It is sad that people look down upon technicals. Technicals are the footprints of the operators and masses. it is like a Morse code of secret communication. Technical traders have to have the mindset of a spy.
The best way to master any indicator is to learn in reverse. Mark 100 high and low points of any chart and see what that indicator did at ALL of those points. the secret will be revealed to you. like Bruce Lee advised, practice one (or select) technical(s) a thousand times....self talk
markets give you next pain only when you have forgotten the previous one. so never forget your pain...self talk.
if market is applying savlon to your wounds, be alert.
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you may not know what the market is going to do, but you can definitely react to what the market has overdone. and overdo it definitely does as part of the game to trap/confuse/bluff.
- very far out of the money, like 5-10 value = for thrill, not trading
- far out of money like 30-35 value = for aggressive betting on profit from earlier trades
- out of the money like 70-100 value = normal trade position
- in the money like 100-150 = when you are confident
- deep in the money like 250-400 = alternate to buying futures
- deeper in the money = not much extra benefit though risk increases
Once the value of the option enters the next, higher level, you may skim the option to lower/earlier category and take some profit/money off the table.
Caution : Never put 5% (at worst 10%) of your trading capital in single trade.
except aggressive betting of profits of one trade. eg you turn 10 to 12 lac....and want to bet aggressively with that 2 lac profit, provided you have an evolved dependable tested plan. several traders have made big sums with that approach.
Selling options only if you have backup funds to withstand big adverse moves and still have a plan. And when you have that much, it is better to buy stocks the investor way. Almost all big professionals do that. I mean those beyond 10-20cr funds.
I know some traders who made crores, lost crores multiple times selling options. They falter tragically in trending and volatile markets.
They failed to go beyond a level because they didn’t know how to know the trend, which is the same reason they switched from buying to selling.
IMHO a disciplined, successful options buyer has all it takes to become an investor ultimately. The %cagr on a big corpus makes them financially free without anxiety and still grow their net worth.
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Traders think that they need more money to buy 100 lots instead of 10 lots. Actually, they need a mindset.
Money comes easily. Mindset doesn’t
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Mental maturity and stability are required. Not money. Money comes.
Until our thinking changes, our financial standing doesn’t change.
If trading doesn’t change you, you are not progressing
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Option buying is gear one and two. Not required after 15 km/h and 25 km/h. Option selling is the third gear. Investing is 4th gear and overdrive,
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Option buying is like buying futures with a premium as interest of borrowing or hafta. People don’t buy options except for the reason that they don’t have larger money.
Those who have money to short options have either inherited or are blowing their savings OR are geniuses.
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Both buying and selling are good tools. Nothing wrong with both. Both are different tools for different situations and stages imho.
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Both shouldn’t be looked down upon. These are not show-off concepts.
I mean buying and selling options
DIIs FIIs use all tools at their disposal as per the situation. They also buy options.
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A trade is like the sail of a wind sail boat. All a trader needs to do is to judge the direction of the wind and adjust the direction of the sail. A trader, like a sailor, can’t decide on the amount of thrust the trade boat will get. That depends upon the velocity of the wind decided by factors not under his control. Big storms or good winds or short bursts come randomly. To be ready to catch them is all that is that a trader sailor has to align with.
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Trading is easy because that is all a trader needs to do. The rest market does. It is difficult to imagine that someone may find it difficult to judge the direction of the wind. It is difficult to make trading difficult.
All we have to decide is whether to buy a put or call. One of them is always right. It is the only gambling with a 50% assured result. We still lose because we either buy too big to hold without anxiety, or we change our mind at the drop of a hat, or we don’t have any logic to pick the trade side. Self talk
