By: Christian Tharp, CMT
When I was in school, one of my math teachers would always preach the message of “K.I.S.S.”
No, she wasn’t a diehard rock fan… but a believer in the “Keep It Simple, Stupid” method.
To this day, I still employ the K.I.S.S. method, especially when it comes to trading options. Nothing fancy, no magic indicators, no fake gimmicks or spiels about how to become an overnight millionaire. Instead, I keep it simple.
I focus on key trading fundamentals, like understanding stock prices and movements, crucial support/resistance lines, and maintaining discipline, position sizing, and a good risk/reward ratio. These are the steps you need to follow to be a successful options trader.
Last week’s option trade in Block (SQ), formerly known as Square, is a great example of how keeping things simple leads to success.
If you look at the chart below, you’ll see that I had been watching the stock’s price movement and waiting for it to hit an important support level before pulling the trigger on this trade.
The “support” line is a price level where a downtrend can be expected to pause due to a concentration of demand or buying interest. As the stock’s price drops to a more attractive level, new buyers step in and push it back up, thus forming the support line.
Generally speaking, this is the price the smart money (in other words, the “Big Boys”) start to come off the sidelines.
SQ has been on my watchlist for quite some time, and as the company moves to innovate more in the crypto space, I’ve been eyeing it as a potential trade due to the amount of volume and volatility the stock can see.
Let’s take a look at how we did on this trade…
We opened this call option for $1.50 on January 10 and placed our exit orders for $3.00 just before the market opened the following day. After hitting this support line, the stock popped for a 3% gain on January 11 — enough for the calls to trigger our exit order.
My students and I closed out the week with a 100% gain in our position, marking our second winning week since the start of the year…
…which is better than the broader market can say for itself. So far, the three major indices — the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average — have all locked in two down weeks.
Now, I didn’t find this 100% gain because I have some magic indicator or signal that pinpoints big winners for me.
People always think that because I’m a CMT (chartered market technician) I have a laser light show of indicators and moving averages up on my trading terminal at all times. But the truth is, I don’t… and neither should you.
Success in trading, and just about anything in life, boils down to a few “simple” ideas, having a disciplined plan, and executing on that plan. Price, discipline, position sizing, risk/reward… that’s what’s going to move the needle for you. These are just a few of the six simple steps to profitable options trading.
In all my years of studying and trading, I’ve found that these rules offer a clear path to becoming a successful trader. It might not be sexy, but it’s the truth…
And here’s the proof. I started my trading service, The Profit Machine, with a $5,000 model portfolio back in January 2018. Since then, it’s grown to an incredible $60,000 — an 1,100% gain.
And I did it by following the six steps mentioned above… the exact same steps that led me to our first two 100% winners of the year.
In fact, you can see exactly what it’s like to make those kinds of trades in my weekly two-hour LIVE trading webinars. On these live calls, I recommend trades, answer questions, and do whatever I can to help you find success in the market.
Let me help you become a successful, highly disciplined trader by teaching you how to implement these basic but effective tips into your everyday trading.
Don’t overcomplicate it; trading is hard enough as it is. As my math teacher once told me, keep it simple…