Within our curriculum of Rich Dad Education Elite Trainings, we cover dozens of different option trading strategies. When faced with this smorgasbord of choices, many traders wonder how to select the best one. Perhaps you, too, have faced this dilemma.
Should the strategy match your personality?
Should it fit your risk tolerance?
In the end, however, I suspect the best answer is to select the strategy that you know how to make money with. After all, what good does it do to employ a fancy strategy if you’ve yet to figure out if you can make it work?
And how do you do that? Why, with paper trading, of course.
For those otherwise unfamiliar with paper trading, a brief review is in order. Sometimes called virtual trading, paper trading allows you to practice any strategy or technique with “Monopoly® money.” Not only will paper trading help familiarize you with how to place trades in your brokerage account, it also helps you test drive a strategy to ensure you know how to make money with it before going live.
Keep in mind, virtual trading is but a step on your path to trading success. Don’t bask in the sweet safety of the virtual realm for too long. Once you’ve proven a strategy and have a good track record, transition to the real world to reap the rewards of your educational efforts.
In sizing up your strengths consider how well you do at forecasting direction. Those with a knack for divining the future will naturally gravitate towards more directional strategies. If you’re a chart reading rock star with a penchant for trend riding, then by all means, swing away with the different directional plays we teach such as stock trading, long calls and puts, or spreads like bull calls and puts.
If, on the other hand, the market’s next move along with quality setups continually elude you, then perhaps you should focus more on the bevy of high probability, non-directional strategies we teach like bull put spreads, bear call spreads, iron condors, and the like.
You don’t have to master every strategy. Find what works for you, play to your strengths, and the profits will follow.
- Jonas Taylor is a financial expert and experienced writer with a focus on finance news, accounting software, and related topics. He has a talent for explaining complex financial concepts in an accessible way and has published high-quality content in various publications. He is dedicated to delivering valuable information to readers, staying up-to-date with financial news and trends, and sharing his expertise with others.