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Options Trading Strategy that makes Money - Alldamoney

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Options Trading Strategy that makes Money


Best Options Trading Strategy
Best Option Strategy 
One of the most versatile financial market instruments existing today are Options.
They can be used to leverage positions therefore increasing returns, make profit from upside, downside and sideways movement in the market and to manage risk through hedging.
Trading options carries substantial risk of loss despite its many benefits and is very speculative in nature.


To become a successful options trader, one requires certain skill sets, attitude and personality type, which we will discuss briefly before giving out the best strategy used and tested by prominent option traders.


1.    Manage risk:
How much of my capital should i allocate to a trade? This question is the most important subject to discuss before diving into options trading. Options are high-risk instruments, and it is important traders know how much risk they can withstand in trading financial instrument.
Some traders manage risk by putting at most 10 – 20% of their trading capital into any trade. They can also diversify into many different trades not to keep all their eggs in one basket. It wouldn't be wise to plunge 50% of your capital into a single trade for example
2.    Practice discipline:
Options traders must practice discipline to become successful. Discipline in the sense of forming and sticking to a strategy, doing extensive research, setting up goals and identifying opportunities, setting up the right trade, and having an exit strategy.
An example of discipline is deviating from your strategy to follow the crowd. Undisciplined traders trust others opinion without doing their own research.


3.    Patience and Match trading style with personality:


Patience is a must have for all options traders, through Patience investors wait  the market to provide the right opportunity, instead of  aiming at a big win on every market movement. Successful option traders sit idle for hours, days and weeks just watching the market, for the perfect timing to enter or exit a trade.
While most people’s personality can’t take that every trader has a different personality type; therefore, each trader should adopt a trading style that suits his or her traits such as day trading, where they buy and sell several times during the day in order to make small profits.
Others may be more comfortable waiting for days for the right timing
4. Learn from losses:


What differentiates successful traders from ordinary ones is their ability to learn from their losses and implement what they learn in their trading strategies. For example a recent report by The Chicago Board of Trade  states that 90% of options traders make losses.


5. Plan your trades and Maintain records


An Options trader, who plans will most likely succeed than one who flies on instinct and feelings. If you as a trader don't plan, you could place random trades, thereby becoming directionless in trading. But with a plan and sticking with it your goals and route to achieve it will be clearer.
For example,you will know how to cover your losses or when to book profits. All these steps are essential to developing a strong trading strategy.


Also by keeping records of trades and maintaining proper trade records a trader will avoid making costly mistakes.
                      What’s the best strategy used to trade options?
* Disclaimer the author will not take any responsibility for the decisions you make in your trade by reading this article


(You are responsible for picking the right type of stock and setting stop-losses)


There are many strategies to trade binary options and new strategies appear every day as binary options become more and more popular.
As there is no universal formula for successful trading for trading binary options the best strategy is therefore combination of a few strategies.
Foremost a trader must through experience set out a strategy, which works and suite all the lists stated above
For example, I use Head & Shoulders, MACD and Collar as my technical indicators you can use any one that works in your case.
Without going further, the strategy most established traders use is the short put, short call, or both together (i.e. Short strangle) selling options naked in other words,.
While this strategy guarantee to make money trading options, it also comes with pitfalls in other word things can go wrong if not done the right way.

Things to avoid are: 

1) Not having enough capital.
2) Not knowing how to manage it properly.
3) Not knowing how to lessen exposure to this type of strategy or the type of environment to avoid.
4) Not knowing the underlying well.
5) Not knowing how much of your portfolio to allocate to these types of trades.
6) Not know the worst case scenarios of every trade you place.
The Bottom Line is
While it’s great see your pick come out on top, options trading is a game of risk that should be done with care. The above strategy is not for beginners. But when you have accumulated enough experience with options and have enough capital, it’s a high success probability strategy to at least follow.    


Video: Options Trading for Beginners


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