My Favorite Option Things

Posted on Thursday, November 21, 2019 at 1:33 PM

Every year Oprah releases a list of her favorite things ahead of the holidays. According to her magazine, she has selected 79 perfect presents and one bonus selection for 2019. I also have a list, but it is not seasonal. It is a few phrases I like to use that I think can make you a better option trader. I am just going to cover three of them in this short blog and I will explain briefly what I mean for each of them. Consider this my present to you for the holidays. In a future blog, I will cover more of them.

Money Lying in a Corner…

The first saying I like to use is taken from a quote from Jim Rogers. It is part of a bigger quote, but I have narrowed it down to trigger a response from traders. When I say “money lying in a corner,” I mean that I want to take a trade I deem to be overwhelmingly in my favor. Let’s face it, as traders we try to put the odds on our side to extract money from the market. Easy money is money that is lying in the corner. So, what I am trying to elicit is that you feel confident putting this trade on because you deem the odds to be on your side and you are taking the trade for no other reason. It is a reminder to think about the trade before execution.

Think of Yourself as a Risk Manager First

Many of you have probably heard the saying that the first rule in trading is to protect your capital. And most likely you thought, no, the first rule is to increase your capital. Who could blame you as a new trader? But once you realize how trading works, it starts to make sense. Essentially when you think about removing risk first, profits are sure to follow if you are managing things properly. That is the notion I try to ingrain in my students’ heads, and it needs to come instinctively. You need to properly manage your trades and know when to remove risk, and then trading can become a whole lot easier.

When a Stock Enters a Target Area, You Need to Do Something

This last saying for today is pretty simple, and it should be straightforward too. What I mean is, when stocks trade into support and resistance areas, traders need to take action. When I look at a chart, I see several potential areas for the stock to move in the intended direction. For me, these areas are usually support for bearish trades and resistance for bullish trades. Knowing that support and resistance have a better chance to hold than not, the stock might have trouble moving in the same direction and might possibly reverse too. I want traders to consider taking some profit at those levels if applicable, or at least moving their mental or hard stops up.

Those are just a few sayings I like to use in my teaching. I hope they make sense to you and you can use them or consider them in your own trading. Have a happy Thanksgiving and enjoy the holidays!

John Kmiecik
Senior Options Instructor
Market Taker Mentoring, Inc.

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