FRIDAY - STOCK MARKET UPDATE:
As you can tell from the recent market action, now is not a time to be going into the market full-force. After the strong up day a few days back, we are waiting for a bullish confirmation before there is even a chance that this nasty bear market might reverse into a bull.
I've been testing the market with breakouts to the upside, but so far this week nothing has panned out.
TRADING LESSON LEARNED THIS WEEK
A personal lesson can be learned from mistakes this week by setting buy points on my trading software. The problem is that they execute and the stocks or options are purchased the first tick my conditions have been met. The problem with this is that the market will often tick up and then drop a bit and then there I am invested in a position that is down somewhat.
Another lesson I've learned is that while stops are good for stock positions, they are disastrous for option positions. I am starting to believe that with options, especially options that are between $1.50 and $2.00 per contract, it is silly to set a stop because by the time the stop is triggered, while you've lost $100 or more, there is only $50 - $100 more value in your option and you likely have A WHOLE MONTH (or until the expiration of your option) to get the value back. In my opinion, the purpose of a STOP order is so that you don't lose big if the stock decides to drop on you. However, one of the big benefits of trading options in the first place is limited risk, so once the option has gone against you and you have lost much of the value of the stock, it makes no sense to sell at a loss because what you have essentially paid for already with your lost capital is the TIME VALUE of the option. So you might as well just sit and see where it goes, even if to zero.
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