Strategy is all about personal choice, of course. However, that doesn’t mean the selection of a strategy is an arbitrary thing. On the contrary, there has to be a strong methodology behind any strategy you choose. Your stock option trading strategies will be the ones that fit your personality while at the same time conforming to reliable investing principles. Let’s have a look at two of them.
Investing Based on Established Knowledge
Oftentimes, an investor knows a good deal about certain facets of an industry, and even about specific companies within that industry. That can be because he has been educated about that industry, has a passion for it, or has worked within it. For instance, if somebody has been a computer programmer for several years, there are going to be things he knows about software companies and even hardware developers that the average doctor or dentist wouldn’t know. And it’s the same the other way around when it comes to the health profession. The little things—the “intangibles”–you know can often factor in to making good decisions when it comes to choosing your stock option trading strategy.
Investing Based on Price Action
If there’s an investing approach that is “opposite” to investing based on industry knowledge, it would be making decisions based on price action. A discussion of why price moves the way it does would be long and complex. However, here’s a simple way of looking at it: the trend is your friend. When a company has a pre-existing trend, it tends to follow that trend most of the time, particularly from a longer term perspective. Any significant deviation from that trend represents an opportunity to make an options decision. This is due to the fact that the trend, which is your friend, needs to be maintained. If the price is going away from the trend, most likely it will go back in order to continue the trend. This is the basic principle behind all technical analysis. In addition, specific technical analysis tools, such as Stochastics, Fibonacci levels and the like are available to help you decide when the move is most likely to happen.
Many traders use a combination of both of these stock option trading strategies. And it can be just as effective to use a company that has invested resources in attaining industry-specific knowledge as well as techniques to utilize technical analysis tools. One such company is Trade Genie. The services offered can be found at TradeGenie.com.
