Option Trading Advice for the Serious Trader
Option Trading Advice for the Serious Trader
Those trying to find option trading advice tend to be either a newcomer to the options market, or are seasoned traders experiencing some challenges with their active trades for that reason hoping for an answer. Should you be among the first group you are probably trying to find some advice about how to start options trading, what potential risks are involved and the way to prevent them, how to trade safely and still make steady profits. If you find yourself among the second group, there are ways to save or at least, salvage, failing trades, but this discussion must be left for another article.
So what is the best option trading advice for beginners?
The simple answer is, to be sure you first learn all there is to know about options trading, especially the concept of time decay, before you decide to risk any of your hard earned funds. Decide what kind of trader you wish to be. Do you prefer to be a day-trader, a short term trader or a longer term trader who only needs to look at your positions to decide if you will need to adjust them once a day and has at least a monthly or greater strategy in place.
The next question you might want to ask is, what underlying financial instruments will you plan to link your options to? Stocks, commodities or foreign exchange? Whichever one you select, each of them have their own set of characteristics. Stocks can 'gap' overnight. Commodities can become very volatile. Currencies trade around the clock five days per week and are affected by economic news items.
Remember also, that the shorter timeframes you intend to trade, the higher the stress and if you hold your positions overnight, the greater risk of losing trades damaging your account.
The Dangerous Approach to Trade Options
In providing option trading advice, we'd be remiss if we didn't bring to your attention the fact that, as with any business, there's a high risk and also a low risk method of doing it. If your intended strategy is to simply buy call or put options in an endeavor to predict short term market direction and profit from these movements in just a few days, you should know that even though this carries a potential high reward profile so that it is appealing, there is also a much greater risk that the price will go against you so that your losses can quickly be greater than your profits. Many traders who try to forecast short term market direction have cleaned out whole trading accounts.
You may believe you have discovered an option trading system that works for this type of strategy. But if you want some real option trading advice here, you should ask yourself whether you have the emotional self discipline to accept stop losses as well as remain in trades for enough time to attain desired profits. Do you have enough free time to be able to completely focus and take action when the need arises? The risky way of trading options often seems tempting to new traders because of the simplicity of its approach and the optimistic prospect of generating considerable profits. But even well seasoned traders find market prediction challenging, so beware of systems promising you the moon.
The Low Risk Way
Now this could be the most important option trading advice you might ever receive. If you understand the principle of time decay, i suggest you discover ways to use this to your advantage. It's far better to be on the short side of an option contract than the long side, due to this characteristic of options. Taking positions with about a month or slightly more to expiry date and being on the selling side of option contracts puts you at a clear advantage. Tips for Buying Tailgate Tables Online Star Trek Online Levelling Guide - STO Levelling Guide Secrets! Star Trek Online Rank Guide - How An STO Rank Guide Can Help! Secrets To Get Web Site Traffic Or Best Places Online To Buy Targeted Web Traffic Star Trek Online Ranks Guide - STO Ranks Guide Secrets! Tramadol Hydrochloride Online – Order Tramadol Hydrochloride No Prescription Needed! Live Pittsburgh Panthers Vs Kentucky Wildcats Bbva Compass Bowl 2011 Liveonline Streaming Ncaa Footb Star Trek Online Ranking Guide - STO Ranking Guide Secrets! Live Pittsburgh Vs Kentucky: Bbva Compass Bowl 2011 Online Streaming Ncaa Football Star Trek Online Level Guide - STO Level Guide Secrets Pittsburgh Vs Kentucky Bbva Compass Bowl 2011 Live Online Streaming Ncaa Football Penny Slot Machines and Nickel Slots Machines Online Alternatives at Slotland Slots Online Casino Protecting Your Online Reputation