Here is a quick reminder to plan out your trade management strategy before entering any trade. My students ask me all the time, “what do I do now?” And I ask them in response, “what was your plan?” Unfortunately, you can probably guess what the usual response is.
‘I Don’t Know’
“I don’t know” is the most common response and definitely not the one I want to hear. Management is the most important aspect of trading, in my opinion, and it is often the most neglected. There are a lot of emotions involved with trading, and you do not want the emotional trader (the one without a plan) making decisions for you.
It’s Simple
Before entering any position, write down your complete management plan on a piece of paper or type it into a document on your computer. Make sure it covers every twist and turn. That way, no matter what happens, you will know exactly what you said you would do and be much more inclined to actually do it. So many times, that trade plan goes right out the window when those candlesticks are moving. This has a much better chance of not happening when you hold yourself accountable to what you see on that piece of paper or on your computer screen.
Bottom Line
It really is simple to plan out your trade before actually putting it on. But like many things in life, we sometimes make things more difficult than they need to be. Making money trading options can be difficult enough, so find that discipline.
John Kmiecik
Senior Options Instructor
Market Taker Mentoring
