First of all, understand, Options trading is a very hard game. It’s a complex subject it has many parts, Greeks, IV, VIX and Price Action. Its not a individual thing. But it can be mastered, if you are willing to learn, the basics, and stick to it. Everything boils down to understanding the basic concepts, and use those concepts which are suitable to your psychology. At the end, trading no matter its options or stock, if you prepare strongly, you will come out as a winner. With the understanding that things could go against you at that time risk management is your first priority. The markets don’t care, who you are, and what knowledge you have, it knows you have money and market wants to take money from you. To become a successful trader, managing risk in your trade is your first priority. Lot of traders focus on making money and it’s a first priority for them. But if you manage your risk, ultimately you will get profit.
You must adapt different systems for different environment,
or you will adapt one trading plan and stick to it through out the years, these
are the only two ways to become profitable. But for doing this you must have
practise, patience and experience. Trading is a journey and must enjoy your
journey.
There are plenty of rules, steps & methods, we are
focusing only on 10 things only, which are prominent, the first one is “Do
Focus on Managing Risk”
Do Focus on Managing Risk
Managing risk is the name of the game and its your number
one priority. The less money you can manage to loss, or fix amount money you
are willing to loss in terms of points, or percentage, you will manage well. In
fact, when people ask you about your trading and what you will do? Tell them
you are a Risk Manager.
By simply researching option methods, you are actively
tackling other financial concerns in your life. These include inflation risk,
income risk, and even market risk linked with buy-and-hold investing. The study
of options trading — because it is all about risk management, attention to
detail, and planning your exit before you make a choice to trade in real time —
is likely to subconsciously rewire the way your brain views the markets, and
possibly life.
How to Manage a Risk
- When you base your trading on risk management, you develop the skill to:
- Understand the risks and rewards involved with the markets you trade.
- Before putting money on the line, learn and test your strategies.
- Make a strategy that specifies trade sizes, entry and exit strategies, and the maximum loss permitted.
- Decide how the plan will be carried out to respect your risk tolerances.
- Understand how to establish positions and manage a trade, including a brokers terminal if you any technical issues like, order punching, brokerage & regarding any margin requirements for complex options strategies.
- You must have a plan for booking profits.
- Ask yourself, what if I am Wrong?
Other things you can do, diversify your strategies, foe example,
if you have non-directional strategy combine it with directional strategy.
Stock in different sectors, in the nut shell diversify,
You will be more effective as a risk manager if you apply
these recommendations to your whole Trading.
Happy Investing & Trading
The ValuePlusOptions Team
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