As traders many times we tend to only look to the short term and what trades we have on or are about to enter.
To be successful with any longer term goal you not only have to know where you are headed but how best to get there.
Having a plan and setting mile posts to mark progress along the way is fundamental to a successful trading business.
Determine a Long Term Goal
First, we want to determine our long term goal. To give two trading examples perhaps you either want to generate a certain monthly income or build a certain dollar value in your account.
Whichever of these you choose it is important to set a monthly goal to track how you are doing in reaching the goal.
That way if things are getting off track you can address any problems before your 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 illustration to understand.
The lower the percentage of your return on capital you require the easier it will be to succeed. So be realistic in what you set for goals to give them a better chance of attainment.
Finally, what trading strategies and portfolio allocation of them 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 and well as a monthly calendar or butterfly and also employ iron condors, etc as part of your over all strategy.
Try to have a mixture of these strategies each month to take advantage or hedge the changing volatilities in the marketplace.
Good Risk Management
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 accountability in your trading business.
Taking advantage of the trial and error of another experienced trader has been through helps you avoid many pitfalls traders often fall prey to.
Putting all of this together is what separates the successful trading business from the failed one.
Mark Fenton (Senior Options Mentor)