.  There are a lot of free option information that you can learn from.

Web site such as optiontradingpedia.com offers lots of useful information for beginners.  You can learn about many different strategies and under what situation they should be applied.  You should get yourself familiar with different strategies as each has its uniqueness.

However you do not need to master every single strategy before you can make money.  In fact, lot of traders just stick to one or two strategies and focus all their time in fine tuning them.  Just like stock trading, there are value investing, momentum investing, swing trading, etc; you can’t be all so you should just focus your time on strategy that fits your trading style.

2.  Finding a Systematic Course/Program

A well structured course/program can help you get started in the right path.  There are a growing number of scammers out there who are claiming that they can help you make consistently.

Beware of them.  Often times these guys are making way more money in selling you that ebook/course than they are making money in option trading.  If you are serious about learning option trading, then you should stick with the big names like optionetics.com.  This way you are sure that you are learning from some of the biggest and trustable players in the industry.

3.  Finding a System/or Trading Newsletter

If you are looking to learn how to trade options successfully right from the beginning without going through much of the struggles that other traders go through and you want to learn by real examples instead of just reading books and material, then buying a proven system or trading newsletter is the best way to go.  Same principles apply here.

There are a lot of these out there that don’t make money in the long run; you should check their record before investing your hard earned money with them.  One way to find out is via pro-trading-profits.com.  It keeps track of many different option trading newsletters and systems over a period of time.  You can check to see if your desire one is profitable or not before signing up to them.

Strategies such as debit spread and credit spread are ideal in a trending market, whereas strategies like butterfly or calendar spread are good when you have a specific view about the short term trend on a stock.

Beginners shouldn’t get overwhelmed by the number of strategies there are because you don’t need to know every strategy before you can start making serious money.  In fact if you want to know the secrets of how to trade options successfully, then you shouldn’t feel the need to learn every single strategy there is on the market.

Most successful traders only focus on a handful of strategies to make them money consistently.  Here we take a look at two of the most widely used option strategies:

Iron condor
Iron condor is basically a combination of two credit spread, one on the upside and the other on the down side.   This strategy has proven to be very popular among many of the professional traders.  The reason why it is so popular is because it usually has a high probability of winning when done right.

Sometimes a trader can go on a long winning streak without suffering a drawdown.  The reason why it has such high chance of making money when one right is because it allows the underlying assets to move freely as long as it doesn’t breach the strike price of the sold option.  Traders can sell a far out of the money and buy an even further out of money option on the upside in order to collect a credit.  This way, as long as the stock doesn’t go pass the strike price of the sold option, then the trader can pocket the entire premium.

In addition, traders can replicate the exact same trade on the down side to collect even more premium.  A lot of option friendly brokers would allow you to use the same margin requirement for both trades because technically speaking, you can only lose on one side only.

If you are looking to use this strategy but don’t know where to start, you can join some of the trading newsletters that utilize this strategy extensively.  In fact, many of them solely rely on this strategy and they can bring in profit month after month.

Buying call and put option
This is the simplest strategy but many people might tell you that about 90% of the people lose money in buying options because 90% of the options contracts never get exercised.  Nothing could be further from the truth.  This strategy does have its own merit when done right.  Some of the most spectacular winning trades are done in this manner because the transaction cost is much lower than other strategies and profit is unlimited.

However what you need to do is have a system that can identify breakouts and can consistently pick the right stock in the right trend.  Some of the trading systems/newsletters have been focusing on this particular strategy and have seen tremendous success in brining home runs trade after trade.  What you also need to look out for this strategy is when to take profit and when to cut your losses short.  A proper system should already have these built into them, so leaving you more time to find the next winning stock.

A lot of novices on the stock market are drawn to the game of stock option trading because of the leverage it can provide and the Holy Grail behind it should one succeed.  We can always recall that there are two sides to a coin, but what we often forget in option trading is that leverage can magnify our gain several times but on the other side it can also magnify your losses until you go bankrupt if you are not careful about managing your risk.

Learning how to trade options successfully to maximize your profit consistently whilst at the same time minimizing your risk is the greatest skill you can ever acquire in option trading.   Needless to say, a lot of traders have been doing it the other way around, which is maximizing their loss and minimizing their gain.

Believe it or not, this is how most traders end up without knowing it.  They get too carried away by the all the gains and profits that other so called successful option traders are making, and they think that they can easily get a piece of the pie by just participating in the trend and what they do is risking more than what they can afford to lose and once the trade turns sour they are afraid to pull the trigger, and hoping it will turn around but obviously it didn’t, it keeps heading south until the trader’s capital dries up.

This is a typical story of how most novice option traders go through.  They often think about profit first then risk second, they never think about how much they will lose first before they will ever make a gain.  If risk was looked at first before anything else, there wouldn’t be that many failed traders leaving the game without returning.

So remember, risk taking & management are cornerstone of learning how to trade options successfully in the long run.  The key to really understand option trading and how it can form a proper trading strategy in your arsenal is through the right education and training. The right training can put you on the right path right from the beginning, in other words you are taking shortcuts to get to your destination if you like.

The most effective way to learn about how to trade options is to find someone that is already doing it successfully and copy how they do it, in other words you copy someone else’s proven option trading system and adapt it to your own.

There are dozens of option trading systems out there and each author behind them claims that their system can make you profit consistently but how many of them really live up to what they promise?

The bottom line is profit!  What you should really consider when learning how to trade options with a trading system is to really look at; their past performances, how many trades the results are based on, whether it can survive during up and down market, what the drawdown is, etc.

I’m sure you get the picture and I’m quite certain that there are a lot more other factors that you would take into consideration when you are looking to buy a trading system that fits your trading style.

But here is what an easy to follow proven system should have, it should have a set of pre-defined rules to govern your trading, such rules should alert you when to enter a trade, a pre-defined stop loss if the trade turns out wrong and when to take profits.

As you can see, these are very simple but many people don’t seem to make money in the long run no matter how many different systems or how hard they try.

Why? This simply boils down to one factor – Discipline.  People give up too soon.  Any robust trading system would have its own period of drawdown.  The key is to understand yourself first and find a system that fits your trading style.

If you are swing trader, meaning you would keep a position open for 2 to 5 days then look for a system that does that.

If you absolutely cant carry positions overnight because you don’t want surprises the next morning, then find a day trading system.

We all know learning how to trade options is much harder than learning how to trade stock in general because option is often regarded as a high risk instrument.  So that’s why having a proven trading system is crucial to your success.

Once you found a system, learn to stick to the trading rules.  The easiest way to make yourself to adhere to those rules is automate it.  Nowadays many of the large brokers would allow you to set pre-defined stop losses or profit taking trailing stop to automate your trading.

If your system tells you to sell when you reach 20% profit, then you can set up the trade at the beginning and forget it, so when it reaches 20% profit it will automatically execute the trade for you.

This can really take the emotions out of trading and helping you to become a more disciplined trader.

Finding a system that fits you is only half the story, knowing whether it will be profitable over the long run is also very important.  After all if the system has never been profitable, no matter how disciplined you are, you will end up losing your shirt.

That’s why services such as http://www.pro-trading-profits.com is very useful when deciding whether you should give a system/newsletter a try or not.  It monitors many different system/newsletter so you can use it to gauge how profitable the system really is.