If you are using an options trading system that doesn't incorporate at least some basic technical analysis, you could be missing out on some very reliable signals for trade entries and exits. Understanding TA can also take a lot of the guess work out of trading the Options market.
It's quite simple really. It's hard to argue about the direction of the trend if a bar chart is making higher tops and bottoms and the moving averages are rising. When you understand the trend, using put and call options to enter trades in the direction of that trend is like riding up an escalator. All you have to do is get on board and go with the flow.
But if the options trading system you are using ignores technical analysis, it can make it harder to be consistently profitable because you can be fighting the trend a lot of the time. Understanding where support and resistance lie on a chart can also allow you to open positions for extra contracts in the direction of the trend. By doing this, you can compound your profits with less risk, but if you ignore technical analysis, you can be flying blind. As the old adage says, the trend is your friend, and that's the direction you want to trade.
So does a system that incorporates technical analysis give you profitable trades every time? Of course not. The fact is that as a trader, you are going to lose on a percentage of your trades because we never know for sure what the market is going to throw at us. But using technical analysis can highlight potential trade opportunities for us, and we can then make decisions based on our trading plan.
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 are your choices if you'd like to become a profitable options trader, but you're not confident in your ability to pick the trend or good entry and exit points? An easy way to reduce the learning curve and get started quickly is to model a successful trader's system and simply implement it for yourself. That means you could start trading profitably almost right away.
For many traders, it makes sense to let somebody else spend the hundreds of hours and thousands of dollars it takes to learn options an options trading system that makes money. Then all they have to do is follow the trades as they are announced and get on board.
It's quite simple really. It's hard to argue about the direction of the trend if a bar chart is making higher tops and bottoms and the moving averages are rising. When you understand the trend, using put and call options to enter trades in the direction of that trend is like riding up an escalator. All you have to do is get on board and go with the flow.
But if the options trading system you are using ignores technical analysis, it can make it harder to be consistently profitable because you can be fighting the trend a lot of the time. Understanding where support and resistance lie on a chart can also allow you to open positions for extra contracts in the direction of the trend. By doing this, you can compound your profits with less risk, but if you ignore technical analysis, you can be flying blind. As the old adage says, the trend is your friend, and that's the direction you want to trade.
So does a system that incorporates technical analysis give you profitable trades every time? Of course not. The fact is that as a trader, you are going to lose on a percentage of your trades because we never know for sure what the market is going to throw at us. But using technical analysis can highlight potential trade opportunities for us, and we can then make decisions based on our trading plan.
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 are your choices if you'd like to become a profitable options trader, but you're not confident in your ability to pick the trend or good entry and exit points? An easy way to reduce the learning curve and get started quickly is to model a successful trader's system and simply implement it for yourself. That means you could start trading profitably almost right away.
For many traders, it makes sense to let somebody else spend the hundreds of hours and thousands of dollars it takes to learn options an options trading system that makes money. Then all they have to do is follow the trades as they are announced and get on board.
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