Option Trading Strategies – Tips for Profitable Trading Part II

Option Trading Strategies – Tips for Profitable Trading Part II

If you missed the Option Trading Strategies – Tips for Profitable Trading Part I click here

Tip 6 – Analyze.  Most option trading software provides a wealth of tools that assist the trader in analyzing positions and trades.  I use ThinkorSwim software www.thinkorswim.com and have used their on-line tools and studies to help me make better decisions.  I consult their charts and tools every day, taking advantage of the analysis and the information it provides.   Learn more about analytics click here.

Tip 7 – Follow the news.  I have a home office where I trade.  I have a TV in my office which is always on, usually tuned to CNBC.  I’m sure my family thinks I’m really watching the Food Network during the day, but not so.  I watch the financial news during the day.  I surf the internet for upcoming events that could effect the market, housing starts, job reports, earnings reports, etc. anything that could cause the market to react, favorably or not.    The market also responds to non-financial news, particularly political news.  Remember to keep your eye on what’s happening, in and out of the market.

Tip 8 – Paper Trade first.  Most option trading software programs have the ability to paper trade or simulate the trading experience with paper money.  ThinkorSwim sets you up with a Paper Trading account that allows you to fake trade with $100,000.  Take advantage of it.  I still use my paper trading account to try new strategies, indexes or option types that I haven’t traded before.  Paper trading allows you to practice placing trades, learning how to use the software.  One thing to take into consideration, paper trading simulates the market, it does a good job of helping you to understand how to use the software, but it is not 100% representative of how the market will react in live trading.  One thing I have noticed about paper trading vs real trading is that trades execute much quicker in paper trading.  Please keep in mind things that happen while paper trading are simulations, real trading is, well, REAL!

Tip 9 – Do paperwork!  We all hate to do paperwork – okay there are the rare few who like it, but most of us would rather not bother.  Here you have to bother!  Create a process that works for you in recording your trade activity.  I use a simple report that tracks all my trades.  I go back to them often to help me plan my next trades.  At the end of the trading period I simply print out my monthly statement and put it in a binder.  I also have created an excel spreadsheet that I track profits and commissions on a monthly basis.  At the end of the year, I print and send to my accountant.  Easy, done, legal.

Tip 10 – Mastermind if you can.  If you are not familiar with the concept to masterminding, Google it, there is a wealth of information on the subject available.  I have a mastermind group of 6 people, we talk for about an hour once a week.  Same day, same time, every week.  We are all following essentially the same strategy, but that is not necessary.  We share our thoughts on the market, our strategies, psychology, wins and losses.  We learn from each other and it makes it really fun.  Being on a mastermind group has given me so much more knowledge and confidence much faster than I could have gotten on my own.  It has helped me make better decisions and has probably kept me out of trouble a time or two.

Bonus Tip – Have Fun.  I don’t know about you, but I have had jobs that were, well, JOBS..  Not much fun, working for people I don’t like or respect, working with people I don’t like or respect, spending countless hours making money for someone else, doing something I’m tired of doing, yadda, yadda, you know the drill.  Now I trade options for a living.  I spend at most, an hour a day trading, most days I don’t trade at all, I just monitor my positions and do nothing.  Fortunately for me, I live on the west coast so my day ends as 1pm when the market closes.  I do what I want to do, pretty much when ever I want to do it, and I make money every month.  I don’t have to sell anyone anything, I get to work my own hours, I carry an iphone with me loaded with a trading application (called iswim from ThinkorSwim) so I can monitor my positions and trade from anywhere.  I have a community of option trading friends with which to share this journey with.  If you are interested in finding out more about our community please visit us at www.optiontradingcommunity.com – comments and participation encouraged!