Active-Trader - Lemons into Lemonade

Welcome back Active Traders.

This past week I decided not to renew my subscription to Simpler Options.  I have learned much from John Carter during my 1.5 year association with him and his services.  But unfortunately his success with trading did not directly translate into trading success for me.

At the heart of it, I've been trading and investing for a long time and - in the end - the habits I have established over my 30 plus years of trading are too deeply embedded into my psyche to discard and start again.  That doesn't mean I can't be successful, it just means I have to do so on my own terms.

That said, I have learned many valuable things from my association with Mr Carter and i'll provide a few bullet points here:

1) Hurry up and wait - Most of the time the best trade is no trade at all.  For example Carter takes the entire day off on Monday and does not trade at all.  Unfortunately, I'm not wired this way and fortunately, I still have my regular job to keep me busy on Monday and most days.

2) Trade Option spreads - Options trading is devilishly difficult when all you know how to do is buy put and calls.  It gets orders of magnitude easier when you sell puts spreads (when you are bullish) and sell calls spreads (when you are bearish).   Carter laid it all out in a single screen shot one time and I'm going to try and find that before my subscription expires this Wednesday

3) Watch for the Fib levels.  I have an entire series of posts on this blog about this, so you can refer back to those for more information.

4) Watch for Continuation - This is a classic situation where you wait for the market to reveal itself before you spring into action.  In other words, wait for the daily pattern to setup so you have a good idea whats going to happen the next day.  Then simply position in front of the move and control your risk.

For example, I think that AAPL is going to rally next week due to a fundamental change in perspective on this stock due to the announcement of earnings, stock split and a buy-back.  Accordingly I positioned myself on Friday with long AAPL call positions expiring next Friday.  Stay tuned to see if it works out.

5) Lemons into Lemonade - This is a trait of many successful people - they take failure or situations of adversity and turn them to their advantage.  Carter does this often - when he sells a credit spread that moves against him - what does he do?  Does he take is losses and consider the trade or himself to be a failure?  No, instead he puts on another position, sometimes twice as large to offset the loss in the losing position.  Do you have the guys and confidence in your trading to do that?  Carter does and that's how he can come out on the top when other traders take their losses and walk away in defeat.

Finally, trading is a tough game.  If you are trying to make a living on a day-to-day basis and you have a losing day, do you consider yourself a failure?  What if your portfolio declines 10% from the peak? Do you have the mental stamina to pick yourself up and objectively view the markets with a clear perspective?  It sounds easy, but is far from the case, particularly when you have previously learned to make a living in a profession that provides small, regular reinforcement that you are doing a good job.

So in the end, you must be true to yourself.  Develop a style and approach to the markets that works for you, your risk tolerance and your lifestyle.  While I have learned much from John Carter, I will never be exactly like him because he has a different set of skills and experiences than me.  Conversely, Carter can never be exactly like me and I have a set of skills and experiences than him.  These stills allow me to be successful in cases where he could not.  So while we can learn from each other,  we have to approach the game in our own ways and under our own terms.

I read a great quote from that sums it up perfectly:

Be yourself - everyone else is taken - Oscar Wilde

Enjoy your week ahead.