AMATEUR OEX TRADER ADVENTURE INTO TRADING!

** Hi! My name is Ray and I live in Western Belize, in the foothills of the Belize Alps. I like the SPRING weather all year around and being able to grow my own food, every day.
**** OEX OPTION DAY TRADERS WILL NOT LIKE THIS SITE! Our goal is to double our money every 5 months, market willing. We don't like losing trade systems. Admittedly you will get one once in a while.
** Remember the story of the TORTOISE and the HARE? The methodology here is UNDERTRADING


AMATEUR OEX TRADER ADVENTURES INTO TRADING - RESULTS!

( Two month results - 2 months, paper trading - 64% return )

Method chosen: KISS ( Keep it simple stupid! )
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PHASE #1
Start time in design and experimenting of trading system. Mid June, 2009.

PHASE #2

Paper trading start of methodology Sept. 12, 2009.
Number of trades: 8 trades
Result 64% return on capital in two months ending November 16th, 2009

PHASE #3

Switch to VIRTUAL TRADING PRACTICE WITH LIVE BROKER IN CHICAGO PITS.
Restart FRESH experiment with live practice, $5000 funny money FREE ACCOUNT!
( Result so far - 1st weekend up 6% )

PHASE #4

Switch to REAL MONEY ACCOUNT with original $5000 of CASH deposit.
( As of Nov.16th, 2009 this writing - this phase has not been reached. Expect to reach the REAL MONEY trading phase #4 around March, 2010? )
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PROGRESS REPORT ON THE FUTURES/HEDGE FUND TRADING

( Searching for an adequate description?) - The rational is; that I'm losing money with SAVINGS in USA money market, savings account and Certificate of Deposits at current interest rates and with INFLATION in the USA at 7% thereabouts. Living on a FIXED INCOME is seeing my purchasing capacity declining. Must do something?)

Hectic morning on the trading for the Futures/Hedge Fund being used to balance out the very low, Money Market and Certificate of Deposits miserable returns in the USA. These are losing money at the purchasing power rate of 7% a year to inflation. My savings CD comes due this month November and I'm cashing it out and putting it in money market to feed slowly into the Hedge Fund trading eventually in PHASE #4 if we reach that far successfully? Expected to be around February or March, 2010.

Graduated Friday last, to the Virtual Trading platform, with $5000 usa of their funny money, FREE GRATIS! Got out of that trade I made, with a 6% gain, or + $330 this morning

My hypothetical paper trading is now at an end. Made over the 50% I needed to graduate into the Virtual BROKERAGE money trading with my KISS OPTION TRADING METHOD. I see I started paper trading Sept 12th. 8 trades in all! Lost at the very beginning though! Trying to use a method that has no losses. Very restrictive! I made three mistakes in the 8 trades over two months. The first loss was due to my second guessing the methodology and tweaking it with an entry that was too early. Another lower returns trade than was expected, was experienced by a second bad entry, second guessing the mechanical system. The third error was leaving on the EXIT signal too early also, and taking less profits, due to impatience and fear! Once I settled down to trusting the methodology ( KISS ) things went better with fairly mechanical ENTRY and EXITS about 95% and roughly 5% a final judgment call as to TIMING on EXITS.)( I'm learning to exit on volatility ballooning of premiums - I think? )

That paper trading in 8 trades netted me 64%, or a balance that started with $5000 usa and ended up with $8230 this morning, Nov. 15th, 2009. When I exited the remaining 3 trades that were running.

So my intention to switch from hypothetical paper trading, to virtual trading with the brokerage account worked out well, even though it was a weekend premature. The next step is to move into real CASH trading when this virtual account does 50% as a gain. Step by step, slowly, slowly! Trying to master and get control of the emotions of GREED, PANIC and FEAR. Let the system prove itself first as we go along. THE KISS MONEY MACHINE! ( laugh )

12 Sept made +$750 for balance starting with $5000 of $5730 ( -$20 commissions )
2 Oct lost -($1620) balance of $4090 in account
6 Oct +$580 with ending account balance of $4670
8 Oct +$320 with ending balance of $4990
21 Oct +$380 balance now of $5350
29 Oct + $1070 balance now of $6400
4 Nov + $1510 balance now of $7890
11 Nov ( my birthday - 72 years old ) +$360 with an ending balance of $8230
( $20 commissions deducted for each trade, which may skew the balances here )

