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 technical analysis based options trading system work for every trade? No, nothing works every time. Some trades are going to be losers because we can never know for sure what the market will do. But being able to read a chart allows you to see probabilities of what might happen, and then you have to make our trades based on this analysis.
The great thing about trading options is that you are never locked into a position. We can always roll our options out to a later expiry, or up or down to a different strike price as we need to. That means if we get the trend wrong, we can modify our position and strategy to suit the market. If you compare that to betting on a horse, where once they have jumped, you’re stuck with your position. With options, you can make changes over and over again based on feedback from the market.
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.
Learn more about trading options by reading this article. And stop by our site where you can find out all about an options trading system that actually works.