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trading stock options
time periods
self mastery
name of the game
emergency situation
self control
stock market
The Art Of Options Trading
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The Art Of Options Trading

There are several areas which make mastering trading stock options an art and a science. For those of us who have been fortunate enough to learn from the best and get better than average returns there are ways in which the professional trader is different than the average trader. Consistency is the name of the game. If you can put the odds on your side ever so slightly and you follow your rules to the letter then you ought to win at the end of enough trades. But for the beginner this never seems to be the case. It seems that even with a proven set of trading rules consistency is close to impossible for the beginner. Sure the beginner may make a few tremendous wins at first, commonly known as beginner’s luck, but the consistency of the pro comes with practice and self-mastery. One master told me to be a pro in his book meant to win nine out of ten times. So how is this done?

The stock market is such an unpredictable entity that it would be foolish of anyone to say that they know what is going to happen next. The only thing that can truly be predictable is one’s actions in the market. The more controlled one’s actions the better access they will have to the consistency of the world’s best traders. This is why every professional trader of stock options has a trading plan.

A trading plan is a set of rules as to the entry and exit of a position, how much the trader of stock options is willing to risk on any trade as well as the actions taken when there is an emergency situation, low volume, sideways movement and so forth. The trading plan should account for things like time periods and target prices. All masters have their rules and use them to plan their trade before they enter. Once in the trade they do not change their plan, modify their rules, or switch their time periods. To do this takes tremendous amount of control of the self.

The loss of self-control in the case of trading is due to the emotions of fear and greed. There are several situations a trader of stock options may find himself in where he looses self-control. For example a trader changes the stop in his plan when the market goes against the position just to stay in the position. This sticking with the plan is the difference between the professional and the amateur trader. Surprisingly, it is the hardest thing to learn as a trader. For some reason it is human nature to have a plan and rules that will work then abandon those rules because we feel we will make more money if we just do as we feel. In the trading of stock options nothing could be further from the truth.

Think of the well know casino example where the casino has a slightly larger odd of winning than loosing. Sure there are plenty of bets the house looses and pays out. But the casino is run on a system without emotion and at the end of the year that slight percent advantage the casino has cashes out to millions of dollars for the enterprise. The trader of stock options must be like the house. The trader must learn that there are some that will be lost because the market is unpredictable, but with solid rules and strict adherence to the plan the trader will win the greater percentage over a period of time.

The concept of “knowing when to hold ‘em” is an important aspect of self-mastery as a trader of stock options.. The wisest advice I got as a new trader was “cash is a position”. Every time we enter the market we put our cash at risk. Looking at cash as a position in itself is beneficial because that means we do not have to force a move to be in the game we can wait for the right set up in accordance with our rules and trading plan.

Trading stock options is a practice in self-control. For the new trader to finally reach professional level he must get a trading plan with rules that account for different situations in the market and he must practice, practice, practice to attain the level of consistency that is required to be a master at the art of stock option trading. This is not an overnight millionaire deal. As those who are masters know it takes time and self-mastery to have consistency in the markets

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