Introduction:
If you also want to do option trading but there is confusion in your mind about whether option trading is easy or not, how do you do it? Or can I do it or not? The article will clear your doubts completely and help you make an informed decision. You should read the entire article so that you can take all the knowledge from it and make a valuable decision in your life.
Is option trading easy to learn?
I don’t know why people complicate option trading, which is very simple, but there is a myth in the market that it is complicated, very risky, difficult to learn, and many more.
But option trading is very easy if you wish to understand it and want to learn the basics of it. Option trading: just like a vehicle, if you do not know how to drive, you will face an accident, but if you do, you will drive it with ease.[Is option trading easy to learn]
If you find a mentor in trading who will teach you how to trade, then it will be easier for you. Then your learning curve is small; if you find someone who will help you learn option trading, then it will be the cherry on top.
Now I will give you some trading tips, so read them carefully, apply them to your option trading style, and try to make more and more of them.
TIP 1: THE OPTION IS JUST AN EXTENSION OF THE STOCK
Option stock: looked at as an extension of stocks, whenever we buy stocks, we can say that we are bullish in those stocks, and whenever we short stocks, we can say that we are bearish in those stocks.
See the same option: whenever you buy an option, it seems that the premium will rise, or whenever we short the option, the premium will decrease.
But the best part about that option is that for the same stock, you can select different types of strike prices for the options that have different amounts of premium.
TIP 2: OPTION CAN BRING ODDS IN YOUR FAVOUR
Believe me, the option can bring odds in your favour while you trade. When we trade, we have a 50/50 probability of having a profit or loss. When we buy shares, what’s our view?
Our view is bullish: we are buying shares because we think that the share price will rise and we will make a profit from that trend, but what happens when the share price falls? We will have to suffer some losses. Now, to reduce this loss, you can use options in your trading.[Is option trading easy to learn]
Now we will see how we will use option trading. Assume that you bought a share and are bullish on it. Suppose the shares go down and you start seeing losses. At the same time, when you get into the trade.
What you do is just put options on the share. When the share price decreases, the option prices will increase, which will compensate for your loss.
Initially, when I was trading, I didn’t know about the options and just bought the stocks, but when I learned about the options, I used to trade stocks and buy an option against them. It minimizes my losses and also acts as a hedge in my trade, which helps reduce my losses when I am wrong.
TIP 3: FEAR AND GREED PLAY IMPORTANT ROLE IN TRADING
Fear and greed are two emotions that are very important. Already, we have heard people be greedy when everyone is fearful. The same applies in option trading: sell when everyone is buying and buy when everyone is selling.
When we are doing option trading, we have to keep our fear and greed in control. When our fear and greed take control over us, our psychology will get disturbed, and we will trade in unusual ways and start taking bad trades.[Is option trading easy to learn]
Taking trades when there is no actual setup because of the fear of missing out. The fear of losing all these things impacts our trading. We start doing revenge trading. When we have greed, it leads to overtrading.
When we trade and make a profit, we want to multiply our profit more and more, which is very bad and can bring disaster to your trading journey. So if you want to be a profitable and professional trader, you have to control your fear and greed.
What makes you profitable in trading is not how much time you are on the right side but how many types you have traded with the correct risk-to-reward ratio. So always keep your fear and greed in your pocket before trading.
I always remember when I was a beginner in trading, I faced this emotion of fear and greed very much. The greed of getting more and more profit led me to do overtrading, and the fear of missing out on any trade let me do trading before my setup was made, but as the journey passed.
When I become consistent in trading, I learn how to control this fear and greed in trading by limiting the number of trades in a day and also minimizing my losses for a day.
TIP 4: OPTIONS CAN ENHANCE YOUR PORTFOLIO IN SUCH A WAY THAT NO OTHER TOOL CAN DO THAT.
So, enhancing your portfolio isn’t about going all-in and praying to God for good luck. It’s like having a secret weapon called “options.”. These are like magical tools that help you play it smart and not take enough risks. It’s like adding a safety net to your trading.[Is option trading easy to learn]
Now, here is the best thing about options: you can lower your risk and make some extra cash. You can’t do that with just regular stock trading. It’s like having a backup for your investments.
