Another year has passed in the markets, and hopefully it was as successful and satisfying for you as it was for us at Explosive Options. We made some massive winning trades and our fair share of mistakes. But most importantly, our members and I gained more knowledge. Hence, I have three options trading success tips to share with you.
I often say that trading is not a game of perfect. Instead, it’s about continual learning, planning, discipline and patience. Are you willing to do whatever it takes to be better in the year ahead?
If you’re read to take on that challenge with me, the tips below may help you improve as a trader.
3 options trading success tips
1: Evaluate your appetite for risk
Successful trading requires excellent risk management. Did you extend yourself at times? Fail to take a profit when you had one? Suffered from FOMO?
I’m quite sure most of you did one or more of these things. But don’t feel bad and beat yourself up over past mistakes. Every trader I know has conveniently relaxed (or ignored) their own rules. In fact, I have violated my own risk management principles at times.
Some healthy self-awareness will help you improve your actions. Just try to keep this tendency under control and do it LESS next year. Discipline is one of the hardest things in risk management, but it will save you from a disastrous outcome.
2: Keep cash on hand and puts working
Keeping cash on hand is mandatory to ensure you have enough liquidity when your next great trade opportunity arises. To raise cash, you may need to sell some names that you do not want to exit. Make it a goal to always have some strong levels of cash reserves on hand.
And protect your gains via index puts. I realize that buying insurance can leave a bitter taste in your mouth, but you’ll be happy to have it when volatility spikes. Index puts serve a very important purpose: They reduce your portfolio volatility and therefore the amount of losses you can incur.
3: Dare to be different
The stock market is a herd-mentality machine. It pulls everyone in when it is going up and spits everyone out when it is going down.
When conditions are poor and markets are bearish traders flee as if someone called out, “Fire!” in a crowded theater. If you’re part of the crowd, you’ll achieve market returns or worse.
But if you make some contrarian trades, your success is in YOUR hands, not the market’s. I never advocate for ignoring what the market is telling you. Just look for opportunities to the downside that others don’t see.
Wishing you a very successful and lucrative year ahead as a trader!
And if you’re new to options trading, try taking our 10 day trading challenge. It will equip you with some solid skills to get you started on the path to success.