END OF PAPER TRADING

Switch to brokerage virtual trading with funny money. Current balance $5330 starting with $5000 6% gain Nov 15 over the weekend. Nervous about the sideways action and EXITED early on a 5% methodology JUDGEMENT CALL, before actually getting an EXIT signal.
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Started the methodology experiments back in mid June/2009. Took about 3 to 5 months to work out the methodology and learn it and learn to trust it. My first loss, was because I didn't trust what I had done. I second guessed it and screwed myself.
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Going to have to buy a generator. The BEL electricity in Western Belize went off this morning in the middle of a volatile opening session. I couldn't follow it. When the electricity came back on about an hour later, the market was running away from me and the volatility and ballooning was very high. I couldn't get my websites loaded again. I got the DOW numbers off the cable TV while doing breakfast. Darned electricity nearly ruined everything. You have to sell into ballooning volatility. You get inflated premiums.
Even so, the market had started leveling off and the collapse of the premiums was already evident by the time I got into the web site, after the electricity came back on. Sold my virtual trade first. It dropped about $20 while I was trying to get it all together. With the slow dial up wireless internet, ( 115 kbps ) everything lags and takes precious minutes. ( going to buy a generator in Belmopan I guess? ) Then I exited the three paper trades I was holding to collapsing volatility ballooning. Lost something, but overall did well.
Am now into phase three, which is the move from methodology research and testing, to paper trading and now into the ( Phase #3) - Virtual Trading. Next step phase 4, will be real cash trading. Probably by March? Maybe even February?

Goal is $250,000 in two years starting with $5000 and putting additional $5000 capital periodically on a money management formula I have designed. Lots of fun, to see how we do here? ( grin! ) Hell I'm alive the adrenaline gets running and feels good mon! An old retiree needs some mental challenge!

** This photo was taken in January. A cold day here in the tropics, in the foothills of the Belize Alps. There were blizzards up in Canada and the USA and here the temperature dropped to 56 F. I had to wear a T shirt, a regular thick shirt and a sweater to stay warm. Normally our temperatures run between 75 and 85 F nearly all year round.


TRADING NOW WITH NEW "OPTION HOUSE" VIRTUAL TRADING ACCOUNT
Started again with the FREE Option House account of funny online money that is not real money. For the learning how to enter orders on their system. Doing paper trading in October and November we did 64% on total $5000 capital. So the next step was to try ONLINE TRADING with a free account for real time learning and no cheating ( which one tends to do with paper trading ) and see if my system works? The idea that once I made 50% of my virtual account, I would send in signed forms and a check for $5000 real money and do it real.
DECEMBER MONTH REALLY WENT BAD FOR ME! I was ahead in this brokers virtual account $310 from end of November in a trade. In December the market went sideways and congested. Everybody on holiday I guess. I took a trade on an early signal, then got the second signal. This was a counter trend trade in a sideways market. I ignored my rules and tried the trade anyway. Turned out I had a fixed OEX number in mind for my weak trade to exit. Got the number but failed to exit with the two options I was now holding. The reason being ??? I don´t know? This is all emotional and physcological. I just hung on too long. What was happening, the first option was losing money, having been entered too early and TIME DECAY was eating it up. The second entry on my signal was GOOD and I made the target INDEX number and a profit, but failed to sell both options on this one trade, as first losing option taken, would have OVERALL caused the two options on the same trade to have given me a loss. Suppose I thought if I held another day, it might put me positive? It didn´t and reversed, proving my methodology was right, but my hindsight critique was faulty. My emotional fault and not the markets or method fault. Anyway promptly cleared the trade and lost $680 on the first option in the trade, though if I had sold them both when targeted, would have lost only about $200. On the second option, I went from the profit to a loss of $245. Ended up with an account balance that went from $5310 to $4385.
Stayed out of the market for the rest of sideways December. There was nothing. Out of curiousity near the end of December I had the sideways market figured, so did a paper trade which won a bit. Though $150 was not worth the risk and this wasn´t my Virtual Account at the broker. I just wanted to try it out and see if I was right. I was right, but + $150 was too little for the risk. We entered January and my chosen methodology is UNDERTRADING. Finally got another signal, but the market was weak and I waited a day or two for things to clarify. Finally jumped in on a second signal. Within the hour I had cleared my SPREAD and gained $35. Unfortunately the next day things went neutral and dead and lost my gain and some to the TIME DECAY and reduced volatility. Still holding at this writing as all the signals are positive, though the OEX is weak. NYSE daily volume is up though, so I´m holding as all trade signals are still positive. Sudden one day drop really had me hurting. Fortunately I had bought March options and could afford to wait. My observation was that we were in a trading range and what went down would go up. I'm pleased to see the higher volatility though. Bigger longer bar days of movement give more opportunities.
January 19th. Finally recovered almost all my down values on a good 6 point OEX UP day, was just a $100 short of breaking even, but EXITED anyway. The balance now is $ 4265 after starting with $5000 of the VIRTUAL MONOPOLY MONEY ACCOUNT. Still workable. Next day saw an 8 point drop again. Really VOLATILE! Love it! Didn't get a chance to buy in though, it was too fast and unexpected.
What went wrong in January? The trend was good, but it was too weak. Small movements of 2 points or less per day and my trades kept jumping in and out of profit, to loss. Due to the angle of the trend. I had thought about it when it started, but didn't know what would happen and elected to try it and see real life what a shallow positive trend will do. This is a learning experience after all and December had been such a dull month. Guess you could call it IMPATIENCE AND OVERTRADING? Anyway, finally exited on January 19th from both trades with a $100 loss. Which in retrospect I consider a victory. In the meantime, I have devised an indicator that will tell me if I have the volatility and premium ballooning needed to make a long term trade profitable. So at $100 cost, or lesson on that one. I'm a guy learns by doing. Theoretical doesn't work. Hopefully I'm wiser? I think my trade last 14 days. Everything went right, except the movement wasn't enough to overcome TIME DECAY.
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IN THE MEANTIME have been playing around with watching how the OEX will make rapid moves on CLOSING prices and then GAP and move drastically on the OPEN next day. Tried a number of things, but was really having trouble figuring out what these guys who were trading OVERNIGHT were doing and how they were getting their signals. Anyway, I think I have it figured it and devised a short term system for 2 or 3 trades per week. The first go around, took two days and netted + $850. This was because I bought a spread of trades at different strike prices & months, designed to inform me, which option is the most profitable to buy on a single trade. This being paper trading ( hypothetical ) you can do that. Hopefully I now have two arrows in my quiver and two trading systems. Short term and long term. We shall see how it goes? Will try this newer one, paper trading for a month and if it goes, will switch to the brokerage VIRTUAL ACCOUNT with it. Trying it there, my money management formula should kick in some place soon I hope into trading with real CASH MONEY. PATIENCE!


