What Do Successful Options Traders Have In Common?
There are many strategies and techniques that a trader can learn and apply to improve the income of options trading. Yet, there is not a universal mold of success as everyone applies the same tactics and process, yet not everyone earns the equal success. So, what makes a successful options trader? Please scroll down this blog to discover the overlooked traits!
Take a look through the headlines in this article, what do you think? I know it sounds too general, yet believe me that these traits are helpful for your success in not only options trading but also in every other instrument. How do I know it?
I have spent many hours reading and researching the backgrounds of many professional traders with consistent success. These traits are what I find they share in common with each other through the sharings in books, online courses, etc.
Also, you should be aware of the fact that every phenomenal achievement has a strong base which is actually simple. Moreover, trading success is personal, which means that every individual will have their own path. Even if a profitable trader shares the entire blueprints that you can copy, there is still risk for huge losses.
So, what I share in this article is a collection of the underlying principles that enhance your trades in a subtle way and create a strong trading edge in the market!
Be Ready For Adverse Situations And Failures
What a nice start for a promisingly profitable career! Yet, “failure is the first step to innovation”, said by Ocean Vuong. I personally find it adaptable to options trading. If you read biographies or autobiographies of investors and traders, there is a common thing — their failure stories before the chapter of brilliant success.
Options carry high probability of profits and high risk-taking levels, which explains why people call it a ‘dangerously attractive’ instrument. Thus, we need to be emotionally prepared to digest possible failures.
I know it sounds crazy and goes against the attraction law. However, it signifies that you prepare for the worst to achieve the best. Such a rule helps you save yourself from painful falls and maintain consistent profitability.
The question how to be ready for bad cases; plan effective risk management out! We might not avoid trading risks completely but can minimize the risks we take! There are some aspects that you can keep in your checklist to improve your trading’s risk tolerance.
- The maximum downsize that a trade can be.
- The implicit or explicit position in comparison with volatility.
- The capital you invested in a trade.
Actions that you can take to decrease the impacts of adverse news to your trades are:
- Analyzing the market trends and its cyclical patterns for accurate market forecasting.
- Adjustments of your positions and trade sizes by buying or selling options.
- Diversification of your trading portfolio to increase chances by being less dependent on one security.
Be Good With Numbers
Options trading is an event-driven market, which implies that price actions will change according to the reaction of options traders to certain news. It explains why technical analysis plays an important role in the development of powerful strategies and flexible tactics.
With technical analysis, you will have to work with databases and charts. So, if you have excellent capacities of numbers, it will be ideal to collect ingredients for strategy development and tactic adjustment.
Specifically, you should master the knowledge and skills of chart reading and database analysis. The list can be long, yet I highlight the fundamental indicators that you should learn below.
- Greeks: the delta, vega, theta, delta, gamma, etc.
- The meanings behind the implied volatility.
- The answer to the question whether the option is in the money or out of the money.
- Finding what the breakeven point of your trade is.
Be Self-Disciplined
Every trader who maintains their trading success for years must exercise strong discipline. Don’t get it wrong with following strict rules that others tell you! It means you develop and effectively conduct a trading process and essential techniques.
There are some activities that many successful traders share in common, including:
- Extensive research about viable techniques and the market patterns of upcoming price actions.
- Spotting the signals of trading opportunities and setting up adaptable strategies to achieve high profits.
- Planning your strategies of entering and exiting the market.
It is like doing your homework that builds up your progress. You have your time which is free for your spending and management. Every trader has their different ways to accomplish their goals but they stick to their plans and the indispensable steps.
For example, you cannot skip the implementation of technical analysis before forming your trading strategies. It is like you construct a building without a technical drawing and materials.
Be Calm And Follow Your Plans
Instant gratification feeds us the expectation of easy and prompt winning. Yet, real-life success is a slow revolution that takes much more time, effort, and failures. So, if you have faith in your abilities and capacities to grow bigger as the strategies are the data-driven models, options trading profits will come, sooner or later.
All you need is to control your hunger for winning and maintain your patience. In other words, you should be calm and keep the presence of your mind to get the right timing. There is still time so you do not have to rush; being too fast or too slow is not good, things should be timely!
Be Clear-Headed To Financial News
As mentioned above, options trading will be under profound impacts of financial events and market news. So, the accuracy of price movement prediction depends on how sensible you are to market events.
When trading, if you state that you do not read news, I’m sorry but I will tell you to be ready for failures! You need to be all ear to what is happening and practice the abilities of forecasting the next price actions.
Not only reading news, you should also interpret news, relevant events, and the possible impacts on your options trades. This is among the most crucial skills that you should master to maintain high profitability and get ahead in such a tumultuous market!
Be Open To New Techniques
The fast pace of trading markets easily makes you quickly lose your mind as the price actions seem to follow no principles. Yet, the fundamentals of options trading are what you can lean in to save you from confusion. Go back to the basics and you figure out that every solution is on the table, already!
However, if you do not update your knowledge and skills, it is easy to be left behind by those who keep learning. So, the key point here is to be an active learner. It means you should actively find the high-quality and prestigious sources of courses to take glimpses into other people’s success and their mistakes.
Another factor that you should consider is that not everything others tell works for your cases. So, get your filtering systems to know which techniques won’t contribute to the profitability of your trades and even worsen it.
Be Flexible to Adjust Tactics
Being disciplined and persistent is not opposite to being flexible. There should be spaces or rooms for changes due to the constantly changing price actions. For example, when you plan to buy options but the prices of assets are increasing, it means you have to pay too high strike price! It is advisable to change your plan to wait for another suitable timing.
So, you should be flexible in terms of trade adjustments thanks to the compilation of trading news and insights from technical analysis. Being proactive in getting updated by reading financial market news and chart reading saves you from costly pitfalls!
Record Your Progress
If things happens and keeps in our memories, we cannot see the progress throughout processes. So, it is essential to keep the records of every trade performance by you or any other traders. You can draw insights into effective tactics, timely actions, and mistakes.
Gradually, you can learn to improve your options trades through the analysis of your own trades. If you spot any sign of growing profits or losing cash, take notes of these successful or failed trades. Such information is precious for you to keep high earnings!
Last Thoughts
This blog compiles some noticeble traits of successful options traders. These characteristics and actions are the great additions to your options trading blueprint. It will not show any phenomenal growth right away, yet you can see the drastic improvement if you review after the period of practicing your mind and tactics. Now, it is time for you to create your own path to trading success!
References:
https://www.investopedia.com/articles/optioninvestor/11/how-to-be-a-successful-options-trader.asp
