Option Trading Success part 2
Written by Donald Scott on February 7th, 2010
Welcome to part two of a video series of six on how to trade options successfully. There is some really good advice in these articles and videos, and if you are seriously interested in becoming a successful options trader, then I highly recommend that you spend one hour of your life watching these videos. You can find them all on You Tube.
One very important step in becoming a better options trader is to spend ample time back testing. Currently there are just a few option software programs on the market that can help you achieve this task, but back testing is worth your time. I personally learned a lot by using Optionvue as well a Think or Swim to back test my option strategies. Although, the previously mentioned software\’s are very good, San Jose Options has just released a new type of back testing tool called the Options Toolkit. This back tester saves you a lot of time when compared to any other options that testing software.
For example, if you like to trade options over earnings, then you can go into the Thinkorswim software and construct a trade click a button and see if the trade made money the next day. Then you can repeat this process over each earnings date. To back test the last few years, it might take you an hour for example. Now, in the new software by San Jose Options, I can simply enter the symbol and click the mouse and back tests several years of earnings dates in about 2 seconds. Not only do I save time, but the software collects data that I could never do by hand.
Another step that each option trader must take before finding success is simply trading for many years. Experience is what we call it. The reason that an option trader needs to trade for so long is because the stock market is constantly changing, and in order to see the many faces of the market, we need to trade for many years.
Paper trading is also a great way to learn how to trade options. Again, you can simply open an account at Think or Swim or almost any of their options broker and get a free paper trading account to practice with. Although it might be difficult, it’s actually very important to paper trade for at least six months to a year. As mentioned before it’s very important to have experience over time, and paper trading is one way to acquire experience without risking any money.
In the last part of this video we discuss why it’s important to keep about 25% of your money in cash. Good option traders know how to make adjustments, they know how to lock in profits, and they need this money to do just that. It’s never a good idea to use up all of your capital in your trading account. This can lead to serious problems. So again, if you want to become a good option trader, then leave plenty of money in cash so you can always do what you need to do.
To Become Successful with Option Trading go to the San Jose Options Course at www.sjoptions.com
Become a Trillion Dollar Trading Pro with an online video trading course.
Tags: Finance, General Investing, income, investments, Money, option backtesting, option trading, Options, options software, peronal finance, Retirement, software, Stock Market
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