How To Start Future And Options Trading?

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How To Start Future And Options Trading?

How To Start Future And Options Trading?

 

Almost every trader’s favourite topic is undoubtedly future and options trading.  Everyone wants to trade futures and options and profit from it as soon as possible.

 

You must trade responsibly and without letting your emotions get in the way if you want to profit from futures and options. Future and options trading demand different knowledge, but with the correct strategy, you may succeed as an F&O trader.

Before starting to trade futures and options, you should be aware of the following.

 

1) Risk in Future and Options Trading

Every rookie trader in FnO trading looks at the returns he will receive rather than the risk exposure, and that is the incorrect strategy. One thing you should keep in mind is that futures and options are dying assets; therefore you should always trade them with extreme caution.

It will be incredibly challenging to turn a profit when trading FnO if you lack expertise and experience. On the other hand, it’s possible that your lack of expertise and knowledge will cause you to blow your account.

Understanding that FnO is a zero-sum game and likely a negative-sum game due to brokerage, taxes, and other factors are crucial. Consequently, the loss of one trader is the profit of another trader, and from your every trade, broker and government are making money.

 

How Should Beginners Approach Future and Options Trading?

You should be sufficiently knowledgeable about FnO trading as a beginner. You cannot begin FnO trading without the necessary expertise and understanding of risk management principles.

Additionally, avoid trying to enter FnO trading immediately as it could be dangerous. You should first spend a few months or so practicing equities trading, learning from your errors, and then come to FnO trading to get some expertise. Additionally, start off trading with just one lot and learn from your errors to improve as a trader. You will first experience losses, and that is totally fine. Everyone experiences losses, but you should always try to minimize them.

 

Mistakes to Avoid When Buying Options

In general, rookie traders are drawn to option purchasing because they want to profit quickly, but the reality is that option buying is more challenging than option selling.

Although it needs more knowledge and experience than option selling, many people nonetheless attempt it with the goal of making quick cash.  Consequently, the following are some things to avoid when buying options. –

 

Avoid Out-of-the-money Options

Trading out-of-the-money options are the best method for blowing your account. Theta decay is your enemy as an option buyer, and you want minimum theta decay to happen, and for that, you have to trade in-the-money options.

So, whenever you are trading options, make sure that you trade in-the-money or at-the-money options, not out-of-the-money.

 

2) Avoid Trading with Large Quantities

The most crucial step is selecting the appropriate position sizing from the available choices. The majority of new traders typically risk all of their funds on a single trade, which results in significant losses.

 

You should only utilize 10 to 20% of your total capital in a single trade when using the proper position sizing in options trading, and your risk needs to be pre-defined. More than 2 to 3 percent of your whole account balance shouldn’t be lost in a single trade. This is how options trading can help you trade with the right position sizing and increase your capital.

 

3) Avoid  Greed

Your chances of winning are already lower if you buy options. You should therefore be in complete control of yourself. Only a move on either side of the market, and one with momentum, makes option buying profitable. Therefore, it is crucial to realize that you shouldn’t trade every trading day. Instead, you should only trade when there are super-setups and opportunities for huge market swings.

 

These are some of the key things you should steer clear of before trading options.  So, if you want to do options buying, then make sure that you follow all the trading rules and follow all the risk management principles. Also, if you like this article, don’t forget to share us across all your social media handles.

If you want to know more about Intraday Trading Strategies you can refer to our previous blog on 10 Best Intraday Trading Strategies.

 

Open a Demat Account using our link to get support from us – https://bit.ly/3gyhIWN and send your ID to [email protected]

Happy Learning!

 

Future and Options Trading

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