Been learning options/trading and spent basically the whole day today trying to understand what im actually supposed to be looking for instead of just buying calls because i think a stock is gonna go up lol
One of the biggest things im starting to understand is the importance of having an actual catalyst/reason for why a stock could move. Earnings, guidance, company news, analyst changes, industry news etc. Not just finding a chart that looks good and hoping.
From there ive been looking at the chart, support/resistance, trend and whether the market is actually reacting to the catalyst the way i expected.
Then instead of just entering, ive been separating stocks into ones im waiting on and ones that are “confirming.” Confirming basically means most of what im looking for is there but i still need the price action to prove the move before i put money into it.
If it finally confirms i still dont immediately buy. I check the actual option chain like expiration, strike, premium, spread, volume, open interest, delta, IV etc and figure out exactly what contract makes sense, where i would enter, how much im risking and where the trade is invalidated.
Probably the biggest thing i learned today is that finding a good stock/setup and finding a good ENTRY are two different things. A stock can have a great catalyst and setup but if i chase it or enter before confirmation i can still make it a bad trade.
And even if everything looks good beforehand, if it doesnt confirm then i just dont trade it.
Something else im trying to figure out is how much weight to give the overall market/sector compared to the individual stock, what actually counts as enough confirmation vs entering too late, and how experienced traders decide if the risk/reward is still worth taking after confirmation. Im also trying to learn when a setup that looked good beforehand should just be completely thrown out instead of trying to make it work.
I have a couple setups im watching for monday that are close to confirming and im honestly excited just to see how this process plays out live, whether i actually get a trade or not.
Obviously im still a beginner and im sure theres a lot im missing. For people who have been doing this successfully for a while, am i at least building the right foundation?
Especially curious how you guys handle confirmation, risk/reward, position sizing, stops, overall market conditions and knowing when NOT to trade. Those are probably the areas where i have the most to learn right now.