Options Trading for Beginners: The Complete Guide to Investing With Options and Achieving Financial Freedom With Proven Passive Income Strategies and the Latest Advice by Mike Buffett

Author:Mike Buffett [Buffett, Mike]
Language: eng
Format: azw3
Published: 2020-09-20T00:00:00+00:00

Analysis of market movements for options trading.

Almost every option trader has heard old-fashioned trading that says “The Trend is Your Friend”. Options trading in the direction of a dominant trend in the market puts the odds in your favor. Too many newbies to options trading have lost all of their accounts when buying call options in a downtrend market and call options in bullish market trends.

So what exactly is the market trend?

Market trends are like tides. You know the tide is rising when you see the sea rising more and more on the beach, and you know that it is the tide going down when you see more and more beaches. Likewise, you know it is an uptrend when you see major indices like the Dow Jones Industrial Average or the S & P500 go up and up and you know it is a downtrend when you see the significant indices decrease more and more.

Yes, market trends are broad directions in which stocks seem to be moving. In the uptrend, the prices of most commodities will rise more and more, and in the downtrend, the prices of most stocks will move lower and lower.

However, one thing to realize about trends is that trends are “Branch of motion”. It does not mean that in the uptrend, the market is only going up every day, and it does not mean that in the downtrend, the market is only going down.

If you watch the tides and the oceans, the rising tide, the sea does not continue to flow towards the beach, but it reaches the “Waves”. A wave is higher than the previous one. The same goes for stock market trends. In the uptrend, you will see days intertwined with fall days. But the old days will occur more frequently and create new highs after every slight pullback.

This fact often surprises new traders who interpret the first day on the bull as a “bear market”. Therefore, novice and veteran options traders alike agree on “Bull Trap” and “Bear Trap” trades, which are short countertrends that are misinterpreted as trend reversals. Traders who fall into a trap are usually surprised when the general trend continues, and they reach a losing position that never changes.

Recognizing how trends work is only the first step in understanding market trends. Have you ever concluded that the market is only going in a direction that your peers disagree with? How can two people looking at the same market come to different conclusions about a market trend?

The complexity of recognizing market trends comes from the fact that the market can be in all three ways on the same day at any time.

The market may be in a downtrend for daily traders, but on the same day, it may be in an uptrend for a swing trader and a long-term neutral investor, how is it possible?

There is not just one “market” condition, but many market conditions, depending on the period in which you are trading! It is the failure to recognize

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