Understanding The Elements Of Successful Option Trading

• Posted by Manav Pietro January 24, 2017 - Filed in Business - #Options Trading Education  - 346 views

  In order to spot a potential trade, there are three major steps. These include the following:

  Step1: Keep an eye on the moving average: It is the average stock price of a stock over a specific time frame. It predicts if a stock is trending downward or upward.

  Step2: Get to know about the overall cycles or patterns: Traders can use the cycles to know about the favorable time to enter into long or short term trading.

  Step3: Understand the market trends: Depending upon the negative or positive market trends, one can get maximum benefit from trading.

  The Infographic titled as “Features Of Successful Short-Term Trading” explains the various elements of successful option trading education. These include the following:

  • Controlling Risk: Traders use ‘sell stops’ and ‘buy stops’ to minimize risk and maximize returns. A sell stop indicates to sell an option when it reaches its predetermined price. A buy stop is used when an option becomes a buy order by reaching a particular price.

  • Patterns: It is the change in direction in the price and shows changing expectations. Patterns develop over several days, months or years and can be used to determine price movements.

  • Technical Analysis: It is the method to predict the future market trends by evaluating and studying the market using previous patterns and prices.

  For further information, refer the given Infographic.