2008 was a year to learn how to trade bearish. 2009, how to trade bullish. 2010, how to trade in a range. Through the summer of 2010 the market moved in a range and finished the year with a nice bullish run. I expected the same for 2011 but never got the bullish run at the end of the year.
As it turned out, a nice wide IC placed at the beginning of the year would have given a bit of a scare but would have returned a very nice profit.
So what would you do at the scary times? Would you have the conviction to stay the course? Would you have a plan to compensate? Would you know the outcome because you planned the trade and traded your plan?
So what do you expect for 2012? Do you have a plan that will see you through whatever the market throws at you? With options there is a way to make money no matter what the market conditions as long as you know what to do. I’ve traded the last 4 years with options and each year has taught me something new. When I put it all together, I have the strategies that I know will work in any market. I may have to adjust them but I know when and how. I also know how it will all work out so I can ignore what the broker’s software tells me during the trade. Some of my most profitable strategies in 2011 showed a loss for the majority of the time I was in the trades. At the end of the trades, theta beat out delta and I ended the trades quite profitable. As the trade was moving against me I knew the market would bounce so I put on more and more contracts as the equity dropped and then I waited. It took conviction and patience but I relied on my experience and knowledge to see past the broker’s profit/loss statement and know the trade would end a winner. Sure enough as the trades came to the end the profit/loss statement started to show a profit and in the end that profit accelerated to finish as planned.
So what will I do in 2012? The same thing as 2011 just a bit better. I’ll plan my trades and trade my plan. As the market shows opportunities I’ll take them. Wait. Adjust if needed, and then, count the money.
Good Trading
Ken Bailey
OptionsANIMAL Instructor
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