Taking low probability trades isn't always a bad idea. It can be worth the gamble provided you control your risk.
Trading some low probability trades isn’t always a bad thing. It can help you to make a huge return if you are right and you can always manage your risk when you are wrong.
By a low probability trade I am talking about trades that will probably not be profitable. Even so it can be a good idea to take a few of these trades now and then if you consider the following.
1. What You are risking
You don’t want to be risking a lot of money on any one trade. But, this is even more important when you are entering a low probability trade. The amount you risk should be only a small fraction of your account, something that would not affect you that much if you lost it.
2. Does it have a huge Reward
The only reason to consider a low probability trade is of course the possible reward. The reward should be great, for example if you buy an Out of the money option for $.30 you shouldn’t be hoping to sell the option at $.40 later on.
Instead you should be planning on selling it for $3 or more in the future. If you are only going to make a small amount if you are right it might not be worth it to take the risk.
3. Why are you entering the trade
You should still have a reason for entering the trade to begin with other then the option is only trading at $.10. You should still have a reason for buying and a game plan for getting out.
Of course taking such a risky bet isn’t for everyone, but there is no reward without risk of some kind. It isn’t a bad idea to take a high risk high reward trade now and then provided it will not cripple your account if you lose.
For some stock tips visit http://www.stocks-simplified.com/stock_tips.html
For more on the stock market visit http://www.stocks-simplified.comNaked Puts
Selling naked puts isn't as dangerous as it is made out to be, if you do it in moderation. It can be a good strategy to pull out money from the stock market.Staying with the trend
Stocks trend, that is what they do. So many people try to fight the trend by picking the top and the bottom. That isn't the smartest thing to do.Trading and commission
No one wants to pay commissions, here are some ways to reduce their affect on your account.