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In this first level of trading, the investor can only see small profits. What I try to help them learn is to let their profits ride and to cut their losses early. In this stage, they almost always trade only futures, and only on very short moves. |
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Second-level investors usually have two or three years of trading experience, have already made some of the most crucial mistakes, and have learned from them. These are some of the best traders because they are well-disciplined. These are my favorite kinds of traders; they have the basic understanding of how the market works and are eager to learn the more-complicated nuances of trading. |
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The third-level trader has exhausted the basic learning experience of futures trading and is ready to dabble in options. Most have also had some experience in stock trading. One point I make to them is how different stock options and futures options are. With stock options, the momentum is usually to the upside, and the trend will carry the market. With commodities, the options are designed to decay. They are simply used as an insurance policy for a range-bound market. Therefore, 90% of all options go off the board worthless. Consequently, traders must use an option strategy which requires the buying and selling of puts and calls simultaneously. Most investors have a difficult time understanding this concept until they reach the third level of trading experience. |
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The final level, the fourth level, is what I call the ''complete trader." These traders are much more sophisticated and use futures and options together for what are known as "synthetic trades." |
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Neal: You mentioned "outfitting" your customers. What did you mean? |
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Mark: Technology has come a long way. Today, you can actually be an off-the-floor pit trader. Technology allows you to be as close to the pit as possible without actually being in it. You no longer need a seat to have the edge. For example, you can be on |
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