A Disciplined Approach To Trading Options

disciplined investor

Download The "Ultimate" Options Strategy Guide

Many traders lose simply out of ignorance - as bad as this sounds it's completely true. Honestly I throw myself into this category as well somethings when I see something I know I should trade on and I don't.

You see most investors base their trades on hunches, news, or tips from friends which we all know is baseless but we still do it anyway. And yet we have no specific risk and profit objectives before placing trades.

Therefore a little discipline is in order to make us more profitable traders overall.

A Winning Approach You Should Follow

Traders often over-educate themselves but fall victim to their own emotions right when then shouldn't. They hold on to losing positions hoping they will turn into winners and sell winners by fear of losing a small gain. They over-trade to fulfill a rush for "living the lifestyle" when the often should site quietly on the sidelines and watch.

The consistent option traders who win follow a similar approach to the one below:

  • They have a clear arsenal of strategies to enter and exit trades.
  • They use great (not good) money management.
  • They know when to trade and when NOT to trade.
  • They follow a trading plan and adjust quarterly.
  • They keep detailed records and review them monthly.
  • They keep a winning attitude and NEVER give up (this is a long road to success).

Attitude Breads Discipline

Since I'm know I've covered most of the above bullet points before I thought I would spend some time talking about attitude.

The markets are an uncontrollable force - learn that now before you lose all your money. You are going to lose money at some point but it's how you approach the next trade that makes all the difference.

Will you fight the tape the next time around or learn from your losses, make adjustments and keep moving forward. Losing traders look for a “sure thing”, hang on hope, and avoid accepting small losses. Don't base your trades on emotional swings but really stick to your guns and trading system.

Start The FREE Course on “Option Entries & Exits” Today: Teaching you the different option order types so that you can properly execute smarter option trades each day including market, limit and stop orders while highlighting some key tactics and tips you can use today. Click here to view all 26 lessons ?

It's A Probability Game - Duh!

To me, a requirement of successful trading is to treat it as a probability game. You don't know what the next move will be but you place your bets in the area that has the highest chance of making money. Don't guess, don't wish, don't pray, just place high probability bets and cut the losers short.

In reality you don’t need to know what is going to happen next in the market in order to make money. All you need to know is that the odds are in your favor before you put on a trade. It's that freaking simple!

How The Subconscious Influences Your Discipline

Your subconscious mind is the most powerful force and I firmly believe you can influence it to your advantage. Continuing to reinforce positive and realistic goals will move you forward each and every day. As a result, your attitude will have a direct influence on your trading results:

  • Take responsibility for your own actions – don’t blame the market or your uncle who owes you money.
  • Don’t be influenced by the opinions of others. Trust but verify.
  • Never never assume that you know enough. There is always someone smarter than you.
  • Don't have any expectations when making a trade. Have two contingency plans (one for winning and one for losing).
  • Trade the probabilities and don't guess.
  • Use your head and stay calm – don’t get excited or depressed.
  • Count your money at the end of the month - not hour by hour or day by day (beginners do this!).

There are countless ways to develop a disciplined approach to trading options. Whatever your routine, establish it early and follow it on a consistent basis with minor tweaks along the way. Success comes to those who are prepared to handle it.

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.