Secret 3PLAY IT ON PAPER
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If you are a beginner to option trading, getting started can
be a difficult task. One way to gain the confidence to trade options
is to play it on paper first. Let’s call it exhibition season or
preseason games where you get to make errors without losing
any money. Make some theoretical purchases of options and play
as if you have real money in the game.
Playing it on paper becomes more important when you are
considering high risk trades, such as naked writing. Then you
want to be fully comfortable with the strategy and be sure of the
pitfalls before you put some real money on the line.
Once investors put real money in the game, their behavior
changes. RISK and GREED come into play, and the greatest
enemy of all, the ego, gets in the way.
When you paper trade, you will act rationally, but once
investors really trade, they tend to become irrational. One of the
greatest battles of option traders is to maintain their rationality.
When you paper trade, nothing is at risk, so it is like walking
a straight line across your living room. However, when you have
money at stake, it is like walking on a ledge of a twenty story
building. Suddenly it is a lot more difficult walking a straight line
because fear comes into play.
Therefore, don’t paper trade for too long, for real learning
only occurs when real money is on the line; you will pay a tuition
in the real world even if you paper trade for a long time.
If you are a beginner to option trading, getting started can
be a difficult task. One way to gain the confidence to trade options
is to play it on paper first. Let’s call it exhibition season or
preseason games where you get to make errors without losing
any money. Make some theoretical purchases of options and play
as if you have real money in the game.
Playing it on paper becomes more important when you are
considering high risk trades, such as naked writing. Then you
want to be fully comfortable with the strategy and be sure of the
pitfalls before you put some real money on the line.
Once investors put real money in the game, their behavior
changes. RISK and GREED come into play, and the greatest
enemy of all, the ego, gets in the way.
When you paper trade, you will act rationally, but once
investors really trade, they tend to become irrational. One of the
greatest battles of option traders is to maintain their rationality.
When you paper trade, nothing is at risk, so it is like walking
a straight line across your living room. However, when you have
money at stake, it is like walking on a ledge of a twenty story
building. Suddenly it is a lot more difficult walking a straight line
because fear comes into play.
Therefore, don’t paper trade for too long, for real learning
only occurs when real money is on the line; you will pay a tuition
in the real world even if you paper trade for a long time.