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When Munehia Homma first created candlestick charts in they 1700s, he had no idea it’d change the way we look at stocks 300 years later.
To him, candlestick charting was meant for the rice trade.
Options are still one of the most misunderstood opportunities.
They’re too hard. They’re far too expensive. You have to be rich to trade them. Those are just some of the excuses I’ve heard over the last 20 years. But to be very honest with you those excuses are laughable.
By now, you’ve heard the expression, “don’t put all your eggs in one basket.”
The same holds true with stocks.
If I risk too much on one trade and it goes against me, I’ve just made a potential mess of my portfolio. Or let’s say you have a $100,000 portfolio, and you decide to risk 10% of that per trade. If your next 10 trades are now losers, you just wiped out your full account. Bad move.
To this day, traders are still scared to death of options.
They’re too volatile. Stocks are safer. It’s too hard, they say. It’s only for the rich.
Sure, there are risks. But all investment vehicles carry risk. But as compared to stocks, options are oftentimes cheaper and much more lucrative. Let’s use Apple (AAPL) for example.
With so many technical tools available, it’s easy to get confused. But with time, patience and plenty of practice, it gets easier to understand.
For example, some traders believe that Chaikin Money Flow (CMF) and the Money Flow Index (MFI) are the same thing. However, the only major similarity between the two is that they are both commonly used momentum indicators.
And that’s pretty much where the similarities end.
You’re in the kitchen. You knock the knife off the table.
As the blade begins to accelerate to the floor, what do you do? Do you put your hand out, hoping it won’t cut you? Or, do you allow it to safely hit the floor?
Let me ask that another way. If you found a stock in the middle of a falling knife pattern, would you put your money in harms way, hoping it doesn’t destroy your account. Or would you allow the stock to safely bottom out before buying?