What to expect
For the sake of clarity, the investment education industry is a very profitable business due to the very nature of the material it promises to teach. Comprehensive materials on derivatives and the theory governing the derivative markets are products of decades of research done by mathematicians (a.k.a rocket scientists!). While its nice to know the theory behind options pricing you won’t be able to apply Black-Scholes’ Model practically while trying to make trades at retail scales. I redirect the interested readers to the original publication.
Quite honestly, these theories are encompassed in the indicators and signals that we will use in our thumb rules. The nature of these indicators vary from visual chart patterns to numerical to just plain common sense.
At this point, you are perhaps eager to learn everything that you need to start trading and seeing real profits in your account. I must say this is the type of mental makeup that leads people n00bs and the veterans alike to bet on losing trades. Yes, I used the word ‘bet’ because that’s without caution that’s what you’d be doing, betting your money steadily on one desperate losing position to another.
A new trader is typically in denial after each losing trade and tends to brush off and ignore a losing trade as a ‘one-off’ and march on to the next trade. This is not any different from walking from a Roulette Wheel table in Vegas where you have just lost more than your ‘fun’ budget and moving on to a ‘warm’ slot machine that somebody has just vacated in the hope that somehow you will recover all the money in another gambling proposition where the odds are stacked heavily against you.
What I have learned is to treat each trade as though your life depended on it before you enter it or you will find yourself very soon deciding your next ‘adjustment’ in a real trade where your life actually depended on it. Please trade with caution and take all the measures so you don’t find yourself in such a situation.
I’m confident that if you internalized the details and steps of the ‘system’ presented here and traded with healthy amounts of caution, analysis and humility, then you will come out on top. You will be a winner.
However, the methods listed in this book are not sexy in the common trading parlance. These methods are not going to make you billions in a short span of time. But they are designed to be effective and stable.
The strategies listed in this book are an honest log of what I have used in the past. I will list the markets during which each of these strategies will yield the maximum returns. However, You will need the discipline to follow the checklist mentioned in this book.
Make no mistake, this book is not a get rich easy method but an honest log of how an outsider could easily get into option trading business and make consistent profits.
The most important attribute of a successful options trader is the ability to follow the rules and boundaries that he/she has set no matter what the external factors. This would require one to you to keep emotions in check during severe market conditions and believe me you will be tested.
The primary characteristic of a successful options businessman is the ability to commit to the boundaries and rules that are a result of well-thought out plan. Once you spend the time and energy to come up with a plan it only makes sense to stick to it no matter what! It is not much of a plan if nobody is sticking to it. Execution trumps knowledge every time. Sure, the basic knowledge forms a foundation for a well thought out plan but top class execution is an absolute necessity for any plan to succeed even to a small extent.
If you stick with the plan of action offered in this book you can rest assured that you will have a peace of mind of knowing the outcome of each of your trades (yes, even the worst cases). The most common reason for a trade to fail is the lack of commitment to stick to a plan because in the options world its very easy for a trader to be seduced by the meretricious metals out there. Do not fall prey to it, our plan will prevent us from falling prey like others do over and over again. TODO: Link to the post containing the basic rules.
If you commit to the plan and promise yourself that you will run this like you’d run your own business and not some game you would play on your console against a 10 year old then you are very likely to succeed in this business.
Shift of mindset: How would you run a business?
Imagine if you were given a choice to think of a business, say, a brick and mortar shop of some kind, decide the amount of capital you would like to put in, set up shop at any location of your choice in the world, define the risk parameters for the business (of course this would likely decide the extent of profits you’d reap too!), not having to deal with uncertainties of the real world that typical brick and mortar business owners deal with such as supplies of raw materials etc. You’d probably say Wonderful I’d love to start such a business. But here’s the icing, what if I told you that you are allowed to do this for free and for as long as you want to before feeling sure of your decisions, strategies by testing it on the real world with real customers! Now how many businesses can you think of that come with this promise?