You need to hear this…
Whether you realize it or not, every world-class trader has a unique bag of tricks — a ‘trading toolbelt,’ if you will — that gives them an edge in the market.
I’ll show you some examples from my own bag of tricks, from buying puts on blow-off tops to buying calls on first green days.
WARNING: It’s essential to be adaptable and not stubbornly stick to one approach. The market can change, and your playbook must evolve with it (but more on that later)…
I’ve spent over a decade learning how to build a bag of tricks (as well as devising my own).
If you’d like a rare glimpse into my unique trading playbook, keep reading and I’ll show you…
Identify Your Strengths (and Weaknesses)
Before building your bag of trading tricks, you must take a long, hard look in the mirror…
As a trader, it’s critical to understand your strengths. And it’s potentially even more important to understand your weaknesses.
Be honest with yourself … What are you good at? And what areas need improvement?
WARNING: The ability to self-evaluate your trading performance is one of the most important strengths you can nurture!
By determining these attributes, you can work to maximize your strengths and minimize your weaknesses within your trading system.
Then, you can build out a bag of tricks, setups, and patterns that fit your unique personality, risk tolerance, and account size.
For example, I’m a short-term trader at heart. Sure, I occasionally make swing trades, but I’m usually in and out of positions within 24 hours.
When it came time to build my trading system, I knew I wanted to devise a strategy that was built around day trading, scalping, and overnight options trades.
But YOU might be completely different…
A system that works for one trader might not work for the next. It’s a personal thing.
Identify your strengths and weaknesses to determine the type of system that’s right for you.
Perfect Your Playbook
Every trader needs a diverse bag of tricks to pull from during different market conditions — this is your trading playbook.
Think about professional athletes. I love basketball and I’m a die-hard San Antonio Spurs fan…
The Spurs don’t have one play they run on every team. They have a deep playbook of strategies to use (depending on the opponent they’re facing).
In other words, the Spurs have a reliable system in place. I want to approach my trading like the Spurs shoot hoops…
Depending on what chart I’m trading, I’ll have a variety of patterns and setups that I can use.
That doesn’t mean I’m ignoring my absolute favorite strategy (buying puts on overextended momentum stocks with a ton of volatility)…
But if the market calls for it, I’ll be ready to flip sides and buy calls — like my recent 598% win on Carvana Inc. (NYSE: CVNA).
If you’re still developing your playbook, take your time. Don’t rush it.
Remember that your trading journey is a marathon, not a sprint.
When I was building out my bag of tricks, I pulled inspiration from great traders that I admire…
If I hadn’t joined Tim Sykes’ Trading Challenge, I’d probably still be a clueless newbie with no playbook.
Sykes taught me that I needed to adapt to survive in the stock market.
But sometimes, what’s required for trading success can go against your most innate personality traits…
Don’t Be Stubborn
I’m a naturally stubborn trader. I want to nail every setup to the absolute maximum.
In other words, I’m a perfectionist. And this part of my personality has its pros and cons.
I’ll always recommend that you strive to be the absolute best trader you can be. This part has helped me to reach the heights that I have in my career.
But there’s a fine line between determination and inflexibility…
If you think you’ve found the one-and-only strategy that will work in every market condition — you’re wrong.
There’s not one trading pattern that works 100% of the time. I’ll let you in on a hard truth … one day, your favorite setup will stop working!
Take it from me…
I experienced this throughout all of 2022 (when momentum setups disappeared and I was left with fewer juicy short opportunities)…
Then, I had another rough string of trades in May and June of this year…
And in these moments, if you don’t have a diverse playbook to pull from, you’ll be left in the dust by other traders who do.
Take it from me. I’m always working toward fighting my stubborn urges and viewing each setup objectively.
And when I’m able to do this, I trade better than ever.
Bottom line: Don’t be stubborn — be flexible!
Examples from My Bag of Tricks
Here are a few examples of strategies I’ve added to my options-trading toolbelt over the years:
- Buying puts on blow-off tops. Blow-off tops happen in a single day when a stock forms a euphoric peak of volume and price action … an ideal time to buy puts!
- Buying puts on first red days. Another good time to buy puts is on the first red day after a long stretch of green closes.
- Buying calls on confirmed bottoms. Playing double bottoms (and bounces off of key support levels) has been working in this market (e.g. my recent CVNA trade).
- Buying calls on first green days. Buying calls on the first green day (after a long stretch of red closes) is one of my favorite ways to go long.
Expand your bag of tricks and don’t stubbornly stick to one pattern after it stops working.
By making your playbook deep you’ll potentially find more setups that fit your favorite strategies.
And in a time as uncertain as now, that’s something every Evolver should strive for.