3 Little Option Trading Mistakes That Could Cost You Big

This article of options trading information was originally published on LearningMarkets.com.

Traders have very little that they can control directly. The market is inherently unpredictable, and even good systems break eventually. This means we should do everything we can to control those things that we can influence.

We cover the brokerages on our industry site, Broker News Blog, and have found that traders make three pretty consistent mistakes about things they could control that lead to account blow-ups.

First, many traders use very inconsistent position sizing.

In the video below, we discuss this in detail, including several tips that option traders can use to avoid some of the complications that makes position sizing difficult.

Second, some traders with account problems will trade positions that are too large relative to their overall account.

This makes draw-downs very difficult to recover from and can be emotionally difficult to deal with. We also discuss this particular issue in the recording below, including a few tips for finding the right size for you.

Finally, overtrading is a common issue that leads to much higher costs, lower profits and too much stress.

Many traders want to be involved in their trades even when they should be sitting back and letting things run. This is a difficult skill to master and depends on the first two issues mentioned above being resolved first. We will be discussing this issue in more detail in an upcoming webinar.

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