How to Become a Successful Option Trader
Hi option traders. I hope you are doing well today and that you find your portfolio growing. This article is part two of a series of six, and each article is accompanied by a video. I highly recommend you to watch all six videos if you’re interested in learning how to trade options as a business.
Back testing is one of the greatest things that you can ever do as an options trader. Now this task can be rather tedious especially with the software that is offered on the current market. The most popular software out there is Optionvue and the other is Think or Swim, the latter being a brokerage. Now in both of these software packages it takes hours and hours of manual labor to produce back testing results. Recently, San Jose Options has released their new back testing tool called the Options Toolkit. With this software we can turn hours into seconds. If your time is valuable to you, then I would highly recommend this software over anything else on the market.
For instance, I used to spend several hours using other options analytical software to back tests stocks over earnings release dates. I was able to find some winning trades; however, the work was so tedious and boring that I did not have the patience to back test 4000 stocks. Now, with the new San Jose Options back tester, I can turn days in into seconds with the single click of a mouse.
So while back testing is very important to see how your strategies have played out in the past, another important quality that every successful option trader has to have is experience. Unfortunately, experience only comes with time, but the reason we need this time to pass is because the stock market has many different faces, and as an option trader we need to fully understand the market as deeply as possible.
Trading with paper money is another great way to become a better options trader. Most option brokers on the market offer a paper trading account. I personally like what Thinkorswim has to offer. I find their software very robust for trading options, and their paper trading accounts uses the same software as the real account, so it’s a great way to learn. Obviously, it’s a good idea to make consistent returns in your paper trading account for several months before entering option trades with real money. As stated before experience is very important because the stock market changes rapidly and wears many faces.
Finally I would like to say that is very important to keep about 25% of your money in cash. This money will be used to make adjustments, to lock in profits and to put on key trades that will make a huge difference in your trading performance at the end of the year. It’s very risky to use up all of your trading capital, so remember to leave plenty of money free if you want to become a good options trader.
For The Best Education in Option Trading visit the San Jose Options Course at www.sjoptions.com
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