Every day I host a live options trading class and every week I choose a trading subject to talk about in addition to just talking about trade ideas. This past week we talked about having a trading plan and following that trade plan. I know when I bring up the subject, many of you groan and most likely it is because of one or two reasons. The first is you have heard this before that you need to have a plan and follow it but have not done so yet. The second is because maybe you have started a plan or have a plan, but are not following it. In either case, this will serve as another little reminder.

Before you get started writing a trading plan, traders need to ask themselves if they are truly motivated to succeed. It may sound insulting to ask that but traders really need to find out. Will you put in the time to make it as a trader? There are going to highs and lows along the way. Will you be able to handle those? And will be disciplined enough to write and follow a trading plan?

Trading has both internal and external motivations. External motivations are ones that cannot be controlled like making money and being right about the outcome of a trade. Internal motivation is the drive that traders need to get through the many challenges that trading can bring like being wrong about a trade and wanting to quit trading all together.

Before you start writing your trading plan, I tell traders a good place to start is to write down your strengths and weaknesses. Who is going to know you better than yourself right? This can formulate based on your personality, what type of trade plan would best suit you. Are you patient or impatient? If you are impatient, maybe longer-term trades are not for you. Are you a risk taker? If you are, selling premium on options were losses can be substantial may be an option for you so to speak.

In future articles, I will go through sections for your trading plan. So, if you have not started to put a trading plan together or you don’t have one that you are proud of or represents you, start from scratch and listen to yourself. You might be surprised at what you find out!

John Kmiecik, Market Taker Mentoring