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4 Easy Steps To Become a Better Options Trader Today. Part 2

A 4 part series in becoming a better trader.

Leon Smith II
Coinmonks
Published in
6 min readOct 4, 2020

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Photo by Jason Briscoe on Unsplash

What You Will Learn

By the end of this 4 part series, you will have a trading framework that you can use everyday that will make you a better, more disciplined, options trader.

Part 1 can be found here.

Photo by Abby Savage on Unsplash

Step 2. Log All Of Your Trades

If you were to look at all of your trades this past year, would you be able to honestly say why you took the trades you did? If the answer is no, how do you plan to improve as a trader and learn from your previous actions?

The answer is quite simple. Keeping a log of your trades has many benefits that you as a trader can take advantage of. To begin with, understanding why you took certain trades is the first step in observing your trading patterns. Are you taking trades based off of research, news events, or perhaps you are taking trades based off post you see on Facebook? Understanding how you come to a trading decision can highlight a lack of a consistent trading system and help guide you towards a trading philosophy that makes sense for you trading goals. In order to get better you have to know what you are doing. It’s why athletes look at film of themselves after a game to understand how they can improve in similar situations in the future.

The same could be done for you; observe your best trades to understand what you are doing to win. Be as detailed as possible about the process you used to get there, then rinse and repeat. This may mean sticking with a concrete percentage to take profits or exiting a trade at a certain loss. You will not fully know if you are taking these steps unless you commit to logging, which is committing to your success.

My brokerage logs all of my trades!

Photo by Waldemar Brandt on Unsplash

This is very true. Your brokerage does log all of your trades and allows you to view them whenever you like. The issue is that with these logs you have no context around the human aspects of the trade. Sure, you can see how much you bought and sold a position for; however, can you see how you felt upon entering and existing the trade? For example, did you buy call options on Kodak ($KODK) after reading a Facebook post about why Kodak is such a great company and how cheap the calls are? Did this lottery ticket of a trade make you excited? As a winning trader, we want to remove emotion and almost become mechanical in how we find, execute, and learn from our trades. A trading journal does this for us. In addition to this, after you close your trades most if not all trading platforms remove your last trades from the dashboard. This makes it all to easy to fall back into the same traps that you always fall for.

So How Do I Log My Trades?

Photo by Thought Catalog on Unsplash

Your log should ideally contain the following

  • Why did you take the trade?
  • Where did you learn about the trade?
  • Did you stick to your plan with this trade?
  • How did you feel at the time of the trade. ex, anxious, confident, nervous?
  • What is your exist strategy for this trade?
  • Transaction notes about the trade. ex, price, date, strike….

If you’re an option seller, solutions such as Tiblio helps log your trades when you open up a spread or naked put from the trade board.

Tiblio Trade Log

As we can see from the image above, there is a summary line that gives top level details about all of the spreads and naked puts you have sold. Giving you a quick sense of how you are doing everyday. The trade log also shows what positions are opened and closed in addition to what was earned from each trade. Each row has a details button that allows you to further see the information about each trade that you took. With this information you could quickly glance and ask yourself what if anything do I need to adjust to improve my win rate based on my history. Seeing the data in real-time removes any biases that you may have about only focusing on the wins or losses, thus not giving you an accurate view of your reality.

Conclusion

Log all of your trades and be honest with yourself about your trading system and goals. Try your best to remove the emotion from your trading by asking yourself honest questions. For options spreads, use a system like Tiblio as part of your trading system that helps you log your trades and gives you stats on your trading reality.

Next Time

In this next installment, we will discuss the value in automating your trading decisions and how this will make you a better trader.

DISCLAIMER

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. I assume no responsibilities for your trading and investment results. The list of option spreads, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for stock observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the stock observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities or strategy mentioned herein. I am not a financial and advisor and I do not give financial advice.

Also, Read

Options Trading
Stocks
Options
Options Strategy
Stock Market

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Leon Smith II
Coinmonks

Written by Leon Smith II

18 Followers
Writer for

UCLA MBA | Options Trader | Software Engineer | tiblio.com co-founder | @fancyoptions

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