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.
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 an options trading system that incorporates TA work all the time? Of course not, nothing does. You are going to lose on some trades because we can never know for sure what the market is going to do. Technical analysis points us towards probabilities and all we can do is make our decisions based on those.
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 trade options, but you're not that confident about your technical analysis or trading ability? An easy way to remove most of the learning curve and become a profitable trader is to use a system that's been developed by a successful trader, and just copy their trades.
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.
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 an options trading system that incorporates TA work all the time? Of course not, nothing does. You are going to lose on some trades because we can never know for sure what the market is going to do. Technical analysis points us towards probabilities and all we can do is make our decisions based on those.
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 trade options, but you're not that confident about your technical analysis or trading ability? An easy way to remove most of the learning curve and become a profitable trader is to use a system that's been developed by a successful trader, and just copy their trades.
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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