Today I will review three option trading secrets that everyone should know…
These are the keys to your success! They may seem very basic, but are frequently overlooked, to the extent that traders miss critical information, which could cost them in their trading.
Secret #1- ALWAYS have a plan!
It is very important before you place any options trade, to have a plan. The plan would include:
- a profit target
- a max loss exit target
- a plan for repairing the trade (if it begins to go against you)
If the trade starts to go against you, one repairing technique would be to stay in the trade a little longer to see if it will work for you. Without a plan, emotion begins to take over and traders make very poor trading decisions. Fear and Greed are a traders worst enemies!
Secret #2- Place the proper size trades for your account.
Basically like the old phrase, “don’t put all your eggs in one basket,” try placing trades that are small. A single trade should be no more than 5 to 10% of your trading capital. Further, you might consider diversifying them a bit for volatility changes. Sometimes when traders have initial success, they get too big, too fast and then over trade and blow up their account. If you always use proper money-management you can avoid this pitfall.
Secret #3- Keep a trading diary and regularly review your trades.
It is always good to go back over every trade you do to see what you did right, what you may have done wrong, or improvements that you can make. Sometimes, you can notice patterns that have led to either successful or unsuccessful trades. Try to learn and grow from yourself as a trader.
I am confident that if you follow these three simple “secrets” you will improve your option trading business. Happy Trading, and Remember, if you need help, look to Sheridan Options Mentoring.