There is not just the buying and selling of stocks and bonds, but also trading in derivatives and futures. Derivatives values are determined by other indexes or numbers, such as interest rates and currency levels. If you are making a futures bet that a stock will go up, or to have an option to buy a stock at a certain level.

There are many courses on the market, some in person, and some through the Internet in written form, or audio or video. Basically, what one learns is a trading system. This system can involve commodities such as gold, silver or oil, or on the Forex (foreign exchange) market, the value of a currency. Since, the person plans on day trading, it makes little difference which one of these objects are chosen to trade, except that they are all values of high volatility where one can make a profit (or loss) quickly. If you do a Google search on these topics, you will see many alternatives. Some systems involve consulting news and financial reports at a certain time of day, and using this to make decisions what futures to buy in the morning and the sell in the afternoon.

Other systems can be more esoteric. A popular system uses the variations of currency values over different time periods, some of which can be a short as 5 or 10 minutes. The curve produced by these currency value fluctuations, say of the US Dollar/British Pound pair are then plotted out on a graph and compared to the Fibonacci number series, the golden mean relations, or other ideal numeric values, and this is used to estimate the right time to buy and sell currencies. Are you willing to risk your fortunes on such schemes? Some say it is a winning proposition if you master “the system”.

Similarities and differencesBuying and selling shares on the US market is virtually an identical process to trading shares in Australia. The options market; however, has a few subtle differences.

Differences between Option MarketsAustralia

US

EducationTo anyone with experience trading the Australian Stockmarket, the US market is a relatively simple transition, with respect to terminology and procedures. However, it still pays to familiarise yourself with the various companies and strategies available before you start trading. There are quite a few books, homestudy courses and seminars available in the market. One of my favorite authors is Michael Thomsett, who has written numerous books on US stocks and options. There’s even the board game, Call Up Put Down which teaches players how to trade US options.

Looking to the futureWhilst many Australian investors have done extremely well over the past year, alas, no market can continue to rise forever. Savvy investors know the benefits of diversification. Today, it has never been easier to trade the US market, and participate in the Greatest Market on Earth!Platinum Pursuits offer a wide range of live seminars, home study courses, DVD’s, Audio CD’s, software and other tools designed to teach investors how to trade US stocks and options. For more information, please visit: www.PlatinumPursuits.com© Platinum Pursuits 2006. All rights reserved. DisclaimerThe decision to invest or trade and the method selected is a personal decisions and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of our services for your circumstances. Platinum Pursuits Pty Ltd is an Authorised Representative (Rep. No. 286343) of Option Partners Pty Ltd, AFSL 298347.Information contained in all Platinum Pursuits products and websites is intended to be general advice only and should not be relied upon as financial product advice. You are warned that:1.    The advice has been prepared without taking into account your objectives, financial situation or particular needs; and2.    Because of that, you should, before acting on the advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs; and3.    If the advice relates to the acquisition, or possible acquisition, of a particular financial product – you should obtain a Product Disclosure Statement relating to the product and consider the Statement before making any decision about whether to acquire the product.Equities and derivatives trading involves risk, Investors need a broker to trade equities and derivatives, and must meet suitability requirements.  Past results are not necessarily indicative of future performance.  Investors are required and advised to request for and read the product disclaimer statements as provided by the particular profile they trade with.None of the information and data contained in this presentation or the Platinum Pursuits websites (www.platinumpursuits.com or www.ppmember.com) nor any opinion expressed constitutes a recommendation to purchase or sell a security, or to provide investment or financial product advice.The information contained on all Platinum Pursuits products is provided for general informational purposes, as a convenience to the customers of Platinum Pursuits Pty Ltd.  The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation.  Consult the appropriate professional advisor for more complete and current information.  Platinum Pursuits Pty Ltd is not engaged in rendering any legal or professional services by presenting this general information or by placing these or any general informational materials on their websites.Platinum Pursuits Pty Ltd and its associates do not receive any remuneration (including commission) or other benefit from third parties by virtue of the advice provided.Platinum Pursuits Pty Ltd is an Authorised Representative (286343) of The International Securities and Derivatives Group Pty Ltd ABN 22 103 552 683, AFSL 227544.

Thinking of trading options, but not sure where to start? Trading Options For Dummies starts you from the beginning with clear, step-by-step advice on how to use top option strategies to reduce your risk while boosting your income and enlarging your retirement portfolio with index, equity, and ETF options. This plain-English guide explains the common types of options and helps you choose the right ones for your investing needs. You find out how to weigh option costs and benefits, combine options to reduce risk, and build a strategy that allows you to gain no matter what the market may bring. You’ll learn the basics of market and sector analysis and what to look for when trying out a new option strategy. You’ll also find what you need to know about options contract specifications and mechanics. Discover how to: Understand option contracts and orders Determine and manage your risk Guard your assets using options Trade options on securities (more…)

The days of buying and holding stocks and mutual funds for years are gone; nowadays, futures and option markets offer some of the best opportunities to make money trading in volatile times. But like all investments, high risk is involved, and in order to become a successful trader you must be prepared to work as a geopolitical analyst, a money manager, and an expert in all types of commodity markets. Futures & Options For Dummies will show you how trading is done and how to survive and succeed in these ever-changing markets. Filled with nuts-and-bolts advice, you’ll soon discover how to manage the risks involved and reap the rewards of futures and options trading. This straightforward guide gives you the tools you need to understand: Ins and outs of trading futures and options How to analyze the markets and develop strategies Interest-rate futures and speculating with currencies How to stock up on indexes The direction of commodity fut (more…)

The underlying probability calculation assumes that the stock price movements are random events, like throwing dice. Of course, stock price movements are not purely random, but are affected by news, rumors, crowd psychology and many more factors. But it isn’t a bad approximation for the reality, especially when averaged over many stocks and over long periods of time.

The essence of the problem derives from the old financial adage, there’s no free lunch. If you were to establish trades with these probabilities, the returns will be rather small, of the order of 7% to 10%. But the losses would be huge, of the order of 90% to 100%. The bottom line is that the one or two losses each year would be large enough to wipe out all of the gains for the year. Thus, there is only a small probability of a losing trade, but when it happens, it will be a devastating loss.

Some traders will readily acknowledge that these high probability trades don’t make sense, and will sell the idea of so called “low risk” trades, where the potential loss is small, hence the label of low risk. These trades are simply the mirror image of the high probability trade. The low risk trade is characterized by a huge potential gain, of the order of 200% or more, but there is a very small probability of that successful outcome. In this case, one would lose a small amount on the trade 10 or 11 months out of the year and then have 1 or 2 large gains. The problem is that the large gains would not compensate for the large number of small losses.

In either case, the outcome is the same, a small net loss, especially after commissions and other costs of trading. So is options trading inherently a losing game? No, not necessarily, there are many examples of successful, long term options traders. They succeed by paying attention to two critical factors: 1) keeping one’s ratio of winning trades to losing trades as high as possible, and 2) minimizing the losses on the inevitable losing trades. But those topics require a much more extensive treatment than can be done in a short article.

One’s choice of either the high probability trade or the low risk trade is not a financial issue – neither is inherently superior. Neither trade will be successful long term without other considerations. One’s choice of the high probability or the low risk trade is primarily a matter of matching one’s trading style and risk tolerance with the right trade.