The 15 1/2 “Avoidable” Options Trading Mistakes You’re Making Right Now
Nobody’s a perfect trader - not by any stretch. We all make mistakes, and when we own up to them, we dramatically increase our ability to overcome them in the future. With more than 35k members in our community here at Option Alpha, I've seen every possible situation and mistake you could come up with - and today we're going to go through what I know are the top 15 1/2 options trading mistakes people are making right now.
Trust me; it wasn't easy to narrow these down to 15. Truth be told, I wanted to start rattling off more than 30, but I knew that I had to focus on only the most critical areas that could help shift or alter your trajectory. And of course, I'll make sure also to cover and talk openly about my shortcomings and challenges as a trader. In the end, my hope is that you recognize just one area where you are struggling and put together a plan of action to overcome it by the end of the week.
The 15 1/2 Avoidable Mistakes Made By Options Traders:
1. Not Making the Time
- People say they do not have enough time to learn options strategies.
- But you do have enough time, you are just not willing to sacrifice something else to do it.
- You work too hard for your money not to invest the time to learn how to build your wealth and make it work for you.
2. Not Doing the Homework.
- You cannot get the result without putting in the effort and doing the work.
- It should be work to learn how to change your financial future.
- It is important to do the work to get to where you need to go, even when it is difficult.
3. Using Prayer and Revenge Trading
- When a trade is going badly, many traders pray that it comes back around.
- Others revenge trade, meaning they fight the trade and assume that they are right, forcing your perspective onto the market.
- This removes all type of logical thought from the trade. Not thinking about the numbers and the statistics, instead become an emotional trader.
4. Having the "I'm Right" Trading Mentality
- Even after being shown the numbers and proof, people are still stuck in their mentality
- Stuck on being the person who is right instead of becoming the person who is profitable.
- Look for the mathematical principles and systems that are in place that show you how to make money. Do not assume that you are right and then force it in.
5. Grabbing the Biggest Bat
- Wealth building is a series of small individual steps along the way, not one big opportunity.
- It is better to have the ability to take small steps with all the little opportunities along the way that eventually add up to a big outcome.
- Do not over allocate your positions, there will be many opportunities.
6. Not Flipping the Coin Enough
- Trading a 70% chance of success trade, you may not have 7 winners and 3 losers after the first 10 trades.
- You have to be in the game long enough to see the probabilities work out; the more you trade, the more they work out more towards the expected outcome.
- Options trading is a long-term game — it is a matter of probability and expected outcomes over the long run.
7. Trouble Being Consistent and Persistent
- Success is reached by consistently doing the right thing, time and time again.
- Being persistent is key, even when it is hard or you do not want to do it.
- Results come with time, and consistently being persistent.
8. Changing Assumptions
- It does not matter what all your assumptions add up to, because everything will be about the same in the end.
- No matter what allocation or diversification mix you have, eventually it leads to the same outcome.
- Set core, foundational assumptions that you believe in and work those assumptions over the long term.
9. Having A Shiny Object Trading
- Trading something specific, but only trying it for a day or two, never giving it the opportunity to work itself out.
- This does not allow for long-term strategies to take effect.
10. Not Accepting the Uncertainty
- With options trading, you have to accept that there are things that you cannot control.
- Stop worrying about the things you cannot control, accept the uncertainty and focus on the aspects that you can control.
- The way to get through a black swan event is to not have all of your money in one single position and have ample cash leftover - 50% of your account in cash.
11. High School Fear
- A mentality of being afraid to tell others that you are an options trader
- Important for your growth as a trader not to keep your trading sheltered or hidden from others in your life.
- Need the support and foundation around you to help foster your education as an options trader.
12. Not Teaching Someone Else
- Often traders are not teaching others from their experience and knowledge learned.
- Teaching someone else reaffirms all the things you know to be true.
- The more you teach, the more the foundational elements and the numbers and the math get solidified in your mind.
13. Not Having Any Concrete Goals.
- Many people say they do not have any goals for their trading
- You have to have concrete goals in order to know if you will be successful or not.
- You have to reverse engineer your goals all the way back to create your strategy.
14. Not Playing the Math Game
- The options trading game is just a game of math, with expected outcomes and probabilities
- The longer you wait to learn the math game, the longer it will take to get to success.
15. Not Investing in Yourself
- Any time you invest in your learning and education, it always pays more dividends
- Investing in yourself creates new opportunities
15 1/2. Do Not Have an Accountability Partner/Coach
- Get accountability in your life, which will keep you on track to doing the things you need to do, consistently.
- This can be your spouse, sibling, or friend who checks in with you once a week where you tell them about your progress.
- When a trade goes against you, know that it is just part of the system. Don't fight the trade, just move on. Take what lessons your learned and try not to recreate the situation or environment where you were greedy, fearful, or emotional.
- They think they see a really good set up and assume that if they allocate the biggest percentage they can, then it will be successful. More often than not, you end up swinging and missing.