When you back test, do you have firm rules of when to put trade on, rules of when you get a signal but chart is not right which negates the signal, Do you know all the answers before having a question? Brainstorm for a few days of all the possibilities of what can go wrong and figure out what to do, so when these situations happen, you have an answer. What is the "mean" profit so you have a target in mind, what is worst each trade went against the position on winning trades, how long did trade take so you could get to breakeven plus a little hard/mental stops? What is more important to you, making most money or not losing? If you out to make the most money-you will have bigger drawdowns and if you working toward having low losing percentages-you working more on money management rules. Keeping great stats helps greatly.
I for one appreciate your post and excellent advices as they summarized the painful experiences I accumulated over the past 3-4 yrs of trading options. Most of my losing trades were because of #3, #4, #5 and #9. I wasn't patience enough, either got in too early or got our too soon. I found out that mechanical trading (e.g. #5, buy/sell every period based on a "formula" like probability) did not work and trading index options did not work. I am profitable so far but boy it is hard work . Perhaps, I have not been doing it long enough and will get "wipe out" one of these days. To the original poster, my suggestion is to start thinking out of the box and don't follow what all the books said. Be humble and accept some of the wisdoms folks here are willing to share as they represent some of the best advices I got. The fun part is there are so many different ways to profit or to lose trading options.
OP. Took me a while to grasp this, but as a small retail trader, you will never be able to profit from the small picture unless you understand the bigger picture. The experienced traders in here know exactly what I'm talking about
drcha, A lot of wisdoms in this short reply. However, easier said than done. What is your opinion on all those published technical indicators (including Ichimoku) and their predictive values? Regards,
Yes, and it's hard enough to predict direction, that worrying about the shenanigans in the options market, in my opinion, just isn't worth it. I'll just put up the cash. With options leverage, comes a whole different set of headaches
Could you further explain this point? (Much appreciated if you do). Do you mean that one should develop a strategy where if you predict a gain using a long time frame AND also predict a gain using a short term time frame, then you go long. Only if data analysis from both time frames (thru whatever logic) concludes the same point should you take up a position?