Sunday, October 21, 2007

Do You Have 6 ‘P’?

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After trading for about a year I’ve come out with my own 6 ‘P’ which I think a must have for an Options Trader:

  1. Passion
  2. Patience
  3. Persistence
  4. Perseverance
  5. Psychologically right
  6. Preservation of capital


First and foremost you had to have the passion for options trading. If you do it just for the sack of money you won’t do it wholeheartedly hence it is difficult to become a successful options trader as you might just gamble away your precious capital.

On the other hand, if you love to trade your focus will not be solely on making money but on learning how to do it right. Besides that working hard and having the determination to improve your trading skill, dealing with the aspect of trading psychology and self discipline are the factors to determine if your trades will be successful and profitable.

You will do it everyday without feeling monotonous. You will keep on learning more and wanting to improve yourself and work harder even though you have failed several times.

I love options trading very much and I treat it as a profession, a business. Learning how to trade is like taking an honours degree course. I do something related to trading everyday and I keep studying, refining and improving.


Be patience, don’t jump into live trading too soon before you can even gain consistence profit from virtual trading.

It is not wise to just jump into the market just because you have not done anything for the past couple of days or hours and feel like you need to do something to make some money. This can really play havoc to your success.

If there is no trade set-ups just stay out of the market, do something else, go and catch a movie, go to the gym for some workout, etc. You’re here to make money by quality trades but not quantity. It is better to be outside of the market and wanted to go in rather then to be in the market and wanted to go out. We always look for reasons not to enter rather than reasons to enter the market.

I used to be very greedy and take what ever set-ups I saw and end up entered many trades with a few difference strategies at once. I realized that it is hard to manage and very confusing. Some times I even forget which trade is with which strategy.

All the great traders have the patience to wait for losing periods to end and for profits to emerge and to only take signals that are consistent with their methodology.

You can’t force profits in timescales you just need to be patient. Period.


Don’t ever give up! I have seen many traders who gave up after having a few losses. They felt disappointed and don’t believe in trading anymore. You must understand that losing is part of the game as long as it is well managed. Take small loses and maximize the profit and you will be fine.

Don’t stop learning. Learn or do something related to options trading everyday. I’m not saying that you should keep learning new strategy or system. Just stick to maximum 3 strategies that you believe in. A decent system with 55% success rate will give you consistent income in the long run.

It is essential to review and revise your past trades especially those losing one. Learn from your mistakes, refining and improving from there. It has been a great help by keeping a journal like what I am doing with this blog.


Would you be able to continue trading if your money was totally wiped out several times? Many successful traders will because they have the perseverance to continue and that will lead them to path of success.

Believe it or not I have actually lost all my capital (real money) twice in 6 months when I first started options trading. I would have give up if I don’t have the perseverance to move on.

Losing all your money is not pleasant, for sure, but a necessary experience for many to eventually succeed.

Psychologically right

To have a right mindset and right psychological aspect is very important. Believe in yourself and the system that you have chosen.

Many options trading courses teach us how to trade but not on handling our emotion. How are we going to overcome our fear (of losing) and greed (of taking more profit)? We tend to hold on a losing trade and hope that it will make a reversal one day; cut the profit short before it reaches our target. This is the most common mistake that many options traders usually make.

We must try to trade like a machine without emotion involved as much as possible. Be discipline, follow the rules strictly. I know it is hard but it is not impossible. You can do it by practicing using virtual trading until you developed such a habit of following the rules of your system.

The real reason so few succeed in trading is because the traits required for success are almost exclusively psychological.(Gary Smith)

Preservation of capital

This is part of money management. Preserve your capital is essential, keep your losses minimum and capture greater profits. Don’t use all your capital to trade at any one time. I always use half of my capital to put into positions and leave another half as cash. This is to prevent from stop out of the market too soon.

Focus more on managing risk. Playing great defense is as important as playing great offense.

Most traders fail because they don’t know how to tale calculated risks. Poor money management is one of the major reasons novice traders lose.


Remember, it is not the system or the strategy of trading but you yourself that lead to your trading success.


Tony Chai said...

Hi M Trader :

Thanks for dropping by my blog.

You're doing great with your options trading profession so far by looking at the appreciation level of your capital. I hope to achieve your level of success one day, as I consider myself still a learner in this journey. Well done.

Like the 6Ps that you've listed to be a more successful options trader.

As for me, I find it crucial to be patient for the trade(s) which would give you a higher chance of success rather than to over-trade due to boredom.

Perseverance is definitely important whether it's in options trading or in any other profession.

Lastly, apply proper capital allocation (money management) for every trade very, very strictly - there's no such trade in the trading world which is a sure-win trade.

Yours Truly,

Tony Chai
My Options Trading Blog

AJ said...

Hi M Trader,
Do you scale in and out of your positions, or do you buy a number of contracts during your entry and get out of all of them during your exit?

M Trader said...

Hi Toni,

Thanks for droppoing by as well :D

Well said.

I'm sure you will be a successful trader.

M Trader said...

Hi AJ,

Thanks for your questions.

I usually enter and exit with the same number of contracts. I've tried to exit with some of the contracts that I've bought and hold the rest to gain higher profit but the result not as good.

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