What factors should be taken into consideration when choosing an options trading system?
Although successful traders follow different systematic decision-making approaches towards options trading; their systems consist of customized routine steps with a well defined beginning, middle and exists applied repeatedly. Traders can rely on several types of option trading systems such as software programs that identify pricing relationships, quantitative earnings models or disparities and technical analysis filters. No matter the approach chosen, all successful traders customize a system formed by their style and experiences.
One looking to define an option trading system may wonder where to start. First, create a trade log by taking inventory to identify trading style and expertise based upon your strengths and tendencies. Your successes and failures are your best guides, they will determine which situations to seek and avoid. As you review your experiences, what commonality do all of the good and bad trades have? If you have never tracked your inventory, review an end-of-month statement and follow it forward; this will be a vital guide as you customize your options trading direction.
As you review, you will clearly identify what aspects of your system that worked or need to be reevaluated. Becoming a successful option trader requires defining a system; this will not come over night and a one approach fits all does not exist. The process could take days, months or years; however, the more systems and styles you have been exposed to makes it better. For instance, two traders with expertise in the same industry can take inventory and devise totally different approaches that work for them as individuals.
Overall, evaluating your experience will also determine your risk tolerance. Your direct experience testing and experimenting with real money, will also guide your efforts towards a style that will fit your needs. Overall, option trading is not easy. Use this process to build an options trading system that works for you.