OPTIONS TRADING: The Complete Guide for Beginners: Learn How to Trade With Options and Become an Expert Day Trader in 2020 (Stock Market Investing Book 3) by Brian Moore & Brian Moore

Author:Brian Moore & Brian Moore [Moore, Brian]
Language: eng
Format: epub
Published: 2020-05-20T00:00:00+00:00

CHAPTER FIVE

Risk Management

M any experienced option traders find it relatively easy to make money, but holding it can prove much harder (this is typical of any trader who makes money mainly as a liquidity provider). As anyone can do, there must be another dimension to the trading option that has been ignored so far; otherwise, any trader would be through. This is the risk management dimension. Most of what professional traders can do is manage risk; play defense and try to keep profits. If a market maker manages to keep a third of the bid-ask range, it will be very successful in the long run. Danger management tension is a key differentiator between amateurs and experts. There are two things to remember when putting risk management in perspective.

At times, it's fun to "take a shot" when you make a trade. This could have been for a number of reasons. You might want to start trading with a new strategy. You might have a hunch that you simply can't get the hard evidence to validate. And you might need to do a swap to help out the trader. No trade will damage you (with the caveats of appropriate size that we address in Chapter 9). It is never necessary, however, to "take a shot" when handling the risk. Risk management is far too important to take the chance. You just don't need to have any patience for errors.

Professional option trading is not about making significant, unforgettable trades. It is about making low, predictable gains and keeping risks under control.

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