Trading Futures vs Options

There are many ways to evaluate what positions to trade in the stock market. All the different evaluation styles basically fall into two different strategies – trading futures vs options.

Many times you will find a mix of both that determines what you end up trading so it is good to develop a mad set of skills. Ultimately your approach will depend on the type of trading you want to do and your long term goals.

A fundamental trader is one who takes a thorough look at the company the stock represents. They evaluate the strength of the company, their past performance and the likely hood of a good future performance. This is my approach if I want to buy a stock and hold it for an extended period of time also known as trading futures.

I would examine elements of the company to determine how strong or weak that company is.

How strong is their management team?

What is their history?

How well is the company run?

How long has the company been around?

What about the product or products the company offers?

Is there a solid market for those products?

What is their percentage market share?

Does the company have a good research and development track history?

What is their debt load and their debt to income ratio?

Do they pay a dividend to shareholders?

Has this dividend grown, is it static or going down each quarter?

Are there any lawsuits pending or outstanding judgements against the company?

What about the cash flow – sometimes it is better to sell a million units for a dollar rather than 1 unit for a million dollars?

I would also want to know the company’s future plans for new products.

Are the considering buying other companies to increase their market share?

All these things would matter if I was buying shares in the company to hold for a long time. There is a fairly quick way to gather this data but you will need a subscription to a company called Investors Daily Business. There you can do a quick stock checkup and gather much of the data you will need to make a good choice of a stock to buy.

As I said I do buy and hold some stocks based on the company’s fundamentals. But the approach I like better is as a technical trader. 

I look at the analytics of how the stock trades.

In other words, I am a herd watcher. I patiently wait for the herd to react. The trading herds’ buying or selling off triggers my trades. I want to be on the good side of a trade as the price moves up and down. So I look at technicals. This is also known as options trading.

The average volume traded each day.

Stock price patterns over time.

Candlesticks and candlestick patterns.

The support and resistance areas where the price will likely reverse.

All these aspects and more give me clues on when to enter, when to exit and how to structure

my trades.

I typically trade options and they are not held for long periods of time. My gains are much

higher percentage than when I buy and hold trades.

If you want to learn to become a great trader, Investing Buddies is for you. Not only do I stress

education. I want you to understand the market and be able to trade your own thoughts and

make a ton of money. I also share the trades I do so you can learn to see what I am seeing.

This will give you a great start on your way to being an exceptional trader.

You can also sign up here for the next DATA class that starts in September.

DATA is a 10 week course. The name says it all Double Account Trading Adventure. Yes, I typically double my account every 10 to 12 weeks. And you can learn to do this too, with some dedicated perseverance and some Investing Buddies help. Learn more HERE!

Thanks for learning all about trading futures vs trading options!