But hold on; you can’t just buy options everywhere and hope for the best. Timing is everything. It’s like catching the perfect wave—you need to be on the lookout for those golden opportunities.
Consistency is the name of the game. Imagine you’re making cakes; you want each one to be just as delicious as the last. The same goes for your investments. Be steady; don’t rush things. It’s like driving a car—smooth and steady gets you there without any problem.
Speaking of cars, think of yourself as a mechanic for your money. You have to use the right tools at the right time. Just like a mechanic with a toolbox, you, the options trader, need to be on point. It’s not about having a lot of tools; it’s about using the tool in the smartest way possible.
Let me share my personal experience. There was this time when I saw my portfolio in red for a long time. That was the time when I started learning about options. I made some strategic moves with options, and again, my portfolio was green,, and I am very happy.
But there’s also the other side. When the market was very volatile and my portfolio was in total red, I didn’t panic. I just used my options and tools wisely and turned the situation around. It’s like facing a tough opponent in a game: keep yourself cool like MS Dhoni, play smart, and victory is yours.[Is option trading easy to learn]
TIP 5: PATIENCE IS THE KEY TO PROFIT FOR OPTION TRADERS
There are two types of trade: a good trade or a bad trade, but the point is how we will define a good trade or a bad trade. It is just a matter of time before we are patient and we wait for our correct setup and all of our conditions get fulfilled. Then that trade is good.
But when we trade randomly, just buy and sell, then that trade is bad so the key difference between the bad trade and the good trade is the amount of patience you have for waiting for your set-up to be completed
The good trade turns out to be a winning trade, and a bad trade turns out to be a losing trade.
You have to plan your trade and act according to it. Planning your trade helps us to be patient and wait for your proper setup and take a trade according to it.
In the initial days, I was a lot of impatient. I just used to book profit as soon as I saw profit and get out of the trade, and later that trade went to give me a huge profit. I used to regret not being in that rally, but as soon as I grew as a trader, I found patience to be very important.
We have to properly mention our target and wait for it, and we have to have a proper exit plan. Without a proper exit plan, you can wait too long for the target. As soon as I started waiting for my target and having patience on my side, my account grew, and I used to get big profits. The only way to get a profit is to have patience.
You know why Virat Kohli’s batting average is so good as compared to another batsman because he always used to play shots, which he was practicing a lot. The same thing with trading is that you have a trade that you practice for a long time. Your trading profit average will increase, and you will have a better risk-to-reward ratio.[Is option trading easy to learn]
TIP6: MAINTAIN TRADING JOURNAL
Trading is just another form of business. We have accountants to keep our accounts in business, which will tell us how much profit or loss we are making. How much do we have for our expenses? How much are we spending in other areas?
The same thing is true with trading; we maintain our trading journal. Here we mentioned things like which scripts we have traded. At what time do we have to enter into the trade? At what cost do we have to enter into the trade, and what are our exit plans? And many more.
All this information helps us in our trading journey, or when we find certain mistakes, we can rectify them and be a better trader than yesterday. It will help you to revise your trade whenever you need to and find what mistakes you are going through, what other mistakes can be rectified, and how your losses can be minimized and profit maximized so that you can become a profitable trader.
CONCLUSION
I think I have told you all the necessary tips that you have to keep in mind while learning options trading and practicing it so that you become a professional options trader and start taking advantage of this market.
The more consistent you are and the more time you spend in the market, you will learn about option trading more easily and quickly. Try to invest yourself mentally in the market. Always keep a trading journal with you so that you can revise your trade and learn from your mistakes. Because learning from mistakes is the best learning in the world.[Is option trading easy to learn]
Read also: What percentage of option traders make money, which will surprise you?
Read also: Really, can I start option trading with 1000 rupees?
Read also: Why do most options traders lose money frequently?
I’m a seasoned trader with over 3 years of experience in financial markets. Throughout my journey, I’ve navigated various market conditions and developed my skills in trading strategies, risk management, and market analysis. Now I am also developing myself as a good digital marketer.