First, we want to determine our long-term goal. Two examples would be as follows.
Perhaps you either want to generate a certain monthly income or build a certain dollar value in your account.
Set a Monthly Goal
Whichever of these you choose it is important to set a monthly goal to track how you are doing in reaching your goal.
That way if things are getting off track you can address any problems before you get too far off your success path.
Secondly, setting realistic goals is key. Let’s say for instance that you want to generate a monthly income of $5000.
If you are trying to reach that amount using a $100k account size it will be easier than to reach it with $20k account size.
A simple idea to understand is, the lower the percentage of your return on capital you require the easier it will be to succeed.
So be realistic in what goals you set for yourself in order for them to have a more realistic chance of attainment.
Finally, what trading strategies and portfolio allocation of will I use each month? With option trading you can utilize both monthly and weekly option expiration chains in your plan.
You may for instance want to do a weekly calendar or butterfly as well as a monthly calendar or butterfly and also employ iron condors, etc. as part of your overall strategy.
Try to have a mixture of these strategies each month to take advantage or hedge the changing volatilities in the marketplace.
To properly understand and have good risk management as well as deployment of a plan you will find that proper education from an experienced mentor and trading education program can help reduce your learning curve and give you better accountably in your trading business.
Trial and Error
Taking advantage of the trial and error that another experienced trader has been through helps you avoid many of the pitfalls traders often fall prey to.
Putting all of this together is what separates the successful trading business from the failed one.
Mark Fenton – Sheridan Options Mentoring