Option trading has always been the favorite job of novice traders. They prefer to trade the options market as it allows them to take advantage of complicated market dynamics. They use the timing setup of the market and make a profit at the initial stage. As they gain more experience in the market, they start breaking the rules and make things overly complex and lose a big portion of the capital. You need to have a perfect option trading method to take the trade like a pro-UK trader. Today, we will teach you how to create a perfect option trading strategy in a few easy steps.
Analyze the 1-hour chart
You need to start analyzing the 1-hour chart since it gives the best results for the short time frame trader. You may think about the expiry period will be 1 hour but it will not be for 1 hour. To make a profit, we will set the expiry period to the 5 minute time frame. When you analyze the 1-hour chart, make sure you are not using too many complex indicators. The simple line tool will be enough to find valid support and resistance level. When the support and resistance level are drawn in the chart, it’s time to learn about the execution of the trade. Unless you can time the trade properly, it will be very hard to overcome the issues and become a skilled trader.
Finding the entry point
To find the entry point, you need to switch back to the 5-minute chart. Look for the pin bar pattern at the support or the resistance level. If you spot the pin bar pattern in the 5-minute chart, take the trade in the next candle with confidence. But for this kind of trading strategy, you need a professional broker. Elite investors prefer options trading with Saxo as they provide the best possible environment for the lower time frame traders. If you are smart, you might have noticed the trades that you take in the market requires a time frame switch. This is nothing but a multiple time frame analysis. Study the different time frame and it can give you vital data regarding the market condition.
Managing the risk profile
To manage the risk profile, you should learn about the important metrics. People become too much concerned about the trading strategy. After getting to the 5-minute trading strategy, they believe they will never lose any trade. But they are completely wrong. Everyone has to lose trades in their trading career. If you truly believe trading is the right job, make sure you are taking the trades with less than 1% risk. When the risk profile is set to a low level, you will be able to earn more money. You will slowly learn to embrace the losses which is one of the best things you can learn as a trader.
The major news
The only problem when you use this trading method is high impact news. Traders don’t know how to assess the high impact news and take the trades’ in the most complicated situation. But if you focus on the long term market dynamics, and slowly take a look at the top traders, you will notice all of them have a fair knowledge of the news. They are so good at analyzing the news data that they often trade during the news. But we are not asking your trade the news. You should be staying in the sidelines and never trade the news unless you become good at analyzing the trend and price action pattern. Trade in the stable state of the market as it will give you a better chance to win the trade. Stay focused and take trades with discipline so that you won’t lose too much money.