“The more I see, the less I know, the more I like to let it go.”
That’s a quote from a song written by my fellow Midwesterner Anthony Kiedis of the Red Hot Chili Peppers. Clearly he was referring to option traders.
Starting Option Trader 1-on-1 Coaching
When I first started working with option traders in 1-on-1 Coaching, I had, well, a different approach than I have now—which I think my current students appreciate.
A student would tell me about their trading method, and I’d (often) not even let them finish their sentence before interjecting something along the lines of, “Why are you doing that? That makes no sense!” Or maybe, “Never do that again!” Or maybe a plain old, “That’s a terrible idea!”
I’m a trader, and a Chicago South Sider. I like to cut to the chase. What can I say? (John’s the same way. Remind me one day to tell you about when he made one of our students stand in the corner…)
Now, to be fair, even in hindsight, some of the things traders would tell me literally were terrible ideas. But many (most) probably were not. I’ve gotten a lot more open minded as time has passed.
The MTM Community Trader Chatroom
I guess I started thinking about this this morning (the morning I wrote this) when I logged into the MTM Community Trader Chatroom and was reading comments under the #earnings-trades channel and saw one of our supportive Community participants, Philip C (a grateful shout-out to you Phil, if you’re reading this!) talking about using the past 10 quarters of earnings data for modeling TED trades, where I state in my material to use the past 7 quarters.
Is there anything magic about 7 quarters? No. Or at least, not that I know of. What’s optimal? 7? 10? 4? 20???
The point is not that it doesn’t matter. It does matter—I imagine at least marginally. But I—and I suspect even Phil—don’t know the exact answer. Traders start out their trading methodologies by trading based on things that make sense to them. That are logical in their current train of thought. On what they know.
But there’s a heuristic called “the availability bias” that gets in the way. When we decide upon something, we do it based on the things that come to mind first or that are most available to our thoughts. Our context. We don’t take into account all the data that exist—every possible permutation. We don’t take into account the things we don’t know—especially the things we don’t know we don’t know.
But when we listen to others, something magic happens: We learn new things. We have MORE thoughts available to us. Our world of possibilities opens up. And then, my friends, we make better decisions.
Creating Trading Systems
A series of other recent experiences has inevitably helped pry my mind yet further open. As you are probably aware, I’ve been working hard the past few years on creating specific trading systems. I started with The MTM S.M.A.R.T. Income System. Then Total Earnings Domination, moved on to The Red Knockout, and most recently OptionsRaider. (And I have a couple more in the works.)
One thing I know for sure is how each of these systems works now is not how I envisioned them working when I first theorized how they’d work. In fact, in back tests on some of these, the exact opposite of what I thought would work best actually yielded superior results. I’d bounce ideas around with John or Nick or other smart folks and sometimes we were all shocked by what worked best.
It’s important to evolve in your trading (and for personal growth in general). And to me, one of the key drivers of that evolution is to forget what you think you know. It might be right… and it might NOT.
Watch. Test. Try. Fail. Fail. Fail. Succeed.
And that, my friends, is how we become the best traders we can be.
Founder and President
Market Taker Mentoring, Inc.