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Important Options Trading Rules That Needs To Be Strictly Followed

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What is Forex Trading? What is options trading? Is it safe and legit? Options trading is considered a high probability of investing. But just like any other investment, it is all based on risk. Options trading is similar to insurance. Meanwhile, Forex trading is the buy and sell of currency pairs. As a trader, you can either become the insurance buyer or the insurance seller. As for the buying side, it’s like amplifying your trade power by leverage and on the side of the seller, you tend to collect cash upfront and you can keep it as long as there are no triggering events.

Top 8 Rules When Doing Options Trading

Trading Small Positions

There is nothing wrong if you assume that something bad will happen if you are in a volatile market. As much as possible, you can make small trades instead of making a huge one to avoid blowing up your entire savings.

Reducing Commissions and Fees

Entering transactions after paying the commission and other fees will financially cripple you. But this does not mean that you should totally avoid fees. As much as possible, you should reduce those fees and commission charges or pick a platform that offers free options. For beginners, you shouldn’t be paying fees when you invest in Forex or the stock market.

Having High Trade Count

Estimating the percentage of your success means that you are also required to take lots of trades. This is the main consideration in options trading and Forex Trading. The more trades, the higher are your chances of gaining more profits and eventually, more chances of wins. If you are afraid to take chances and seldom trade, then, you are on the safe side with really low profits.

Trading Uncorrelated Tickers

Traders tend to look for several diversities on their profile to be able to minimize incurring losses. But they can also create mistakes with these if they don’t invest with uncorrelated tickers. These uncorrelated tickers never get affected by any changes in the market. For instance, if you invest in social media platforms, Twitter, and Facebook, this can be seen as investment diversity. But take note, they are not uncorrelated tickets and can be affected by changes in the social media market.

Non-Emotional Expectations

Always remember that the market will never care about what you think. As much as possible, you need to hold tight your emotions and never make decisions out of the verge of greed. Don’t be overcome by your emotions, this part is critically important.

Playing The Edge

The options seller is considering the edge of options trading or Forex Trading. But it shouldn’t mean that you are not encouraged to buy options.

Having a Balanced Portfolio

Options Trading lets you bet on two price directions, whether it goes up or down. Most of the time, traders gravitate that their investment value will go up without considering the balance on their portfolio as positions can also go down.

Having Enough Cash Reserves

Since options trading is leverage investments, it is important to secure your investment money in cash. This is also needed by brokers as a margin requirement is needed when you trade. When saying this, it means that they will cover potential losses by putting a partition on the amount of investment. Before knowing what is Forex Trading and options trading, you might have doubts on them. But now that you’ve known some of its basic concepts, you should be able to distinguish the right one to choose.