In this video, I want to talk about trading simplicity. This is something that I think is important to discuss as we get into this module about professional trading and being able to consistently trade options for a long time.

We’re not talking about a couple of months or even a couple of years. We’re talking about making a career and business out of trading options.

It's important I think just to take a step back before we get into a lot of the nitty-gritty and to realize that this whole system of trading options and being on the right side of the market, generating money is not that complicated.

In fact, on the outside, it’s very, very simple. Although I've heard over the last eight years from thousands of people and hundreds of traders that I’ve coached, everyone assumes that for this system to work or any system that generates money.

It’s got to be super complicated because something that’s complicated has to be important and that's just not true. I think I’ll start off today by showing you this graph because the ability for something to be incredibly simple is directly correlated with our ability to make that system incredibly effective.

The simpler you can make your trading, the more effective and the more profitable you will become. It doesn't have to be complicated. I get this all the time that it’s got to be complicated, there’s got to be more to it, and there isn't much more to it.

I’m sure there are details that you have to learn, there’s things that are very specific to little innuendos, but on the outside, you master the main points about options trading, it becomes incredibly simple, and then you can hone in on your particular strategy or style of trading.

Let’s go through what I think are the four most important things. We narrow it down to these four things that make or breaks your ability to generate money long-term. I truly believe without these four or any one of these; you don't have a good chance of success long-term.

You could be profitable maybe a couple of weeks, maybe a couple of months, but long-term, if you want to create a sustainable, profitable business out of trading, you’ve got to have these four things somewhere inside of your trading plan.

The first thing is you’ve got to keep your position size small enough to be persistent. I changed this up because a lot of people say you got to trade small, you got to keep position size small.

I think it's all about the ability to be persistent with your positions. Trading small in and of itself is great, 1% to 5% of your portfolio. We talk about that so much in a bunch of our video tutorials, in our trading plans.

We talk about keeping those positions small. But persistent is the keyword here because if you’re able to trade small and stock goes completely against you, then that position won’t blow up your account, and you have the ability to come right back.

Bounce right back with the next trade and be persistent in putting on trades. I think that makes or breaks good traders and great traders, the ability to bounce right back after a trade that goes completely against you and keep putting on new trades and I think that that's one of the key distinguishing factors between people who make money and people who don't.

The second thing is you’ve got to be on the right side of volatility. It goes without saying that that is where our edge lies in the market. It’s this concept that implied volatility always overstates the expected move, so you’ve got to be on the right side of volatility.

What this means is that your ability to choose the right strategy that will profit from wherever volatility is at that time will trump and is more important than your ability to choose the underlying market direction.

We've seen this so many times with credit spreads and iron condors and strangles and straddles that the market can make all kinds of crazy moves, but it's that drop in implied volatility or the rise in implied volatility that makes or breaks a position. Your ability to be on the right side of volatility is paramount.

Number three is you've got to understand and more importantly, believe in the concept of limiting your profit as a way to increase your probability of success. I’ll totally flip this around real quick and give you an example.

I’ve talked about this before, but the complete opposite of limiting your profit and increasing your probability of success would be having unlimited profit and a very small probability of success, and basically, that's a lottery ticket.

You buy a lottery ticket, you maybe pay $1 or $2, a very small investment, but you have this huge potential payoff. You could win big, millions, billions, whatever it’s at, but your probability of success is minimal, practically none, no probability of success doing that.

You’ve got to believe in the concept that the market rewards people who limit their potential profit as a way to increase your probability of success. As traders, what this means is that we've got to be option sellers far out of the money and take in a small credit while putting up additional margin.

Number four is your ability to be consistent is directly related to the number of trades that you made. I love these two words, and they’re my buzzwords every year, is persistent and consistent.

Your ability to be persistent as we talked about in number one in keep bouncing back from bad trades if they also happen important that you also stay consistent with placing trades on a consistent pace.

That can be different for different people. Some people, consistency means placing trades once a month. Some people, consistency is placing trades once a week.

But the number of trades that you make throughout the course of a year, the more consistent you’ll be because of the higher chance you have or, the bigger chance you have of meeting your targeted probability level.

If you're making trades day after day at a 70% probability of success level, well then it’s only a matter of time between where you make enough trades that you finally meet that chance of success level.

We have a great video tutorial about how the number of trades is related to how close you are to getting to that probability target. I think that these are the four things that define trading as simple as possible and hopefully I could narrow these down into these simple concepts.

Keep coming back to these and referencing these because if you don't have these, even just one of these completely throws you all off balance and I don't think that you have a good chance of being successful unless you have all four of these things.

The late Steve Jobs said it best. He said, “Simple can be harder than complex.” That’s true because everyone thinks it's got to be complex, but understanding how simple things can be incredibly hard actually.

You have to work hard to make thinking clean to make it simple. Look, Apple is one of those great companies that have done amazing things. They’ve taken such incredibly complex technology and made it so super easy for us to use. Take the iPhone for example.

The iPhone only has one button on it. Can you imagine what people thought when he said, “I want to make a phone, an iPod, the whole thing, an internet explorer, email, everything, one button.”

How incredibly hard that must have been for people to understand and to wrap their heads around. But as simple as the iPhone is, it is incredibly powerful.

Hopefully, through this quick video, I just explained that it doesn't have to be complicated to be powerful and I think the more simple you can make your trading, of course, there’s going to be little innuendos and details throughout.

But the more simple you can make it overall, concept and the goals, the better off you’re going to be long-term and the more profitable you’ll be.