Too many option traders fail because they learn a lot about trading options but don't do anything to keep their feelings from getting in the way. Yes, more than 95% of people who trade options fail because they don't have any discipline and can't keep their emotions in check.
Trading stock options is the only thing that really tests how traders feel. Due to the leverage effect, stock options move much more than the underlying stock in terms of percentage. This often tests the emotional strength of option traders, especially those who use a day trading method.
If you have a strong desire to get out of a trade as soon as it turns red, if you can't sleep because you're worried about your trades, and if you've lost money by doing all the wrong things at the wrong time, then you definitely have an emotional problem.
Here are five things every option trader can do to keep their mind and mental health in better shape while trading options:
- Sleep 8 hours a day!
Yes! This is the most basic way to train your mind! Have ample rest! Many option traders who trade the US markets at night from the other side of the world and option traders who do their research at night are high-risk groups. Your mind and body get tired and worn out over time. You lose money because you lose your cool and do and say all the wrong things at the wrong time.
- Set aside extra time just for trading options
Nothing puts an options trader's patience to the test more than trading options while doing something else. Option traders who trade in secret on their computer terminals during office hours often feel nervous. That nervousness makes it much more likely that you will do something wrong. If you are an adult who works, use long-term option strategies that let you take care of your positions after work. You can find a list of option strategies at http://www.optiontradingpedia.com/options strategy library.htm.
- Know how you like to trade.
Every option trader has one trait that stands out the most. Depending on what kind of person you are, different option strategies will work for you. Go to http://psychometric.mastersoequity.com to find out what kind of trader you are.
- Enjoy Your Weekends
I can't name all of the option traders I know who spend their weekends staring at their computer screens, going over their trades for the week, trying to figure out what went wrong, and reading charts and news. After a stressful weekend in front of the computer, the week of trading options starts out just as stressful. Professional option traders all know that the weekend is a time to forget about the market and spend time with family.
- Look for Help
The support of family, friends, and a good mentor is the best way for an option trader to keep a healthy mind. One of the most important parts of keeping a healthy mind is making sure your spouse backs you up in option trading and understands when money is lost. A good mentor will also be able to give you advice and point out where you went wrong, so you don't have to spend hours and hours worrying about it.
