Are Retail Traders too Directional?

When I was in the pit, we had a saying, ‘Trade the trade and not the Market”. What does that mean? Once you have a trade on you like, have a good plan, where you will take profits, how much you will lose, where you might adjust, etc. Using a phrase from Alcoholics Anonymous, “ Control the things you can control”. Most Retail traders make all their decisions based on which way they think the market is going. I think that is a losing proposition, very difficult to do every day. I like to put trades on every month that make money in a range and I’ll adjust them if we move out of that range. Over the last few months, the market has continued up and many people are frustrated because they thought it would back off. Accept the fact that the market will generally do what it wants and focus more on a strategy that you can put on weekly or monthly , get good at it, and bring in some consistent income over time.

An example of such a trade would be an 8-9 day Calendar trade in RUT that we having been doing pretty successfully over the last 3 months, even as the market has shot up pretty fast. Jay Bailey, long time mentor at Sheridan mentoring came up with this strategy.  This will give you a little idea of our philosophy towards trading. With RUT at around 992 as I speak, here is an example of this trade. Buy 1 June 990 Put and Sell 1 June 990 Put in the weeklies. The debit or cost would be about $7.15 ( $715) as we speak. The plan would be to make about 10%  and lose no more than about 10%. That would equate to about $71 on our investment of $715. If the RUT moves up about 10-15 points, we would add another calendar and same thing on downside if we decline 10-15 points in RUT. We expect to be in the trade about 3 days or so. The plan is to do this trade every week of the year , rain or shine! There are a few additional tweaks that we do with this strategy, but that is the basic thrust of it. How does this Philosophy I presented toward trading differ from 99% of retail option traders out there? We talked about trading the same vehicle, same strategy, profit and loss targets, adjustment points and what adjustment we would do, and how often we would do this strategy. Foreign to most but this is how you develop into a consistent craftsmen!