WHY DO WE LOSE MONEY IN OPTIONS TRADING?

WHY DO WE LOSE MONEY IN OPTIONS TRADING?

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Most derivatives trader lose their money while making the trades. In this article, I will discuss some key points which is the reason behind losing money in options trading.


In the share market mostly in options trading, there is a myth that is almost a truth that most retail traders can lose their money.


If you are reading this article maybe you also have lost some money, but don’t worry if you are trading or investing in the share market then you may be aware of the loss, that loss is a part of this trading journey but the aim of a trader is that to minimize your loses and maximize your profit.

In simple words, if I want to explain what trading is cut you as soon as possible and if you’re in profit book it.


More than giving you any definition let’s discuss some common reasons for losing money in options trading:-


  1. Not having proper knowledge of the options market. If you don’t have proper knowledge of the share market or derivative market it is the biggest reason for your loss. before trading in options gets a piece of proper knowledge. 

  2. If you are having proper knowledge that you are losing money then the following are the reasons for your loss:-

  • Greed: if you are greedy and expecting more and more profit in a trade which at the end of the day converts into a loss. Don’t be more greedy if your trade is in profit book your profit.

  • Skill and setup: Improve your trading skills and work on your trading setup. Here the trading setup does not mean your hardware like monitors and laptops it means your trading strategy, work on your strategy.

  • Lot size: the big reason for the loss is the greed for more profit we take a big lot size more than our risk-taking capacity.

  • Risk reward ratio: we can’t maintain our risk reward ratio in options trading you have to maintain at least your risk if you are not able to manage your risk then the market will eat up your all capital someday or even in a second your capital may swipe.

  • Patience and psychology: The biggest reason for failure in options trading is that we don’t have the patience to take the right trade we are just buying and selling calls and put without proper logic and just marking trade to cover our loss and making lots and lot of revenge trade. 


To become a profitable options trader just work on the above-given points if any of the reasons are present in your trading style remove them. In simple work on your strategy, believe in your strategy and be Patience and work on your trading psychology.


Don’t follow anyone's tips if you follow some professional trader's tip then before taking any trade research it once by yourself.


At last, keep your trading strategy and style as simple as you can and make a habit of booking profit, not a habit of booking loss, for that you have to work on your greed.


To open a DEMAT Account and start your trading and investment journey in share market click on the below links:

  1. https://zerodha.com/open-account?c=TI4014 (Zerodha account opening link).
  2. https://tinyurl.com/2o7vat36 (Angelone account opening link).
  3. https://link.upstox.com/WQiW (upstox account opening link).

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