If you trade options part time or full time, and you don’t have at least a basic understanding of technical analysis, you’re probably missing out on a lot of very profitable trades. The fact is that understanding technical analysis can help you to take a lot of the guess work out of your options trading, meaning you’ll have a chance to become a much more profitable trader.
The simple fact is that if the market is making higher tops and bottoms on a chart, you want to take advantage of that. As traders, we need every piece of help we can get, and riding a persistent trend is one of the biggest legs up we could ask for. Using moving averages can also be helpful in determining the trend, because they provide a visual cue to which way the market is going.
But if your options trading system ignores technical analysis, and you are fighting the trend, it makes it harder to be consistently profitable, regardless of whether you’re a buyer or a seller of options. Following a trend and understanding support and resistance can also allow you to enter positions in additional contracts in the direction of the trend as the price rises or falls. This lets you compound your profits with less risk than if you ignore technical analysis completely. Always remember – the trend is your friend, so that’s the way you want to trade.
So does a system that incorporates technical analysis give you profitable trades every time? Of course not. The fact is that as a trader, you are going to lose on a percentage of your trades because we never know for sure what the market is going to throw at us. But using technical analysis can highlight potential trade opportunities for us, and we can then make decisions based on our trading plan.
The good thing about options is that we can always roll our contracts up, down or out in time if we need to, so if we are on the wrong side of a trade, we can change the strategy to suit. This is an important benefit, because it gives us more time to let the position become possible, rather than simply buying or selling a stock, where the profit or loss is locked in.
So what choices do you have if you’d like to trade options, but you’re not confident in either your technical analysis or trading ability? A great way to cut down the learning curve and become a profitable options trader is to ‘borrow’ a successful trader’s system and use it for yourself. That means you could start trading profitably almost right away.
It really makes sense for new traders to let somebody else spend the vast amount if time and money it takes to learn an options trading system that actually works and makes money. That way all you have to do is take the trades as they are called, and enter the positions to get on board.
To learn how to trade profitably without wasting a fortune on useless options trading systems, visit options trading experts. Then read this trading article on how to choose an options trading system.
Author: James KupeThis author has published 5 articles so far.