Options trading business has changed the overall concept of trading. The retail options traders can easily make a consistent profit just like the elite day traders. But to make a regular profit in the options trading industry, you must learn some of the most advanced techniques. Since the trades are taken in a lower time frame, you must learn to pay attention to the minor details. And this will be only possible if you have a professional options trading strategy.
Some retail traders often buy professional option trading strategies from experienced traders. But this never works. To succeed in the options trading industry, you need to develop your options trading method systematically. Let’s read this article and learn some amazing techniques to earn more money.
Get a demo account
You need to get a demo account to learn the basics of trading. Instead of learning to develop your trading strategy, you should learn about the price movement of the different assets. By having a clear overview of the price movement, you should be able to manage your trades more strategically. Things might seem difficult and boring, but you don’t have any other option rather than using the demo account. Some retail traders often think they can learn to trade in the real market since they have enough money to invest. But if you invest your real money and try to learn to trade, you will be under heavy pressure. Thus you will never learn the important factors related to the option trading business.
Support and resistance level
The support and resistance levels are the most important trading levels. If you intend to make a regular profit in the market, you should evaluate the market data systematically. Look at the higher time frame and use the highs and lows to draw the important trading zone. You may also seek help from the trained traders at Saxo Bank and learn the proper way to draw the support and resistance level in the chart. Once you learn to analyze the support and resistance level systematically, you can start taking the trades in the demo account.
Usually, the support levels are the place where we will take the call option. On the contrary, the put option is taken at the resistance level. Before you learn to take the call and put option, you need to be aware of the fact that these levels are often broken. If you try to ignore this fact, you will keep on losing the market.
Dynamic trading zone
To deal with the options market, you need to deal with the dynamic trading zone. Usually, the traders use the 100 periods moving average to find the important support and resistance level. When the price of an asset test the 100-period moving average from a higher position, traders take the call option at the 100 SMA. On the contrary, they set the put option right at the 100 period SMA when the price is trading below the SMA.
The SMA can also be used as a trend identifier. When the SMA has a positive slope, consider the overall trend as bullish. If the slope of the SMA becomes negative, you should be looking for a sell signal. Practice using the 100 periods SMA and you should be able to develop a robust trading method.
Risk management policy
Once you have a basic trading strategy, you should start working hard to improve your risk management policy. You can’t survive in the options market by trading with high risk. The maximum risk that you can take per trade should never exceed 2% of your account balance. If it does, you breaking the basic rules of investment. Try to adhere to the common risk management rules so that you can withstand few losing trades. And avoid taking any trades that go against the existing trend.