Dear Friends, 

Whether you are quite unfamiliar, familiar and even knowledgeable with options trading better read this one!

In short, everyone currently trading in the market should read this!

Trading is far more dangerous than you might have heard from various sources.

Indeed, there are countless individuals who have lost their livelihoods, their peace of mind and ended up in  deep debt because of it.

Do you know why they met such a fate?

It wasn't because of options trading by itself!

But, it was because of them only.

They, and they are alone are solely responsible for their worst situation. 

Let's analyze the specific reasons for this in detail, one by one:

1. Over-trading
2. Holding overnight positions.
3. Failing to make a Stop Loss
4. Buying premiums at inflated prices
5. Engaging in "Revenge Trading"
6. Lack of sufficient technical knowledge

1. Over-trading:

This involves of executing more no of trades in a single day or trading in the full day of the market hours. Even if the first two trades conclude successfully with a profit, one might enter a third trade out of overconfidence, only to lose the profits gained from the previous two trades, thereby eroding their capital investment.

Who actually profits from this "over-trading"? Only the broker house and the government with brokerage and all the taxes. You are not!

Therefore, it is wise to refrain from excessive buying and selling.

2. Holding Overnight Positions:

Options trading is extremely time-sensitive. With every passing second during trading hours, the value of your premium steadily erodes automatically. 
This continuous decline in premium value is due to the "Theta" factor (time decay). Therefore, if you are engaging in options trading it is quite advisable to buy and sell within the same trading day ( intraday basis- on the most occasion)

Holding overnight positions does not guarantee success every single time. Whether the outcome is a profit or a loss, strive to close your positions by the end of the trading day.

3. Failing to Set a Stop Loss:

The most common complaint raised by many traders is this: "The moment I set a Stop Loss, the market hits that specific level and immediately reverses course to move upward".  However, that is precisely the purpose of a Stop Loss. People usually in the market often say that not to set a Stop Loss (SL). If an SL is triggered, the loss might range merely from Rs 2,000 to 3,000.

However, if you do not set an SL, your entire trading capital could eroded to zero—what would you do then?

On what basis do we drive a car at high speeds? It is based on the confidence that we have brakes, isn't it? The Stop Loss serves this  exact same purpose in trading also. This is for armed with the assurance that this safety net exists, you can step into the market with confidence.

To put it in our own colloquial style: it is like saying, "A disaster is destined for the head was averted with just the turban."

4. High-Premium Buying:

This refers to the "chasing the price." Fear of missing out (FOMO). Let's imagine you need to travel to a specific town; you would go to the railway station and board the train there, wouldn't you? You certainly wouldn't wait until the train has gathered full momentum before attempting to board it.

Trading works in much the same way approach: the proper approach is to wait patiently for the price to reach a specific level before making your purchase. If you chase after a price that is already on the move, it is highly likely to reverse and drop shortly thereafter—resulting in maximum financial loss.

5. Revenge Trading:

Whenever you engage in trading, an interaction between you and the market is one thought must always remain at the forefront of your mind: "The market is always supreme; it always functions correctly."
If you hold this mindset, hitting a Stop Loss (SL) will not become a matter of ego or pride for you.

Kindly keep your mind calm and compose. You will always remain composed and calm while making your trade. Impulse trading must always be avoided.

However, if you view this situation as an ego clash, that is the end of it; All your trade will transform into "Revenge Trading." Your decision-making and rational thinking processes will ultimately deteriorated.

The ultimate Result is the entire Financial Loss.

6. Lack of Technical Education:

Buying stocks with the application of various technicals. Don't merely buy or sell without a foundational education in technical analysis concepts such as:

Candlesticks
Support & Resistance
Trendlines
Divergence
Volume
Patterns
Fibonacci Retracement

Do not ask, "If I learn all these things, am I guaranteed to make a profit?"

What is certain is that you will avoid incurring losses.

If you understand Candlesticks, you will not get trapped in positions where a market reversal is imminent.
If you understand Support and Resistance, your entry and exit points will become clear and precise.
If you understand Fibonacci Retracement, you will be able to execute effective retracement entries.
In any profession in the world, if you wish to generate a profit, you must atleast have a thorough and clear understanding of that specific trade or business.

The newcomers to the market should steer clear of Options Trading and instead focus their attention on Investing.

Do not come to the market merely to give away the money you have earned through hard work as charity.

Options Trading is mostly like an addiction; once it gets into your system, that intoxication will not let you go.

So exercise with extreme caution always.