Trading Options Successfully
Over the past seven years, I have been a full-time trader and options trading mentor. I have found, over that time, that becoming a mentor has helped my trading, just as much as or more than any other thing that I’ve ever done to improve my trading.
As a mentor, I see day-in and day-out what works and what doesn’t. So whenever someone asks me, “How can I trade options successfully?” I think I can speak with some experience.
How to Be Successful at Trading Options
The most important thing you need to being a successful options trader is to have a plan. The plan requires answers to these questions:
- What will I trade?
- How will I trade it?
- What will my profit goal be?
- What will my max loss be?
A very important part of the plan is that the plan has to be a good one, meaning I have to find a valid option strategy, and I have to understand how stock or indexes that I use, move. The plan must involve:
- Which options I’m going to use?
- Which underlying (and the strategy)?
- When I’m going to enter the trade?
- How will I manage the trade if it works for me/ against me?
- How can I hedge my risk?
- How can I adjust my trade?
Those are all very important things you must know before you ever enter a trade!
Be sure to check out our online options courses.
Have a Plan
Many times I see traders who think they have a plan, but once they enter a trade, they change around what they are going to do. They then become listless and indecisive, which causes problems.
You must have your plan and stick with your plan and adjust it only over time.
Do not follow every emotion and whim that you have, while you are in a trade. I think it’s also important to not only have a strategy and a plan, but also to have trading goals.
You should keep a written record of your trading goals and your trade results over time, so you can see for yourself what works for you and what doesn’t, allowing you make changes along the way.
Risk Management
Risk management is also key along with having a max loss number and adjustment plans. Many times, when you are making a monthly living in options trading, it’s really not how much money you make when you win, it’s how much money you do not lose when you lose.
If you have a 10% profit goal each month and you are successful most months, that will work, if, maybe you only lose 10-15%. However, if you are losing 30% and 40%, that will become a problem.
Accountability
Lastly, you need some accountability. I found for myself and for other traders that, if you have someone to talk to about your trades and to give you a second set of eyes to look at them and give you some guidance, I think that will do great things for your trading and take you to new levels of ability and success.
One-on-One Mentoring
This is why, at Sheridan Mentoring, we feel that One-on-One mentoring is the best process for developing traders. Trading can often be solitary and when you get out on your own, you tend to lose your way.
Having someone checking in with you, who you feel accountable to, will keep you on the right track and make your trading much more successful.
Mark Fenton, Senior Mentor at Sheridan Options Mentoring