it comes to options, the more you learn, the more you understand, and the
better your performance will be. Options
are not special in this regard. Dr.
Brett Steenbarger alerted his readers to an interesting comment
by Henry Carstens.
“Studies have shown that learners who learn for the
sake of getting better continue to learn and progress, but that when a learner
focuses on winning, they become fragile, eventually reaching a place where they
stop improving because they are afraid of losing.
Trading and systems development goals that focus on getting better are stronger
than goals that focus on winning.”
never write about trading systems because the strategies I teach and prefer are
not suitable for very short-term traders.
Nevertheless, my desire to educate investors on how to use options is
the reason this blog exists. And
that means my goal is for readers to get better and better at understanding their investments. With that knowledge and careful risk
management, you can expect to achieve excellent results from your investments.
do not fall into the trap
of believing that if you have a few consecutive winning trades that no more
education is required.
look to others for specific trade recommendations. If the source of that recommendation does not
know you, your investment goals and your
comfort zone, how can that recommendation be suitable for you? Following that recommendation means you are looking
to make money, trusting that the other party knows what he or she is
doing. It’s better to focus your efforts
on education – and learning how to find your own trades.
why I find the above quote worth sharing.
When learning how options work and experimenting to find your comfort
zone, it’s important to recognize that whether your first trades with options,
or your first trades with a new strategy, are profitable, is NOT important. In fact, by paper trading you can remove all
emotions involved with ‘winning’ or ‘losing.’
That makes it easier for learning to be your ONLY goal.
paper trading is not for you, or if you believe you are too experienced as a
trader to revert to paper trading, there’s nothing wrong with using real money,
but please trade in small quantities and use your time and effort to learn:
How to use options to invest in reduced (and limited) risk strategies.
How to find an option strategy (or two) that allows you to discover,
and remain within, your comfort zone.
The importance of risk management and understanding when positions are
too large for your bankroll, or that risk for a specific trade, has grown to an
uncomfortable, and therefore unacceptable, level.
The importance of recognizing that no strategy produces a profit every
time and that being willing to accept losses is a trait of disciplined traders,
and is necessary for long-term success.
You are using options with a long term goal in mind – building wealth
over the years. Using options in an
attempt to make a pile of money in a hurry is a wild gamble and unlikely to be
successful. Using options to generate
steady profits over an extended period of time is a very achievable goal.
is an appropriate quotation by Bill Beattie, American author:
The aim of education should be to teach us rather
how to think, than what to think – rather to improve our minds, so as to enable
us to think for ourselves, than to load the memory with thoughts of other men.