Find a Way to Achieve That Goal
How you achieve your goal is an important part of your overall strategy when it comes to trading. In fact, it might be the most important thing. If your goal is
to make $10,000 in your first year of trading, but you have an awful methodology for getting there, you’ll be lucky if you make any profit at all, let alone ten grand. So taking a look at your strategy is a vital part of your success.
THere are a lot of things to take into account here. You need to select a few assets to focus on. You need to identify the types of trades that you will be
making. And you need to figure out how much to risk, and under what conditions. Let’s break this down a little so you can get a better idea of just what the process here looks
Assets to Trade
This one really should be the easiest part. You want an asset that you really understand, both the fundamental side of and the technical. Ideally, it should be something that
you have an interest in outside of trading. That will help you to really enjoy what you’re doing and stick with it through the tough parts. If you’re a tech
geek, maybe focusing on things like Apple and Intel is your thing. If you love politics, maybe currencies are more your speed. Or, if you really like global economics, focusing
on a commodity like oil could be more your cup of tea. There are endless possibilities and combinations, but choose something you know, and something you want to know more
Trades You Can Take
There’s more than one type of option trade. There’s the traditional call/put where you’re deciding whether the asset will go up or down in price.
There’s the one touch, where if the goal price is achieved at any point before expiration, your trade is a winner. There’s other exotic trades, too. We recommend using mainly
the call/put, but it is okay to branch out once in a while if good opportunities are spotted.
Next, you need to focus on timeframes. Most trades out there revolve around 15 to 30 minute trades. But you can open up an
option for as short as 30 seconds with some brokers. You can also have trades open for up to a year, in some cases. Choose what works best for you based upon your strategy and your goals.
Understanding the Risk in Play
The risk you take on includes the amount that you are willing to spend on a trade, but that’s not all of it. Risk also involves the types of strategies you use and how you
implement them. For example, it is generally agreed upon in the options world that when an asset is in a bear trend, put options are less risky than call options. In a
bull market, call options are less risky than put options. Both have merit, but what you choose should be determined by your risk tolerance. The sooner you know what that is,
and the sooner you figure out how to trade within that range, the more comfortable you will be with your decisions, and the less often you will find yourself trading outside of
your comfort zone. This will decrease the number of emotion-laden, bad decisions that you make over the course of your career. This is just one of many trading strategies that
entail risk that you need to be aware.
In a perfect world, you should be varying the amount that you risk based upon your odds of success. This is a more advanced strategy, but as you progress in
experience, this will be easier and easier for you to figure out.