Option Trading Success part 2
ByHi option traders. I hope you are doing well today and that you find your portfolio growing. This article is part two of a series of six, and each article is accompanied by a video. I highly recommend you to watch all six videos if you’re interested in learning how to trade options as a business.
One very important step on the way to becoming a successful options trader is simply back testing. That testing might not be the most enjoyable things to do, but if options are actually interesting to you, then it can be somewhat fun. However, in the past it has been a very tedious job indeed, but now that San Jose Options has released a new instant back tester called the Options toolkit, back testing can now be done in a matter of seconds instead of hours.
For example, it used to take me one hour to back test one year of trading a Condor in the Optionvue software. Using Thinkorswim it’s a little bit faster. Now, in comparison, to do the same job and actually gather more organized data, it takes about 2 seconds to back test one year in the Options Toolkit. It’s really phenomenal.
So while back testing is very important to see how your strategies have played out in the past, another important quality that every successful option trader has to have is experience. Unfortunately, experience only comes with time, but the reason we need this time to pass is because the stock market has many different faces, and as an option trader we need to fully understand the market as deeply as possible.
Trading with paper money is another great way to become a better options trader. Most option brokers on the market offer a paper trading account. I personally like what Thinkorswim has to offer. I find their software very robust for trading options, and their paper trading accounts uses the same software as the real account, so it’s a great way to learn. Obviously, it’s a good idea to make consistent returns in your paper trading account for several months before entering option trades with real money. As stated before experience is very important because the stock market changes rapidly and wears many faces.
Lastly, I would like to say that it’s very important to keep about 25% of your capital in cash. This is because the best option strategies require adjustments, and to make these adjustments, you will need extra cash. It’s very dangerous to use up all of your spending money in your trading account. Every successful option trader leaves plenty of money in cash to make adjustments, to lock in profits and to be able to manage their portfolio as needed.
To Become Successful with Option Trading visit the San Jose Options Course at www.sjoptions.com
