KEYS TO SUCCESS IN OPTION CALL PUT TRADING
1) Don’t Average There is a reason for the expression that ” the trend is your friend.” Don’t fight it and most of all Don’t assume that it will turn itself around. Averaging down into a losing trade is a sure way to lose your money.
2) Trade when the market goes up and when it goes down. Most traders know how to buy calls. They know how an when to buy when they believe that the market will go up. But there is an equal amount of money to be made when it goes down. You have to be comfortable investing in both calls and puts. Again look at the trend and if it reverses get out of the trade.
3) Trade logically. Fear based trading is a sure way to lose money. Fear creates paralysis. It keeps you from pulling the trigger and getting out of a trade.
4)Trend: The objective of successful options strategies is to create profit. It is opposite of what many believe. You are not there to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower. Look at the trend.
5) Sell markets that show the greatest weakness; buy markets that show the greatest strength. Again look at the trend. You are not here just to buy into strong markets. You are here to make a profit either way.
6) Trading is not compulsory:You do not have to be in a trade all the time. There are times when the markets are flat or in a sideways trend. This is not the time to enter a trade. Stay out of the market!
7) No one can predict the market. Your options strategies should always include entry and exit points. Have a stop loss point in mind for each trade before you enter it. This is where most people get it wrong. You must be willing to put exit points in and stop losses as well.
You will win many trades but you will also lose some. No one is infallible. The main thing to remember is that you must trade long enough and minimize your losses enough to continue trading for those big winning trades.