What does it take to become a successful options trader?

This is a very complex question, but we will try to give a few brief thoughts on the subject. Most people believe that to be a successful options trader, it simply requires learning one of the many options trading strategies that provide the trader an edge over the market over time. Does this mean that taking a $5,000 weekend seminar or weekend course will arm you with all that you need to start making money the day after the course is over? Hardly.

New options traders often fail to see what is truly required after you learn a particular strategy. It’s not as simple as reading about a trade method, then taking a test and getting 100% of the answers right.  Trading is more like learning a sport then trying to execute at a professional level immediately after you learn “what to do”. We all know that would be impossible—otherwise we could all read Ted Williams classic book about hitting a baseball and be in the major leagues shortly thereafter.

So why would trading be any different? One of the reasons is that there is no barrier to entry in trading, other than trading capital. As for sports or any other business, where can you just walk on and compete against other professionals? Thus it is important to be realistic about trading expectations no matter what sales pitch you hear. There is no way that any trading course or weekend seminar can cover every aspect of trading. This means that time and experience is a major requirement in becoming successful a successful trader. It is a journey, not a sprint.

Another major component (many would say it is the biggest) is the psychology of trading. Unlike most other professions, trading requires the ability to handle losing or being wrong. For many this is one of the hardest issues to overcome, especially when we have gone through life learning to be right all the time and seeking to get an “A” or 100% mark in school.

In trading, you can have more losses than winners and still make money as long as your winning trades are larger than your losing trades. However, this is very hard for many traders to deal with emotionally. Taking multiple losses in a row is very normal, but can cause a new trader to abandon their trading methodology in search for a better “holy grail” only to find that the trade they abandoned performed beautifully once they abandon it.

Lastly, as you progress as a trader, you will come to realize how huge of a roll psychology plays in your ability to be consistently profitable. Most average-to-advanced traders (skill-wise) will tell you that trading psychology is the biggest single component to trader success. Then ask those same traders how much of their education is spent on trading psychology and most will say zero.

Trading is a business like any other and requires time, persistence, and getting out of your own way! So make sure while you are looking for that holy grail or learning a new methodology that you commit time to really learning the trading methodology and take seriously your study of trader psychology.

Seth Freudberg and Michael Schwartz

no relevant positions