options trading: ETMarkets Trade Talk | Options trading not a lottery ticket, avoid these 5 mistakes: Rahul Prajapati

Mumbai-based options trader Rahul Prajapati, who has trained thousands of traders in the last few years, says over-reliance on technical analysis is one of the 5 mistakes that one should avoid while navigating the ‘chakravyuh’ in the world of derivatives.

Edited excerpts from a chat:

Please take us through your previous work experience and educational background?
Before joining Quantsapp, I have served as a research analyst for over 4 years in various broking houses. I have also been a professional trainer with different institutes training over 10,000 students so far. I hold a master’s in finance along with a PG in Wealth Management.

How did you get into trading?
I developed a passion for trading after graduating from college, and it has since become an integral part of my daily routine. As I gained knowledge and experience in trading, I discovered a love for sharing my insights and helping others learn about the markets. Teaching has become an important aspect of my life now.

Can you take us through your trading strategy?
As an options trader, I believe in adapting my strategies to suit different market conditions. While my focus is on directional trading, I constantly explore and experiment with new strategies, leveraging my technical and derivative expertise to gauge market directionality. With an eye on options Greeks, I seek to optimize my returns through a combination of tried-and-tested approaches and innovative tactics. There are a few standard strategies earmarked for particular market conditions, but out of experience each one has to be adapted to the current market conditions.

You have trained thousands of students in the last few years. Tell us about the 5 most common mistakes that new traders make in options.
Based on my experience, I have seen people making these mistakes while trading options:

1) Lack of trading plan: Traders should have a clear plan with defined entry and exit points, position sizing, and risk management strategies.

2) Over-reliance on technical analysis: While technical analysis can be useful, traders should not rely on it alone and should consider derivative data as well.

3) Not being patient: Options trading requires patience, and traders should not rush into trades without sufficient analysis and consideration.

4) Failing to keep emotions in check: Options trading can be emotional, and traders should avoid making decisions based on fear, greed, or other emotions. Having a disciplined approach can lead to better trading outcomes.

5) Not adjusting trades: Option traders should be prepared to adjust their trades when market conditions change. Failing to do so can lead to significant losses.

Among all the genres of trading, options, in particular, have become extremely popular among the retail community. Do you think it is the toughest way to make money?
Options trading can be difficult and challenging, especially for those who are new to it. The options market is complex, and there are many different strategies and techniques that traders can use to trade options.

One of the challenges of options trading is understanding the different types of options, Greeks and complex strategies. Additionally, options traders must have a good understanding of market trends, as well as the technical and fundamental analysis needed to make informed trading decisions.

Overall, options trading can be difficult, but with the right knowledge, skills, and strategies, traders can achieve success in the options market. It is important to start with a solid foundation of knowledge and to practice trading.
However, on the positive side, options are pretty scientific in nature, which gives a lot of opportunity if we know the factors that affect the options premium (Greeks). A trading system backed by a well-tested model has a very limited chance of failure.

Is options trading the best way to start your trading career?
Options trading can be a lucrative career path, but it may not be the best starting point for everyone. It is important to evaluate your skills, risk tolerance, and goals before deciding on a trading part and to gain a solid understanding of the options market before trading.

A thorough knowledge building exercise is a must for anyone exploring options trading at the start of their trading career. Doing that destroys the perception of options as a lottery ticket and helps build realistic expectations.

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