OptionsHouse

Options Trading News

April 18, 2013  Thu 2:14 AM CT

SPX: SEE CHART GET CHAIN FIND STRATEGIES
Some of the biggest issues with trading involve skill acquisition and assessment. Research shows that getting better at most things, like playing the violin or skiing, comes through what Daniel Coyle calls "deep practice": 10,000 hours of mistakes and learning to become the best.

That makes sense for physical skills and most mental tasks, including writing, math, and even poker. But trading is quite different.

Unless you are a high-frequency trader, it would be very hard to log anywhere near that many hours. (Staring at charts or tickers doesn't really count.) Trading is also rare in that you can be successful as a novice.

journal41013.pngNevertheless, there are other things you can do to form a solid foundation for good trading. For me, that means having an edge in rules and risk management, as well as a method of assessment.

This is where a trading journal is invaluable. I highly recommend that traders write down all of the above, as you should be able to articulate your edge. You should have rules about the size of your trade and when you plan to get out of it--whether it is a winning or losing transaction. You should also write down your rationale for originating the trade and then examine whether it worked and why.

We at optionMONSTER have a hard assessment of our trading in terms of profit and loss. But that does little to tell the whole story of one's success.

Like most other ventures, good trading is about process, not outcome. Successful trading strategies and programs are profitable in the long term, even if they don't always make money. Many great traders are right only 50 percent or 60 percent of the time, so there will be plenty of instances when your P&L won't tell the whole story about whether you are successfully following your plans and processes.

My best strategies have come from reviewing my trading journals. It is quite easy to forget why we initiated a trade or which strategies are really working. The discipline of a journal can also keep you from acting impulsively and getting into bad positions--even without 10,000 hours of actual trading.

(A version of this article appeared in optionMONSTER's Advantage Point newsletter of April 5.)
Share this article with your friends


Related Stories

SPX

Stocks drifting at bottom of range

March 27, 2015

S&P 500 futures are off 0.1 percent, while European markets are mostly higher. Asia was mixed overnight. Oil and metals are under pressure as the euro surrenders some of its recent gains.

SPX

Revised GDP, Yellen lead calendar

March 27, 2015

The final reading of fourth-quarter gross domestic product is due at 8:30 a.m. ET, and Federal Reserve Chair Janet Yellen is slated to deliver a speech at 3:45 p.m. ET.

SPX

Stocks fall amid Yemen airstrikes

March 26, 2015

S&P 500 futures are down 0.7 percent, while the Nasdaq remained weaker with a drop of 1 percent. European indexes slid 1-2 percent, and Asia was broadly lower overnight. Oil and the yen are surging.

SPX

Jobless claims lead quiet calendar

March 26, 2015

The report at 8:30 a.m. ET is expected to show that 290,000 Americans sought unemployment benefits for the first time, down slightly from 291,000 the previous week.

SPX

Stocks edge lower, drifting in range

March 25, 2015

S&P 500 futures are down 0.1 percent as investors wait for the next catalyst. European stocks are lower as well, while Asia was little-changed overnight.

OptionsHouse

Premium Services

Archived Webinar

Education & Strategy

Short Gamma

Last week, we talked about long Gamma. We said that long gamma is acquired by purchasing options and when you...

View more education articles »