Have you ever wondered how easy it looked when some guy at seminar or class explained option trading to you? You would’ve been pretty convinced back then in believing how “simple” it is to make money from options trading. But, when you came back home and started trading you failed to earn money. Truth is, you’re mistaken. You believed that options trading is a way to get rich quickly. On the contrary, it is a marathon where you gotta keep patience and build a mentality to do options trading for the long run.
Even professional options traders use countless methods to do an evaluation of a prospective trade. It is because of the options trading carries a sustainable risk. But, don’t worry! Because there are still professional options traders out there who didn’t even have a finance background but still able to acquire the skills required for professional options trader.
Which is why we will help you by mentioning the important characteristics which required for both beginners and experts in options trading.
Characteristics Required in Every Successful Options Trader
The first thing all professional options traders have in common is the understanding of risk. In options trading, risks are directly proportional to rewards. But, some traders only focused on rewards and give very little concern to the risk factors.
So, to recognize the risk at any point you must analyze the trade by maximizing the downside of trade and position w.r.t the volatility.
Most importantly, how much of your money is allocated to the trade?
Quick tip: Never block all your capital in a single trade.
Patience is one thing which is common for all smart options traders. They watch the market, analyze, and wait for the right moment to enter and exit. But, novice traders are quite the opposite. If they gain from the market at one time then they become impatient and rush into things so fast. The result, emotions clouded their judgment and spoiled everything.
Remember, successful traders, take time to understand the market, studying different trends, and try to learn everything. This lead to our next characteristic “Discipline” which differentiate experts from amateurs.
Note: the Formal education of Stock market and F&O market is irrelevant to your actions and decisions. Even a person without associated with formal education can be a pro options trader.
Discipline allows you to handle any critical situation without panicking. Plus, discipline here is not about your manners but certain steps which you must follow like doing research, setting the trade, create & follow strategy, setting up goals, and create exit strategy if things go south.
If you do not have discipline and deviated then you are following the herd. You shouldn’t depend too much on the advisor’s strategy instead create your own which work on your particular trading.
It is important to do options trading which suits your personality. Most successful traders have their own style. For example, some people use time decay and do intra-day trading but some need longer to figure things out and choose swing trading. Although, there is another type of trading i.e intra-day trading which is also common in a lot of traders. So, you better figure out your type of trading.
Watch & Learn
The best thing about smart options traders is that they can interpret the news and differentiate between hypes from promising news. This key quality separates professionals from amateurs. You can also try to interpret news and take appropriate decisions based on that.
Plus, you have heard of “Practice makes a man perfect” which by the way is a fact actually. Especially, in the case of options trading, when experts lose (yeah! Even they lose too.) they think of it as a future lesson and learn from it. To keep in touch with latest trends, you must follow the latest news and learn current trading strategies based on the behavior of the market.
Make a Plan
A options trader who solely depends on his/her instincts has fewer chances of success than a options trader who plans everything. A options trader with a plan usually make smart decisions and have a habit to not lose cool when things go south. Plus, you can’t depend on your instincts all the time. It is not wise to take big decisions without any research and planning.
Records! Keep it Safe.
At last, keeping all the records of your past options trading all the time. 1. it will help you to go through the details for future trading in the form of critical information and 2. It will help you to avoid making costly decisions.
Final Thoughts: –
We believe this guide will help you in becoming a better options trader and you will implement these characteristics to build your skills to do options trading. Remember, it is not a sprint but a marathon where you need to be patient, disciplined, and adapt your surroundings to make smart decisions for future.