JANUARY MONTH TRADING
-Entered DECEMBER account balance of $4630 in the VIRTUAL account.
-Holding the 530 MARCH CALL at $12.20 bought and now slightly negative.
-Bought another option, the OEX March Call 520 at $19.90 Friday Jan. 8th, with a good signal to buy. Got a bad fill from my virtual account. The Option Chain showed $18.20 ASK and the index had dropped after the OPEN and tried to TIME it at the lowest price, so I waited for 40 minutes after MARKET OPENED, but the computer system gave me the price of the CLOSE from the day before, which was a dollar higher priced. Hope this isn't the way it goes with real money? For my purposes, I can just mentally deduct a dollar though.

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ARE YOU A PROFESSIONAL OEX OPTION TRADER?

**** I'm an AMATEUR because I'm not a PROFESSIONAL. In my lexicon, a PROFESSIONAL OEX OPTION TRADER earns 80% to over 250% a year on his total cash account, deposited with his broker. An AMATEUR is everybody else. ( We are not talking individual trades done with percentages of an account cash available. )

*** In my experience limited as it is and I traded OEX OPTIONS about 20 years ago. Unfortunately I was under capitalized and unable to survive even one loss. Different I hope this time around?? ( grin! ) I even wrote a half a dozen books on it. At the time I was heavily into TRADE STATION and computer generated systems and indicators. I learned that simple things work ( I hope! ) The thing is these guys selling you online, or in magazines TRADING SYSTEMS, or TRADING ADVICE, or BUY and SELL orders. If they can't provide you with the last year's BROKER's STATEMENT proving they are PROFESSIONAL and professional in this context does not mean Membership in organizations, or possession of certificates, but a statement that shows PROFITS over 80% a year, on the whole account balance. Not on individual trades. I'm not partial to trading systems that say you have to have; a win to lose ratio either. I know a loss will occur once in a while, but sure don't want a mental set, or system that plans on it as a working methodology. My experience with losses are; that one LOSS will wipe out the profits for three to seven trades, which depending on your trading frequency, translates into a few months of lost earnings while you try to recuperate your capital. If you give up half your year recovering from losses, I cannot see how you are going to make a profit reasonable enough to be doing this. Mind you I've had a trader friend or too, doing volatility trades that had draw downs from $75,000 to $15,000 and then came back to a healthy profitable balance at the end of the year. I tried it last year, hypothetically and the OEX just was not reliable enough. I don't see him on the internet anymore, so he is either DEAD, or BROKE. In the meantime, hypothetical trading, or paper trading, can give you experience, but only REAL TIME trading has value, as the next few days, or weeks are going to change all those fancy computer indicator signals on you. They are lagging indicators and if you will take a few months and the trouble to print out the OEX chart each day with your forecast and look back, you can actually see the computer indicators based on historical data reforming themselves as the future unfolds. Paper trading and this VIRTUAL TRADING are not the same thing either, when you go to real money Especially when it is your money! USING YOUR REAL MONEY CHANGES EVERYTHING AGAIN, AS IT PREYS ON YOUR EMOTIONS. I could go on, but why bother? Needless to say I'm eccentric and of strong opinions. Only the balance of my account at the end of 2010 will show whether or not, I graduated from AMATEUR status to PROFESSIONAL STATUS. Have fun, that is what it is all about! Don't use money you cannot afford to lose!
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VIRTUAL BROKER TRADING ACCOUNT REPORT
From: 11th November to January 25th. EXPERIMENTAL LEARNING TRADING SYSTEM TRIALS!

