Why the retail options traders lose money
Options trading has become a craze for young people. The novice traders jump into the options trading business without getting enough knowledge about this market. Though some of them make a decent profit at the early stage, eventually they blow up the trading account. To trade the options market, you have to think like a professional options trader. And the pro options trader never thinks about the profit rather they are more concerned about the risk factors. That’s why they can protect their capital from the big losses.
Thousands of reasons are there for losing money in the options market. If you have a look at the professional trader, you will realize that the professional options traders always take the trades with strict discipline. By doing so, they are avoiding the silly mistakes at trading. So, let’s find out some of the key reasons for which novice options traders are losing money.
Not having enough knowledge
Lack of knowledge is one of the key reasons for which novice options traders are losing money. If you intend to protect your capital, you must learn to take the trades based on logic. And to do the market analysis, you need to learn about the use of the trading platform. Unless you have a strong idea about the support and resistance level, you are never going to make any profit. Support is such a place in the market that pushes the price of a certain asset higher. On the contrary, a resistance level pushes the price of the asset down. So, you have to take the call option at the support level and go for the put option at the resistance level.
Ignoring the news factors
The majority of the option traders ignore the news factors. They consider the news factor as a waste of time. But the smart traders at Saxo bank group always consider the news factor as the prime event to analyze the market data. If you want to protect your capital, you must learn to take the trades like the professional traders at Saxo. Only then you will be able to protect your capital. Let’s say, you don’t have any knowledge about the news factor. So, you have opened a trade right before the NFP news. No matter how good you are at trading, you are most likely to lose money right after the news release. So, evaluate the news data before you take any trade as it is the only way to make a profit in this market.
Trading with high risk
Do you know the professional options traders never trade with high risk? But if you have a look at the inexperienced options trader, you will notice most of them are trading with high risk. They do so because they think it is the only way by which they can make a regular profit from this market. To make money in the trading industry, you must learn to trade with low risk. If you fail to reduce the risk exposure at trading, you should never try to trade with real money. And to test your skills, you may use the demo account. Consider the demo account as your blessings and learn from your past mistakes. Never trade with more than 2% risk as it will blow up your account.
Trade with discipline
Breaking the rules in the options trading business is another key reason for which novice options traders are losing money. If you want to protect your capital, you must learn to trade within your rules. You might have to lose few trades in a row still you should stick to the rules. By following the core rules, you should be able to avoid the big faults. No matter which profession you chose in your life, discipline is the core factor that will determine your success. If you manage to trade with discipline, you will succeed as a trader. If not, you will keep on losing money like the majority of the investors.
