5 Steps To Create An Ironclad Options Trading System

All options traders need to have a clear options trading system to follow, it’s that simple. In this business you don’t want to be ruled by your emotions so having a plan in place when things start going against you, makes life much easier as you just follow your plan and keep a cool head no matter what the market throws at you. Even a simple five step options trading system like the one outlined here will set you up with a framework for trading success.


5 steps to create an ironclad options trading system

Ultimately you should create your own system to match your personal trading style, however, if you are struggling to come up with your own ideas then follow the plan here as an initial outline which can be expanded and developed as you get further into your trading career.

Step 1: Assess Your Trading History

Have a look back at your experience with options trading to date so that you can learn from your successes and your losses. Be really honest with yourself and look at areas where you may have made bad decisions and work out how you could have done it better. Which strategies worked best for you in the past, and which ones were maybe not right for your personal style?

You need to take some time out to be honest and clearly assess your approach and your experience to date. It will help you to start to see what kind of trader you need to become. It should highlight areas you need to focus on to move your trading forward – any gaps, educational needs, strategies to try/avoid and that way you can start to build your trading plan.

Step 2: Write Down Your New Plan

If you don’t write it down it becomes so much easier to forget all the work you put into your initial assessment. People who write down their goals and make them concrete are far more likely to achieve them so do it right now. Get something on paper. What is your trading plan just for the next month? What are your goals and what strategies will you follow as a result of your assessment?

Once you have completed your monthly goals and crossed them off your list, then start again and write a new plan for next month, and keep it going. It’s an easy and effective habit to get into. What is it they say, Fail to Plan is a Plan to Fail? Make sure your plan is in place and written down.

Step 3: Identify The Gap

We all have an area where we are weaker when it comes to trading, whether it is in our pricing methods or our strategy section. Use your assessment carried out earlier to identify your areas of weakness and areas where you need to develop, and put an element in your plan to fill those gap areas. A great way to get feedback and help is through our Facebook Community which has more than 10,0000 traders currently – why not use them to bounce off your ideas and new strategies.

Go to our free education portal and type your weak area into the Answer Vault to find out if anyone else has asked questions about the same field, or search for relevant podcasts and video tracks on your topic within our learning platform.

Step 4: Put Your Options Trading System Into Action

There is no point having a plan unless you execute it so be confident, you have the knowledge – just get trading already. Remember to be consistent and persistent – don’t rush in and put all your savings into your new plan, however confident you are in it. Keep your risks manageable, and practice makes perfect in everything we do in life – why would options trading be any different? The only way to really make sure that your new options trading system works is to use it over and over again.

Each month revisit your strategy and adjust as needed. To be honest this whole process can take years to perfect (if ever), but it will help you continue to push your limits and grow your bank account.

Step 5: Get An Options Trading Coach

Options trading takes time and experience to perfect. Having said that, if you are the only one looking at your strategy day in and day out, how biased is that going to be? You may be too hard or too soft on your own strategy and thinking. So bring in someone from outside to help you! Look for a trader you admire and see if they would be happy to coach you, or sign up to our PRO membership and talk to me!

Explain your strategy to your coach and they will help you close all the loop-holes you may have not even thought about. Additionally they will help keep you accountable for your system and goals and keep you motivated through the trickier times.

I hope this quick five-point trading system framework has been useful for you as you move forward with your trading career. The only sure fire way to get better and better as a trader is to keep trading, keep assessing and keep learning from your experiences. There are no quick fixes or shortcuts, just experience and time. The more regularly you trade, the better you will get.

Once you have your ironclad trading plan in place, stick with it, and follow it regularly and keep trading – if you only trade once or twice a month you won’t learn enough to be profitable. Once you have identified the gap areas, if you do require any advice and guidance on all aspects of planning your trading, and personal development, please do sign up for free as a Member with Optionalpha.com. You will then gain access to a vast wealth of free educational resources, videos, podcasts and blog posts to help you on your way to becoming a better and more profitable trader.

About The Author

Kirk Du Plessis

Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. In 2018, Option Alpha hit the Inc. 500 list at #215 as one of the fastest growing private companies in the US. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D.C., he's a Full-time Options Trader and Real Estate Investor. He's been interviewed on dozens of investing websites/podcasts and he's been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and three children.