Have A Plan…But Not Just Any Plan

Option trading is not a “free form” competition.  Successful option traders have “rules” they follow to optimize their chances for executing successful trades.  Another way of saying it… they have a “Trading Plan.”

“What’s that?” you say.  Well, savvy option traders define a series of trading “goals” that address trade outcomes over both short-term and long-term time horizons. They also address financial life goals like financing a home, paying off the kid’s education, or providing for a comfortable retirement. But simply having goals is not enough for a successful trading plan – you also need a way to reach them.

So beyond having trading goals, successful traders also have a “Trade Management” regimen to inform and adjust their trading strategy. It covers everything from trade initiation and ongoing management, to exit criteria. Finally, when the trade has gone ‘full circle,” a post-trade evaluation is made. If trade outcomes are falling short, savvy option traders don’t throw their hands up in despair – they adjust their Trading Plan.

As any experienced trader can tell you – sticking to a plan and continuously refining it, and not getting swayed by emotion, is your best chance of success.