By James Kupe
If your options trading system doesn’t consider some basic rules of technical analysis, you could be missing a lot of profitable options trades. A basic understanding of technical analysis will help you remove some of the guess work out of trading. That’s because you won’t be fighting the trend whenever you place your trades. The simple fact is that if the market is making higher tops and bottoms on a chart, you want to take advantage of that. As traders, we need every piece of help we can get, and riding a persistent trend is one of the biggest legs up we could ask for.
But if you are ignoring the trend, and your options trading system is giving you trades that fight the market, it makes it harder to make money consistently. Riding a trend can also give you places to enter additional positions as the price of the underlying goes up or down. That means you can compound your profits with lower risk than if you ignore what the market is doing. As the old timers always say – the trend is your friend, so you should be going with it.
So does an options trading system that incorporates TA work all the time? Of course not, nothing does. You are going to lose on some trades because we can never know for sure what the market is going to do. Technical analysis points us towards probabilities and all we can do is make our decisions based on those. The beauty of options is that we can always roll out, up or down as required, so if we get the trend wrong, we can adjust the strategy to suit the market. Compare that to a horse race, where once the race has started, you’re stuck with your decision.
So what are your choices if you’d like to trade options, but you’re not that confident about your technical analysis or trading ability? An easy way to remove most of the learning curve and become a profitable trader is to use a system that’s been developed by a successful trader, and just copy their trades. For a lot of new traders who haven’t yet developed an profitable options trading system of their own, it’s a great idea to let somebody else spend the time and money it takes to discover an options strategy that makes money. Then all you have to do is subscribe, enter the trades as they are published by the service, and let the system do the work for you
To learn more about creating a profitable options trading system that helps you to trade the big, profitable trends, read this options trading course. And this article on how to choose an options trading system should also make things a lot more clear for you