Too many option traders fail because they load themselves with tons of option trading knowledge but do nothing to ensure that their emotions don?t get in the way. Yes, more than 95% of the option traders out there fail because of a complete lack of discipline and ability to control their emotions.
Nothing tests the emotions of traders more than trading stock options. Stock options move much more than its underlying stock in terms of percentage due to its leverage effect, frequently testing the emotional capacity of option traders, particularly those who follow a day trading methodology.
If you find yourselves having a burning desire to get out of a trade the moment it turned red, if you find yourselves having sleepless nights worrying about your trades, if you have lost money doing all the wrong things at the wrong time only to regret later, then you definitely have an emotional problem.
Here are 5 tips every option trader can use to ensure a healthier mindset and mental health while option trading:
1. 8 Hours Of Sleep A Day!
Yes! This is the most basic of all mental conditioning! Have ample rest! Many option traders who trade the US markets from the other side of the globe at night and option traders who do their research at night are high risk groups. Over time, your mind and body grows weary and tired. You become hot tempered and do all the wrong things and say all the wrong things at the wrong time?. And lose money.
2. Set Aside Time Especially For Option Trading
Nothing tests the patience of an option trader more than option trading while doing something else. Many option traders who trade during office hours secretly on their computer terminals frequently find themselves nervous. That nervousness dramatically increases the probability of doing something wrong. If you are a working adult, use long term option strategies which allow you to manage your positions only during after office hours. Go to http://www.optiontradingpedia.com/options_strategy_library.htm for a list of option strategies.
3. Understand Your Trading Style
Every option trader has a dominant character trait. Your character trait determines what option strategies are suitable for you. Please visit http://psychometric.mastersoequity.com and find out what your trading style is.
4. Enjoy Your Weekends
I cannot finish naming those option traders I know who spend all weekend staring at their computer monitor, going through the trades for the week, trying to find out what?s wrong, reading charts and news. After a stressful weekend in front of the computer, an equally stressful option trading week starts. All professional option traders know that weekends are for taking your mind totally off the market and enjoy time with your loved ones.
5. Find Support
Nothing helps an option trader maintain a healthy mindset more than the support of family, loved ones and a good mentor. Making sure your spouse supports you in option trading and understanding when money is lost is one of the most critical aspects of keeping a healthy mindset. A good mentor will also be able to counsel you and tell you where you went wrong so that you never have to spend endless stressful hours pondering.