7 Common Mistakes of Option Traders

Harvey runs the government must affirm options trading on cute and today we’re gonna be looking at seven common begin option trading mistakes.

Assuming that it takes a professional to succeed with options

Case at first up commissioning that it takes a professional to succeed with options not true dole retell investors can succeed in this he tended to be one of these guys down here on the floor shouting out numbers in orders it really is possible to do this online from home so don’t be scared off that you not big enough or not smart enough and when that have enough experience to do this you really can do it it just takes a little bit of time a little bit of application and a little bit of experience in a little bit of knowledge so was keeping the back him on that you can do this and then there are other people like you who are doing this and who are succeeding.

Not having a pre-defined trading plan

Now this is really really important perhaps the most important one i would say meaner roughly speaking out cycle b eighty percent of people don’t have a training plan and that’s probably why eighty percent of people of successful you need to have a determined this needs to be written out by the way trading plan that says when you know and to try it when you gonna exit rights when you look at the losses when the inner tell you profits and things like risk management rules and money management rules as well as a very very important and it’s a constantly developing thing it’s not something that you gonna set up on day one and that’s going to be a training plan for the rest of your life he constantly evolving missing us to gain more experience in gained more knowledge it’s a very very important they guys make sure you’re going to try trading plan.

Trading options before having suitable knowledge

Now i’m sure some of you have there perhaps a little bit guilty of this united getting sucked in by some of the big numbers the people of spurting out there some of the big risk-reward profile of the people talking about and putting on treasure that having for understanding of what you’re doing and what you try to achieve so i really just do yourself a favor get yourself educated first before you start risking live capitol paper trade for at least three to six months to get the hang of it and then go laws die just jump right in on day one.

Looking at the potential rewards and ignoring the risk

So when people first learn about options trading they say the the massive amounts of leverage that is available in my mind looking to try and so i can invest five thousand all of them i could potentially make a hundred thousand dollars may get all excited but what they fail to realize is that they could lose a hundred percent about five thousand dollars so united bank it sucked in by these big numbers that some people were staffing make sure you understand the risks of what you doing and and understand what the worst-case scenario is before you place it right.

Choosing a broken that doesn’t specialize in options

Now this is another important one a lot of the retail brokers that you might use to be a stock trades may not be suitable for options they may have options trading capabilities but they may not be the specialized in options that may not have a decent fee structure for example options house have a very very competitive fee structure estas interactive brokers in a TV ameritrade elliott via fidelity begin to be a little bit more expensive to trade options and i may not have some of the functionality in air online platform he might be looking for tonight reaches a good option to an option broke a options houses that there’s a really good on an interactive brokers as well.

Putting all your eggs in one basket

Again going back to that idea of investing five thousand those in your options and looking to make a hundred thousand dollars united doing it within a week after all in one auction try it is definitely not a good idea and also you’ve got to diversify in this sort of sectors that you’re investing in as well he training debbie training all in the the technology sector or all in the retail sector you gotta spread your investments around a little bits forget riding around and also try different strategies as well dot be just writing long colborne just writing covered calls may show you try some different things that  gonna behave differently in different market environments so you can diversify a little bit of volatility risk is one way to diversify just by looking at different options reading strategies

Having an emotional investment in your trades

And finally a lot of people again and probably guilty of this one whether their option trader or just a stock trade or even forex and it’s having an emotional investment in your trades right so how many of you have had it right in your cake you stop loss level but you’ve decided to stick with and and you’re absolutely sure it’s going to turn around and the come a winner in all of sudden there absolutely wiped out a couple of hours later and you you really disappointed with is something you just had that emotional investment in the trade and he just thought you were definitely had a winner you know you fully smarter than everyone else and analysts on new sitting on a fifty percent lost sight that’s another really really good big one that is very important when you try to options just because of the high levels of risk and the high levels of leverage you know you really need to stick to those trading rules that you haven’t cut the losses when you should.

 

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