8 Rules For Options Traders That Could Make You More Profitable

We all hate rules right? But here are 8 rule for options traders that could turn that lack-luster portfolio into an income goldmine. Remember that professional traders don’t trade on emotions…they have set guidelines that help them uncover and trade the best options opportunities in the market.

1. Trading capital comes in both mental and your account. Both are vastly important to your success. However, mental capital is more directly linked to your success. Smart traders will little money become highly successful while “dumb traders” with large sums of money see their holdings disappear quickly over a few weeks/months.
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2. STOP trying to pick market tops and bottoms already! We can never know what price is “low.” Nor can we know what price is “high.” Remember that professional option traders take advantage of trading “ranges” versus market tops/bottoms.
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3. Never trade opposite the market direction – EVER. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and all too often it’s the #1 reason why we were so profitable during the crash of 2007-08. We did not trade net long that market as everyone knew the market was heading lower.
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4. Market are not perfect and can remain illogical longer than anyone can expect. Unexpected moves higher/lower can continue in that direction for weeks/months. Case in point is the recent bull run from October-November. The best way to trade these is to stay FAR from the market and give yourself room for error.
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5. Be patient with winning trades; be extremely impatient with losing trades. Another one of these “golden rules.” Let your winners run and cut your losers short quickly.
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6. To trade successfully, think like a fundamentalist; trade like a technician. Of course it’s important that we understand the fundamentals driving a trade, but also that we also need to understand the market’s technicals. Just because fundamentals are strong does not mean it will continue higher – as it may be technically overbought.
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7. Stop watching the TV market news! Biggest problem I see by far from beginning traders. They watch and LISTEN to these market TV hosts. Remember that TV stations make money with more viewers so naturally their daily stories are always marketed with “extreme tones” to drive in views and keep them engaged. Just turn it off already!
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8. Insanity is doing the same thing over and over and expecting a different result. If you have been trading for years and losing money, try something different. You CLEARLY are not doing what you need to do right now to make money so why do you keep trying using the same old strategy. Try something new, get an options coach, read more books!