Here are some basic rules that will make you a successful options trader. It is not what you trade that’s the question, its how you trade that is the first stepping stone in realizing option trading success.
Rule 1: Follow the written trading strategy
It should be written next to your bed or working space. If you do not have a written trading plan, then you are already executing a daily plan. It is human nature to explore doing things without the rules, and it takes discipline to act in line with the rules that one has established. If you can only follow your trading rules, you will have a higher chance of becoming successful in options trading.
Rule 2: learn on a daily basis
Markets change on a daily basis and the strategies you used to trade the markets years ago will not be working at this point. You need to continue educating yourself on a daily basis. There are very many articles and videos online that can help you improve your strategy as the days go by. This will help you have a huge knowledge that is fundamental to trading successfully.
Rule 3: Do not compound losses
You need to know early enough when and where you need to cut your losses. There are different reasons that can lead to it, but it does not matter whether its a move or technical failure, always use of proper risk mitigation plan. Some traders have a low tolerance to losses which is fine, but what needs to sink us the fact that you need to set stop losses that have limits of loss tolerance.
Rule 4: Always rely on the charts
It is important to know that you cannot affect the market the way you think you can. Praying, hoping and even pleading and sacrificing something in the name of price moving in your direction will not work. Wishes and hopes are left for the horses. Always focus on the charts, everything is normally reflected the volume and price when you look at the technicals.
Rule 5: Stop with the analysis paralysis
Stop over-analysing the trades and start making the trades more often. Again, do not go overboard and start day trading to the max. What you should know is that a setup needs to be followed to the latter without hesitation.
Most people analyze for days and never gets into a trade. How will you ever learn if you don’t act? You need to stop hoping for large trades or thinking if you are wrong, start small and keep trading. If you start trading with a few shares, you will trade several hundred or thousands of share successfully.
Conclusion
Finally, as a trader, you need to set high targets but do not setup yourself for mediocrity. Fixate your mind on the process and how to trade successfully and do not place your emotions in the market. Stay motivated, set realistic goals to get to the next level.