END OF JANUARY REPORT

START WITH: Balance $5000
11th November 2009 OEX 505 CALL +310 Balance $5310 Total Capital + 4%
30th November, 2009, OEX 510 PUT - 660 " $4630 ( - 7%)
4th December, 2009 OEX 515 PUT - 225 " $4365 ( - 12%)
5th January, 2010 OEX 530 CALL - 20 " $4365 ( - 14 %)
8th January, 2010 OEX 520 CALL -100 " $4265 ( - 12% )
25th January, 2010 OEX 505 PUT +100 " $4365 ( - 12%)
1 st February, 2010 OEX 500 CALL -580 $3765 ( -24%)
2 nd. February 2010 OEX 500 CALL +100 " $3865 ( - 20% )
3rd February 2010 OEX 510 CALL -360 " $3465 ( - 30%)
23rd February 2010 OEX 505 PUT +115 " $3600 ( -28% )
( Losses so far! Switch in trend messed me up. )
25th February 2010 OEX 505 PUT


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NEWER SHORT TERM PAPER TRADING PRACTICE


JANUARY QUICKIE TRADES
$5000 -0- ( START BALANCE )
PUT + 300 (- 20) = $5280 + 6%
??? + 460 (- 20) = $5720 + 15%
PUT + 130 (- 20) = $5850 + 17%

