I haven’t always been the most patient trader. In fact, I could never find the time to wait early in my trading career. I was constantly pushing ahead and on the hunt for a new trade. Did the trading environment matter? Nope. Did I take the time to analyze the situation and understand if I was standing on fertile ground or a trap door? Nope. I learned the hard way that patience in options trading is a must.
As an active trader, ‘learning the hard way” means taking hits to your bottom line. I think back now on some stupid mistakes I made, knowing that I could have avoided huge losses by simply waiting a bit longer – a few hours, a few days – for the right moment to buy or sell.
In movies and on TV shows, aggressive traders are positioned as successful. They appear to be in on the action all the time. Contrary to what is served up on the big or small screen, having your capital on the line doesn’t equate to being in the game.
Patience in options trading is a must
Successful traders practice good risk management; they prefer to sit and wait for conditions to become more favorable. They don’t want to buy into a risky trade, hoping it will work out. They wait for a fat pitch before taking a quality swing.
As an options trader, you are always fighting against time, which makes it even harder to be patient. Buying options (calls or puts) gives immediate advantage to the seller. Your trades will fight the clock until they are closed out. You cannot waste time holding onto a depreciating asset if the stock is not going to move in the right direction.
But don’t become so cautious that you miss out on good trades! Conditions do not have to be perfect to win, whether it you are trading stocks, options, futures or commodities. But certainly the playing field should at least be even and fair, providing you with an opportunity using your technical and fundamental skills to make a profit.
The current market conditions are challenging at best, so continue to exercise patience in options trading. Wait for the fat pitch. It’s hard to do, but it does lead to winning trades.
