Option Traders Need a Plan

Posted on Thursday, April 25, 2019 at 1:39 PM

When I became a retail option trader, I was told by many that I needed to write and follow a plan. Although many of you know this as well, you may have either not written or finished your plan. As I always like to say, if you were opening a restaurant, would you do it without a plan? The answer is, of course not. So why do most option traders not have a solid trading plan? You need to answer that for yourself.

Before you start writing a trading plan, ask yourself if you are truly motivated to succeed. It may sound insulting to ask that, but traders really need to find out. Will you put in the time to make it as a trader? There are going to be highs and lows along the way. Will you be able to handle those? And will you be disciplined enough to write and follow a trading plan?

To make it as easy as possible, I tell traders a good place to start is to write down their strengths and weaknesses. Who is going to know you better than yourself? This can formulate, based on your personality, what type of trade plan would best suit you. Are you patient or impatient? If you are impatient, maybe longer-term trades are not for you. Are you a risk taker? If you are, selling premium on options where losses can be substantial may be an option for you.

Now you have something to work with, and that can give you the motivation you need to continue on and finish your plan. Next you will have to complete sections such as goals, strategies, management and post-mortem, just to name a few. In later blogs, we will talk about them too.

John Kmiecik
Senior Options Instructor
Market Taker Mentoring, Inc.

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