When Options Trading Doesn't Work

 I have gotten a lot of messages from folks. My old tried and true trading style just don’t seem to work well anymore.  What should I do?  

I agree the old try and true methods aren’t giving us consistent returns.  I was struggling with this same frustration.  Instead of letting it bring me down, I sat back and thought.  What is really going on?

Find out what I discovered in this week's video!

We are being bombarded with bad news 

• economically
• socially 
• politically

Based on basic beliefs and standards – the news out there is not good

It has caused the trading herd to be very nervous, even skittish.

Think of a herd of cattle just before a big thunderstorm.  They mill around, can’t get settle and all it takes is a clap of thunder and they scattered

The clap of thunder to the trading herd is any bad news.

A second point to consider is the us vs them mentality.  

Us vs Them

Stand apart from the herd and don’t be part of the panic trading going on out there.  It is reactionary in nature adding even more fear.  What I do is watch the herd.  Determine the mood and direction then join the herding placing my trades to take advantage of the short directional spurts.  

That’s what I explained to Nate when he sent me this email.

“Hey, Maggie.  I really appreciate your posts.  I learn a little each time.  You keep saying what doesn’t work in this Market picture.  So how exactly are you making your gains?

Thanks,

Nate”

Well, Nate, I have been watching the major news events, seeing the reactions.  If the reaction is strong either up or down I join the direction buying either a Put of a CALL to match the direction.

Here’s an example of a trade from last week.  It was the release of  like the release of the FOMC minutes on Wednesday. The release was prior to the opening of the Market.  

I won’t go into the reasons here.  That is part of the knowledge you need to acquire to be an effective trader in these times.

WHY IS THE HERD REACTING AS IT IS?

Once the Market is open, my next step is to find a line in the sand.  That is an area where the price keeps reversing.

Then watch for another strong reaction either up or down I buy a PUT or a CALL at the money.  In this case I bought a PUT

I also have been using stop losses because of the quick reversals.  I want my stop loss to take me out quickly.  Determining where to place the stop is pretty simple once you are good at seeing support and resistance areas.  A lot of people will use Fibonacci or other technical indicators.  I think it is much simpler that that.  I look for reversals areas.  It is quick and easy and safes a lot of time and effort. 

At the same time, I place a Stop loss order at a major support or resistance area I see on the day chart.  Which a periodically just in case the direction reverse fast.

As you see I adjust my stop loss as time goes on.  I am protecting my gains.  I wish I could say I came up with this trading style.  Giving credit where it is due – I learned this decades ago in the last recession from a guy named Dave Johnson.  He was an instructor with Investools.  I have taken his insights to new areas but that is what a good student does to honor a great teacher.  Think of Socrates, Plato and Aristotle

That is why I love teaching what I have learned from other and what I have developed myself.  I do this with the hope that you are the next great Thinking Trader out there.  We are all building our knowledge together.

On this week’s webinar we are taking a Deeper Dive into what Dave Johnson taught me and what I passing onto to you.  Look forward to you joining us.

Get 2 weeks of free coaching!