February 2010
CALL ( -70) - 20 = $5770 + 15%
CALL + 120 - 20 = $5870 + 17%
CALL - 380 - 20 = $5470 + 9%
CALL + 120 - 20 = $5560 + 11%
CALL + 55 - 20 = $5595 + 11%
CALL - 50 - 20 = $5525 + 10%
CALL - 350 - 20 = $5155 + 3%
PUT + 260 - 20 = $5395 + 7%
PUT + 20 - 20 = $5395 + 7%
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SHARED OPINIONS ON RISK CAPITAL
It is possible to start trading successfully with $5000, using only 1 option contract per $5000. This is a money management risk style. In the case of options, your average option contract, which actually contains 100 options, costs anywhere from $1300 to $1800. This means you are risking about 25% to 33% of your capital on each trade. A more conservative approach would be to risk 1 option contract per $10,000 of capital. In case of a loss and your loss is limited to what you paid for the option, you still have money left to do another option. The advantage in options is that your loss, or risk is limited by what you pay, but the UPSIDE in profits is unlimited, dictated only by market action and your skills and wits. Stock traders can have losing accounts for years and years, because they didn't get out in time. They rationalize they still own the stocks - which is just paper if it is losing. The capital is unavailable.
The question arises from amateurs who are under-capitalized. What is the smallest amount you can start with? The smallest amount you can trade with is $2000 and this is 100% of your capital is at risk. If you lose just once, you are out of the game. Possibly for years?
Professional OPTION TRADERS working this as a job at home on their computer, normally starting with a minimum of $25,000 for the gambling of $5 option contracts on one bet. They work their way up to ten contracts which is $50,000 of capital required. It is absolutely dangerous to start with the bare minimum of $2000. You might have been successful, if you were not under capitalized.
The problem for an amateur is how to learn without losing your money. There are as many trading systems, which are successful, as your wife, or girlfriend has in changes of clothes. Each person has to find a physcological fit, to what suits you emotionally. The idea you can buy a successful trading system and start making money is ludicrous. It does not work out that way in practice. The market is ever changing to new players. Many of the classic patterns reoccur, but in slightly different contexts. Computer indicators are always lagging, not telling the future, because they are based on historical performance. The future is UNKNOWN. You CAN guess though and put the odds in your favor.
I would say that you require six months of practice. In my own attempt here, I am starting my 8 th. month already. The first months were in designing a system I was comfortable with. The actual practice part was done and is still being done with PAPER TRADING. Then I have moved into VIRTUAL TRADING using monopoly money with the FREE Broker training account. I have not yet reached my own money in CASH yet. ( Feb. 2010 ) I have a progression planned here, of earning +50% before progressing. The proof of skill learned, is in the profit and account balance.
You have to realize that becoming a trader is akin to becoming a musician. You have to learn to finger your new instrument, learn the scales and how to read music, or not. Learn to play your first songs, like JINGLE BELLS. Then you progress to chords, or melodies and so forth. Of course you must practice every day. This is an intuitive, instinctive, automatic process that you must learn through DOING! A bit like typing. I can give you a book on HOW TO PLAY A GUITAR. I can even show you how. That will not make you a guitar player. Buying a trading system is a lot like that. Without the practice you cannot learn through your finger tips, which is the only way you can succeed. Your subconscious has to learn and recognize all the variables that are happening in the market. This is not a mechanical process. You are trading either with, or against millions of dollars, gambled by other people and what they are thinking. You need to know what the mob, or herd are doing, or going to do? There are also the manipulators, mostly market makers and brokers, to learn to recognize what they are doing. This is easier to do than it sounds, as it shows up in market patterns.
About 20 years ago, I did a lot of the paper trading and learning. Even wrote myself some good books on it, designed and invented many computer indicators, I still use for reference. All based on hypothetical paper trading. I was however under - capitalized and only had the money for one contract in OEX options. I did of course make a mistake and lost my very limited capital, when I went to real money. Now I am back again, to try it once more. Albeit 20 years later, older, hopefully wiser and better capitalized. Things have changed in that 20 years. The commissions are dirt cheap now. Back then it cost me $150 to $300 for commission, versus the $20 of today. You could not enter online through a computer either. Now you can. A lot of my trading real time, back then, would have been successful, if I had the cheaper commissions and prompt service that is available today.
Off hand, I would say, if you got taught a trading system, or bought one, give it six months practice, starting with paper trading, then virtual trading and when you double your money, then move into CASH.
There are many variables in the markets and decision making. When you forget one, it will be a mistake and cost you in real dollars. Losses always take months to recover usually. Humans learn by mistakes. When the market tricks you, you will recognize that situation again and not get caught a second time. Personally, my phsycological state requires a system without losses. This has to become INSTINCTIVE, like learning typing at 65 wpm. The big costly variables are emotional, these are : IMPATIENCE, FEAR, PANIC, GREED. These are what create mistakes! Funny enough, MARKET TIMING is not that hard to figure out and learn. Forecasting what happens after the market turns is the unknown future.
I made mistakes this past December and January. Impatience is what got me. I realized the market was not volatile enough to make money in my system, but rationalizing that; I needed to learn and see by DOING, I traded anyway. I lost in my account as you can see above. I sort of knew I would lose, hoping I wouldn't, but wanted to see what would happen any way. I'm a guy learns by DOING, through his hands. What I learned was to revisit an old friend called VIX and VOLUME. The volume is not so important, but the VIX is important. This number gives you the volatility that is present, which translates into daily and weekly OEX index points that will probably occur. If you don't get enough movement in the market, you will lose. I had a perfectly timed trade in January, the trend went on as predicted, by my correct MARKET TIMING, but the moves were too small incrementally daily to make any money, versus TIME DECAY costs. So, I was forced to remember VIX from 20 years ago. In December the VIX had been down around 14 or 15, by January it was still low around 17 and it wasn't enough, even though the market timing was correct. In February we are running with a VIX of 24 or more. That is good for option trading, the hit and run guerrilla type trades. So, we learn by making mistakes. Better to do it on paper, or virtual trading.
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SPECIAL NOTICE - THIS PAGE HAS BEEN TRANSFERRED AND IS NOW CONTINUING TO RECORD TRADES IN THIS OEX OPTION UNIVERSITY COURSE WITH IT'S OWN BLOG.

The new name for this BLOG is "OEX OPTION TRADING EXPERIENCE"
http://oexoptiontradingexperience.blogspot.com

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Informative web sites of the author trader here: Western Belize Happenings webpage ( use GOOGLE ) ( Over 600 reports of retirement in Western Belize, ( ETERNAL SPRING weather ) with photos. ) Also check out Retirement in Belize, webpage, and my home in the foothills of the Belize Alps. _______________________________________________