There have been a few positive effects of the pandemic too! One of them is when people like you and me have got to invest in different things, thanks to the work from home model! There has been a considerable increase in the number of first-time investors. This article aims to help you understand how to trade using the options trading app. Here are five rules that you could follow:
Table of Contents
Time is always the enemy:
While using the app to trade options, it is a rule of thumb that options are to be held only for short durations. This is because options undergo losses over some time due to time decay. So if you start making losses, you might want to square off your options. The longer you hold on to such options, the deeper they cut on your investment.
Always research on your own:
The news always tries to predict the best options trade. But never fall for them blindly. Always conduct your research about the options you would like to trade-in. It is advised to look at the technical and business aspects before starting online trading. There is a good amount of content available while using options trading apps. You can learn from the comfort of your home and at a speed that is comfortable for you.
Sell, when you double:
Many people who have made good returns through online trading of options have said that they made good profits when they sold their options when they doubled. Trading options on the options trading app is a straightforward method. You can learn it within minutes.
Options are risky! It will help if you remember this every time you want to engage in online trading of options. Never invest all your savings in options. Options could empty you in a short period of time. Instead, investing in options in parts would help you reduce the risk of losing it all. Invest in smaller amounts. This will help you mitigate the risks. However, do not go about investing in too many options. Be cautious in the total number of open trades you would like to have. Whenever you are about to add a trade, always check if you can replace it with an existing one. This will help you mitigate the risks of loss.
Understand stops and targets:
While online trading for options, you should always make it a habit to pre-calculate the stops and targets for the options you would like to invest in. Many online apps help you calculate options before investing to predict how they might react. You could try them out.
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