I would like to discuss this topic alerting to the inevitability of having negative trades. If someone tells me that this is not part of the game, I can tell you that they are not true traders! 

In opposition to experienced traders, newbies seem surprised when losses happen. Or expecting to have a big majority of profitable trades. I would like to point out that psychology gives us some clues on this topic. To become a real trader you need to change your attitude towards each trade you place.

The majority of us think that placing a trade is accepting risk!  No, it is far more beyond: placing a trade is taking a risk. 

A clear example of trading psychology that illustrates loss avoidance (yes, we have difficulty accepting it!) is canceling or moving a stop loss when the trade is going against an initial thesis, in the hope of recovery.

Most traders, especially less experienced ones, have a problem with trades that are producing losses. They never expect to have them.

If a trader truly accepts risk, which means he is accepting the possibility of having a loss, before the trade, the experienced trader would never move the stop-loss or cancel it. This is because prior to the trade, he accepted the investment at risk (max loss), in exchange for a potential profit.

From a business perspective, a trader accepts the risk/trading loss as a standard business cost, like in any company. And, when it happens, the experienced trader closes the trade and move on to the next one.

This is why trading losses don’t seem to bother experienced traders as much as new traders.

In a standard business (like running an online store) you should spend a certain amount of money on promotions, otherwise, you will not grow your sales. You need to have some kind of costs to sustain your business. Losses will come along the trading year and you should think about them as “costs”, like in any business. If you had a track record of consistent revenue with a clear trade plan, you believe you can spend money to make money, which will lead to profits. This is the mindset of a pro trader, or similarly an entrepreneur in a normal business.

New traders don’t have this in mind, because they don’t have the track record yet, so trading losses take on a much bigger meaning for them.

So how to become consistent? 

With a proper trading plan. You can find in my book a set of strategies that I am teaching and trading which were developed and tested and produced a proper trading plan. A trading plan is a script with profitable ideas. For each strategy, there are clear guidelines to follow and achieve consistent profits.

Trading profits are a direct result of having a structure for producing winning trades that surpass losses. 

To achieve consistent profits, you need an edge, a strategy that gets molded and adjusted into a trading plan. When a trader reaches this stage, trading losses are a business cost, because in the end of the year the results will be positive! 

 

Below I describe a set of rules to improve your trading skills and move from a beginner options trader to a pro options trader. 

 

Options trading is risky. So why do people still choose to trade options? Because there are many benefits associated with options trading. And while the risks of options trading must be considered, it is possible to manage those risks.

In fact, you could say that managing risk is one of the most important things you could ever learn about options trading. You see, options trading involves taking positions based on expectations about future market movements. When markets move against our expectation, we lose money. But when markets move in accordance with our expectations, we make money.

When we look at option prices, we want to understand what our chances are of making money. In other words, we want to understand the level of risk we are willing to accept. If we don't like the level of risk, we shouldn't enter into the trade.

The first thing we can do is limit our exposure to the underlying asset. We can set stop loss levels to protect us from large losses. For example, if we think that the stock price might fall 10% over the next month, we'd better sell puts that cost $0.50 each. If the stock falls less than 10%, we'll make money. If it rises above 10%, however, we'll incur a loss equal to the value of the put sold.

There are many options strategies that traders can employ, like covered Call, naked puts, Iron Condors, to name a few. These "standard" options strategies are often not well managed, or the trader is not managing correctly the risk. That is why I developed my own options strategies with clear risk guidelines that target specific profit targets and avoid losses... this is key to become profitable when trading options.

 

Options trading requires discipline. You cannot simply follow the crowd. This is true whether you're trading stocks, bonds, forex, futures, ETFs, cryptocurrencies, or anything else. Even though many people think they know what they're doing, most don't really understand how markets work. And even if they do understand how markets work, they often lack the discipline required to execute trades successfully.

The best way to avoid being swayed by others' opinions is to develop your own trading strategy. This strategy will help you identify potential positions, set up the right trade, form and stick to a strategy, and determine your exits. Most importantly, it will give you confidence throughout each day that you did everything possible to make money.

 

The best way to trade successfully is to find one that works well for you. In fact, each type of option trader has a different personality, and it helps to know what kind of trader you are before you start investing. Here are some suggestions about how to choose a trading style:

• Day traders tend to look for short-term trends and try to capitalize on them quickly. They often use technical indicators like moving averages and relative strength indices to help them identify entry points.

• Position or Income traders focus on long-term trends and try not to deviate too far from their positions unless there is compelling evidence to do otherwise. These type of traders can also be classified of Delta-neutral traders if their strategy focus is controlling directional risk.

• Swing or directional traders aim to profit from the ups and downs of the market. They usually don't hold onto trades very long because they believe that markets move up and down based on fundamentals, and they want to jump into the action whenever possible. 

 

Patient investors are willing to wait until the market provides the right opportunity, rather not trying to make a big gain on every market move. A patient investor knows that there are always opportunities out there, even if it takes some time to find them. He does not try to guess what the next price action will be, he simply waits for the right moment to enter or exit his position.

On the contrary, amateurs are impatient, unable to contain their emotions, and they are quick to enter and exit positions without analyzing the situation properly. They do not know how long it will take to reach their goal, and therefore they are prone to making hasty decisions based on emotion.

 

The number one thing I tell my students is that we're all human beings trying to make money. We all want to do well. But there's a difference between being successful and making money. Successful people have a plan. They've thought things out. And they stick to it.

In fact, research shows that traders who follow a strategy are far more likely to succeed than those who operate on impulse. A study conducted by researchers at the University of Texas found that options traders who had a written trading plan outperformed those who operated without a plan by nearly 20 percentage points.

So why does having a plan help us become better investors? Because it forces us to think clearly and logically about our decisions. When we have a plan, we are forced to consider the following questions: What am I doing here? Why am I doing it? How might I fail? And most importantly, what do I stand to gain?

If you don't have a trading plan, you won't know where you want to go. Instead, you'll just trade based on whatever happens to come up next. This type of trading is like driving down the road without a map. You could end up anywhere. And that's why you never seem to find yourself in exactly the same spot twice.

Most successful options traders keep diligent records of their trades. Maintaining proper trade records is an essential habit to help you avoid making costly decisions. The history of your trade records also provides a wealth of information to help you improve your odds of success.

 

The most important thing you can do to improve your trading skills is to study the markets and learn about trends, options strategies, simulating trades, etc to improve skills and knowledge. If you want to make money, you must know what makes the market tick. You cannot rely solely on conventional wisdom and experience alone. Learn about the markets and how they work. Becoming an active learner is key. for me, the best advice I can give you is to join other options traders and learn from a community. Do not trade alone. Transfer of knowledge is proved to be faster in group than studying alone.