Option trading - Your ultimate guide

Option trading - if you’re interested in learning how to succeed with trading options, then you’ve come to the right place. In this guide, you’re about to discover several tips that’ll help you improve the success rate and overall profitability of your trades - so without any further introduction - let’s get straight to it.

Option trading

Tip 1 – With option trading understand your risk tolerance

In option trading, one of the key things you’ll learn during your trading experience is that higher profits usually entail higher risk. With this in mind, it’s important to understand your own risk tolerance and pick a strategy that will confirm to your risk tolerance level. 

It’s all too easy for an excited beginner to risk more money than they can really afford - especially if they’re lucky enough to have a few early successes. But ultimately, it’s best to avoid the emotional impulse decisions that come from success or failure, and stick to a strategy that accommodates your natural level of risk tolerance.

Tip 2 - Trade the charts, not the news

The savviest of traders will keep an eye on the news, but they won’t use it as their sole source of decision-making. While you can pick up some useful insight from current events, the real secret of successful option trading is learning how to read the charts effectively, and learning from your own experience. If you focus on the charts, you’re going to have a better success rate than merely relying on gut instinct and watching the news.

Tip 3 - When in doubt, stay out!

While it’s unwise to always trade on ‘gut instinct’, there’s no denying the benefit of staying out when you’re having second thoughts about any particular trade. If something in your gut is telling you not to risk the trade, then it’s usually wise to trust this impulse. Even though you may miss out on the occasionally profitable trade, by and large, you’ll be making the right decision if you stay out.

Tip 4 - Be prepared for losses

No matter how smart your option trading strategy is, you’re still going to make some losses. Keep in mind that no strategy can provide a 100% win rate, so it’s a good idea to prepare yourself mentally for the possibility of losses. Ultimately, an effective strategy will aim to give you more wins than losses - but those losses are still inevitable, so get used to it early if you want to avoid disappointment that a loss is likely to bring.


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