Do’s and Don’ts of Option Trading


Do’s and Don’ts for Option Trading

Option Trading has gained a very good reputation over the past few years, primarily due to the economic conditions, but also because option trading is both user friendly and a safe trading method.

Option Trading is not without risk; however, with careful planning and consistency these risks can be minimized.

Being aware of the risks, and taking necessary steps to avoid them, will help to protect your investments. Here are some strategies you should bear in mind if embarking into Option Trading.

Do’s

- your research. Learn as much as you can about Option Trading
- diversify your Option portfolio
- save some of your money, to offset times of recession
- learn to technically analyse the market
- follow the news reports, keep up-to-date with any stock changes
- watch your timing. Be consistent when you make your move, be patient, buy at the right time
- plan. When embarking on any venture, planning is the key to success

Don’ts

- trade according to a newsletter. Take advice from a Broker or rely on your own knowledge
- over-trade. Your commissions will quickly disappear in fees and your profits will be nil
- trade if you don’t know what you are doing, you will only meet with a fall
- learn to technically analyse the market
- be greedy. You should never risk more than your initial plan, of 10% the value of your portfolio

If you follow these rules, you stand a good chance of becoming a successful trader.

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Do’s and Don’ts for Option Trading