When you are a beginner in the derivatives market, you will definitely make mistakes and loose money in the starting but gradually you’ll realise your mistakes and work on your setup and style that will lead you to a profitable journey.
As an experienced option trader, I will share 5 most important tips that will help you for sure if you inculcate them into your trading style and prepare yourself accordingly.
1. Don’t Hold Loosing Trade
If you entered a trade and it starts going in loss for more than 5%-10% of your investment, then accept the fact that you have made a wrong entry and against the trend. Cut the small losses so that you can ride the trend.
2. Trade Based on Levels
Make support and Resistance levels on 1 hour time frame or you can go with the levels based on Pivot points. Always try to find a trade when market is trading at these levels and stoploss is small and the target is next resistence or support level.
Make sure that you don not enter or exit in between the levels, either take Stoploss or wait for the price to hit your target.
3. Understand Seller’s Psychology
So this one is a Pro Tip, but still I know that only few people will understand and actually work on it. if you want to win buying trades against the sellers, first you will have to understand how selling works and what’s the psychology of seller.
This will help you avoid wrong entries and make your buying positions on levels where sellers are reacting to the market prices.
4. Follow Position Sizing
If you have 1 lac capital. do not trade with the whole capital. Instead, divide the capital into five parts of 20k each and trade with 20k first.
also try to trade every time with the same lot size. for example, if you are trading with 4 lots ans even if you loose or win a trade, make sure to enter the next trade with the same lot size. This will help you maintain your risk management better
5. Avoid Overtrading
Overtrading is just like a contagious disease for a trader. Fix your daily trades and stick to the discipline. Believe me, if you can control overtrading then ultimately you will be a profitable trader.
Conclusion
Trading is simple but following these rules and discipline becomes hard for people. But believe me if you want to be profitable, then you will have to follow discipline and plan your trades rather then just doing it anyway.
If you think these tips will help you let us know your thoughts in the comments section below and don’t forget to share these tips with your trader friend.
