How To Start And Do Index Option Trading In Stock Market : Beginners Guide
Index Options Trading: Beginners Guide
You want to start option trading in index to make money from it then this is good things because index has what a trader wants to trade at their initial stage like capital, momentum,volume, liquidity, Up and down cycles, so starting with index is good thing to build trading base and go forward to make good money out of it.
Index Options Trading: Watch Market Carefully
Watch market carefully means what see it, observe it, read it,learn and take what you want to trade from it. Watching market is the first step of starting options trading. Because option trading works on it, so watch market carefully.
When you see market observe market carefully then you learn from and able to decide in which index you start option trading because it’s not like equity stock trading where you need to watch only one chart and depend on it.
Watching market carefully helps you to collect data required for effective profitable trading otherwise you can’t do it properly and you would be like other trades.
After this choose one index from major indices and try to trade in it at small scale and gain practical experience. Learn from it and compare your theoretical learning with practical learning. This difference makes you to trade the market effectively and make money from index option.
How To Do:
Open your Investing app or software and start watching market carefully. you are going to trade index then select one index like sensex see what is sensex today, how it is doing, going up or down and why, how much liquidity is their, how much momentum is their, what is the volume and Open interest is their. see all these small things in details and take notes. when you done for one index then go to next indices and repeate same steps. do this all five days from morning to market close.
Index Options Trading: Observe The Price Chart Of Instrument
Now you have selected index then see, price chart of their option and repeat above process again and collect the data. In actual you are going to trade here in price of option but with reference to movements of indices. In what direction index moves option price also moves in same direction so you have to trace it and trade for call or put option.
You can’t be fully relay on price chart in option trading and need to see both charts (index and price chart) same time and trade. Price chart moves as per direction of index but then also other things are present their like price action so to take advantage of it you must learn the price chart carefully otherwise you miss the good money making opportunity. When market is bullish or bearish so in that sense buyers or sellers get activates and day trading, scalping trading happens in that so you can take advantage of it.
Learn to read and use option chain Option chain is very one of important part of index option trading because lots of data for trading is taken from option chain so focus on option chain. Read it carefully and try to understand strike price, call, put, volume, open interest and changes in open interest, put to call ratio which required for successful option trading. This is not very hard do it daily you easily read it and take data from it for your index option trade keep open tab of option chain and keep eye on It because this data can change market direction and so you take advantage of it.
Index Options Trading : Practise Chart Observing And Learning On Same Screen
In option trading you need to see two charts at same time and do trade. So here problem is that when you trade on single chart then it’s ok and easy for you to trade fast but when you see multiple charts and trade, then it’s not easy and in option it is very risky because you can lose money. in this process because this happens fast and also you should be fast other miss the opportunities.
Here problem is you need to do three tasks at the same time, first one is watch index chart, Second price chart of option and third one is to trade, it means place buy or sell order, set stop loss and profit margin and when target hit take exit. When you start you don’t know about it and this is the reason behind failing in trades. So for this reason and to take advantages of opportunities you have to learn these things and practise them regularly.
How to do this First watch two charts on single screen and then change setting of layout and watch two charts on single screen same time and do practise to watch market and price chart to make yourself ready for trading. Use paper trading mode or another tool to trade with live market and place all the orders.
Do live trading practise on chart and same time place orders, set stop loss, target order. If market situation changes then try to change orders and make your trade successful. This is how you need to practise it otherwise initially it’s very hard and risky to execute fast in live market. So practise watching charts, drawing on charts and placing trading orders and exit.
Index Options Trading : Do Strict Analysis Of Your Trading
Analysis is process of going deep in everything single and takes details of it for further study. Analysis means open all the shades of a single like what is the thing. How it work, how to do it, its process and steps, its advantages and disadvantages, its limitations everything which get out it take them and save.
When you trade you go as per your plan but marker can be change anytime so in that process how you made profit or loss and what you did to make it happen write it down and save it in your notebook and study them carefully this helps you to make your trading more effective and profitable. Find out mistakes from your plan, method, and implementation and analysis then strictly and study them properly to find solutions and correct them immediately. Whatever you do for option trading analyse it and study it again and again to make your trading smooth. From your thought to your trading profit margin everything analyse them first and then go for trading. Every weekend do analysis of your trading work:
- How you are trading
- What is the result?
- you are going in right or wrong direction
- what things keeps in right or wrong direction
- what mistakes you are doing
do this every weekend and correct it by proper study and apply it in next week and try to make trading better. Target Profit margin and stop loss When you start trading index options then first start with small capital, affordable stop loss and small profit margin and fix it for time period. Repeat this until you are able handles all these things carefully and flexibly. Don’t change your capital if you get profit, likewise don’t change your profit margin but you can adjust your stop loss as per market situations to save your capital.
See market changes so some day you exit on target and price move further or maybe you get more profit in same trade, so take the profit and stick to your plan don’t change it and run back to more profit margin. Making changes in capital and profit margin distract your process of being good trader and completing small goal. This unknown small thing makes traders’ loss and they miss money making opportunities. So be consistent and is more important than making more and big profits.
Index Options Trading : Do limited Trading
When start trading index option then it seems like, this is easy you can do it easily and make money but it’s not. In this thought process you do again and again and lose earned profit and may be from your capital also so don’t let this to be reason of trading loss and losing money making opportunities. Do limited trades every day for that trade only when there is trading opportunity in index otherwise wait and focus on next day. If some day can’t trade or can’t make profit then its ok it’s normal for every one and happens. Focus on next because market is not going anywhere but if you lose your capital then it’s very bad for you. Be normal and learner while trading index options.
Index market is depends many things and also affects by many things so it can change suddenly or may be slowly so whatever happens when you make money then be normal trader and learn from that. Don’t keep any attitude in mind and don’t cross your confidence level in wrong attitude because most of trades lose their earned profit also capital in the wrong attitude and confidence. So when you make money then be normal say yourself this is market and can change any time you must be stable all time. Remember this all-time either you trade or not.
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