What Is the Best Way for Trading Options? - Candlestick Patterns Explained by TechniTrader®

Use Stock Chart Analysis

Options Trading requires that you know more than just options chains, puts and calls, and other basics. Options Trading for beginners is often confusing and overwhelming and can result in a significant loss of your capital base unless you learn right from the get-go that trading options successfully starts with THE RIGHT STOCK PICK.

Stock Chart Analysis for Trading Options:

The stock chart example below shows potential for an option trade. Within the chart, you can calculate which option contract is the correct one to use, whether Out of the Money (OTM), In the Money (ITM), or At the Money (ATM) is the better choice. In addition to which contract to use, options traders must also consider the risk of the trade versus the point gain potential, possible given risk, resistance, and which Stock Market Participant Group is controlling the stock chart price.

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Using Worden Bros. Balance of Power (BOP) and Time Segmented Volume (TSV) along with stock Volume and other stock indicators will help you choose the best stocks for options trading. Not every stock chart is ideal for options trading. You also need to consider whether you are going to Swing Premium Trade, Position Premium Trade, Hedge, Mitigate, or use as a means of leveraging into the stock. All these decisions are part of the stock chart analysis.

Use TC2000.com charting software with proper candlestick chart analysis, along with the unique Worden indicators such as Balance of Power and Time Segmented Volume.

The WORST WAY to trade options is to use a Social Media feed, recommended stocks, broker recommendations or suggestions, retail chat rooms, and other services that tell you which stock to option trade. Why? Because there are predatory systems out there that track every retail news feed, retail social media, retail chat rooms, etc. to determine which stocks are most in favor with the retail options trader.

Then, it is easy for these predatory systems to jump in ahead of your options orders and drive price up or down before your order is executed.

To trade options successfully, you must choose your own stocks, and this is far easier than you may think. Actually, the stock chart tells you everything you need to know to put on the option trade.

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You Can Learn to Use Stock Chart Analysis to Find Your Option Trade Details:

What Option Contract to choose.
What Chains to use.
The risk of the option trade over the risk of the stock trade.
How long you should hold the option contract.
Whether you should use a weekly, monthly, or quarterly contract.
Where you should place your stop loss for your option.
How many points the stock is likely to run before it hits resistance.
Whether Dark Pools are quietly accumulating the stock or not.
Whether you will see anomalies in the Put/Call Ratio due to Dark Pool “insurance policies”.
The stock chart will provide ongoing data as to the profit of the trade versus risk.
When to sell your option contract.
Time decay factors based on trend, candlestick patterns, and other chart factors.

Everything you need to know to put on an option trade is there in your stock chart. This makes trading options easier. Yes, you have probably been told to focus only on the options market. However, that worked decades ago before Dark Pools were using options as a hedging and mitigating tool for their stock purchases. Now, options trading requires that you really know what is going on with the stock as well as what Retail Traders are trading in options.

Summary

Most Options Traders make options trading harder than it has to be, and they lose more often than they make money. Using TC2000.com charts and TechniTrader Options Trading Education together will make a huge difference in your monthly profits.

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If you have not yet begun to trade or invest, go to Introduction: Learn How to Trade Stocks – Free Video Lesson to get started.

Learn the steps to trade like a pro with this introductory mini course. You will learn what it takes to create a Professional Trading Plan that can help you achieve your trading goals: How to Create a Professional Trading Plan

Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses