Over the years I have researched and tested many strategies using the seemingly countless tools and indicators available to traders. The goal is to understand the logic of each technical tool, as well as to learn the fundamentals that impact the stock or commodity. Each tool has a purpose, but generally they are meant to reveal trend strength or change in trend. There are short-term indicators for timing breakouts or reversals. And of course, there are the universal long-term trend indicators 50- and 200-day moving average, which are standard for most equity market traders. 

Through much trial and error, I chose a few gauges that suit my style and time frame. Each trader must develop their own personal methodology. The factors involved are time or how often are you available to trade. This also includes the time you plan to be in a trade. Trade size needs to be determined by the risk you are willing to take. After a trade has been executed, profit targets and management techniques should be implemented.

After a few decades of primarily futures trading, I have recently gravitated to stock, index and ETF trading and their options. To build on my methodology I chose a few options strategies that fit my time frame and style. First, I decide which type of trade I need to explore…bullish/bearish/neutral. Because I am new to these markets, I want to keep the approach very simple and the option strategies basic. I chose the following trade types to fit my strengths for identifying directional bets. Moreover, risk is well defined with these strategies.

Strong directional bias and a breakout imminent; Purchase a call/put.
Moderate bull/bear; Debit spreads-Bull call spread/Bear put spread. Use OTM strikes if more bullish/bearish. Use ITM strikes when less confident on direction.
Moderate bull; Credit spread-Bull put spread. Use OTM strikes to take advantage of time decay. ITM is most directional.
Moderate bear; Credit spread-Bear call spread. Use OTM strikes to take advantage of time decay. ITM is most directional.

As a beginner I focus on two types of market stages: trend/directional and consolidation phases. My next endeavor is to study neutral strategies to take advantage of time decay when a market is in a consolidation phase.

John Seguin, Market Taker Mentoring