Sticking To New Tasks Is Hard
Statistics show that well over 80% of people who start New Year’s resolutions give up after the first week.
This means that a majority of people don’t go beyond the first page in that new book they buy. This also means that gyms will be packed from Jan 1-7, then abruptly empty out as the year progresses forward.
The point I am trying to make is that human beings have a hard time sticking with new routines. This is magnified even more when the new routine has heavy psychological pressure associated with it (like money).
I mean, think about it...
There's not a lot of pressure associated with trying to develop the routine of reading more. If you fail, you have an extra book or two laying around your house (and maybe a little bit of nagging defeat). Now, if you wanted to pursue something more ambitious, like taking control of your finances on a routine basis, then there is added psychological pressure involved.
Developing a habit requires that you consistently work on that habit by integrating a routine into your schedule. There have been scientific arguments about the exact amount of time it takes to form a habit (anywhere from 21 days to 256 days), but one thing that is universally agreed upon is that consistent action breeds habit.
The good news is that developing the habit of reading is the same process as developing the habit of investing your own money. By doing just a few things each day, you can learn more about finance than you ever thought possible!
Get Hooked On The Process
Each time I place a trade, I learn something new from the process. Each time I try out a new strategy or new underlying, I learn something new. Every single day, I make trading part of my routine because I know that over the long run, developing this habit will empower me in my quest to completely manage my own finances.
I like to compare trading to playing chess. Chess Grandmasters have played so many games of chess, that all the possible move permutations and combinations automatically play out in their heads. That gives them an obvious edge over someone with less experience.
The same thing applies to trading. The more trades you put on and the more you stay engaged with the market, the more you learn and the more you grow as a trader.
So how can you make a habit out of trading?
6 Ways I Stay Engaged With The Markets
1. Putting On Mechanical Trades, Everyday
Unless I cannot find any good trading opportunities, I generally try to place 2+ trades a day. I have a small account, so most of my trades have a buying power reduction (BPR) of $100-200 (these are typically vertical spreads or iron condors). By doing this simple habit, I constantly stay engaged with what the markets are doing and specifically, what certain underlyings are doing.
Sometimes I don't find good trading opportunities so I sit on my hands, but the process of scanning the markets looking for trades to place is enough to give me a sense of what's going on at a macro level.
2. Use dough For Trade Inspiration
Each day, I will choose a trade from the dough follow page to put on in my own account, but again, only when I feel the trades are a good opportunity for my account). I love following the dough traders and learning from their trades.
I typically trade the ones where there are comments (like Tony from Mexico's trade to the right) because it helps me understand the "why" behind how a trade is placed (along with seeing the mechanics).*
*It's important not to blindly place the same trades as the follow traders because sometimes the trades are rolling orders, closing orders, or hedges for other positions. Always monitor the comments and if you're not sure, shoot an email to firstname.lastname@example.org.
3. Trying Trades outside of my comfort zone
I've done plenty of credit spreads and iron condors due to the size of my account, so I feel pretty comfortable finding the right conditions for and placing these strategies. As a way to develop my overall knowledge, I like to challenge myself to place trades using strategies that stretch my trading knowledge.
Recently, I have been putting on at least one butterfly and/or calendar spread each month. I do this because I still don’t understand the mechanics as well as I would like to, and watching how the change in the price of the underlying affects my P/L (profit and loss) helps me stay engaged with my positions.
4. Earnings Season Is A Fun Time To Trade
I love to use earnings trades as an engagement tool. I put on at least 2-3 earnings trades every week (during earnings season) in stocks of companies that I use. For example, I use Lululemon products and love them, so I am bullish about their earnings.
I find it extremely exciting to wake up the next morning and follow my trade to see whether or not my directional bias was correct. It is like waking up on Christmas morning and opening up a present.
5. Watch tastytrade To Stay Current
I watch Tom & Tony in the morning as much as I can. Listening to Tom’s rants about the financial industry really gets me pumped up about controlling and managing my money. When I work during the day and can’t watch them live, I download them on my Podcasts app and watch them during my hour long commute. (P.S. everyone on the subway car thinks I am odd for laughing out loud at Tom and Tony’s shenanigans).
I watch the Market Measures, What Else Ya Got?, and Skinny On Options Math segments to learn something new everyday. With all of this amazing information in the palm of my hands, I have the surefire recipe to succeed IMO.
6. Try Explaining Options Trading To Your Friends
The best way to learn something is to teach someone else. I try to teach my girlfriends about options and trading in random conversations.
If I can explain a concept on options to someone new, it means that I understand it well enough to have the confidence to explain it, which keeps me motivated!
Remember, staying engaged with the markets isn't as hard as it might seem initially. The best way is to build some form of engagement into your routine in order to make it a habit. If you've found it tough to stay engaged and haven't been able to consistently, start with just one form of engagement. Whether that's logging into dough each day to check the Follow feed, or flipping on Market Measures everyday at 9am CST.
Choose whatever works for you and do it every weekday for at least a couple of months. After that, you will start to notice that your overall awareness of the markets will increase, and will in turn help you become a more successful trader.
Keep yourself engaged. It is really easy to give up after the tenth trade, especially if you aren’t making money. But this isn’t just about learning how to trade options, this is about learning to take control of your finances because, as we always say, nobody cares about your money more than you!
How do you keep yourself engaged in the process, even when IV is low and there isn't a lot to do? Put in your techniques in the comments below or tweet to us at @tastytrade!