Hey everyone. This is Forexgist.club. And in this post, we’re going to talk about developing a daily trading routine. Now, it might seem odd actually to start here in Track but I believe that habits and routines are insanely important to your success, maybe not only as a trader but also in anything that you do in life.

And it really comes down to the difference between what to do versus actually doing it. The analogy that I use all the time when I coach people is, “We know that to be healthy, you have to eat right, you can’t have sweets, you have to go to the gym and workout or exercise. That’s not important. We know what to do. It’s actually doing it that actually makes a difference.

It’s going to the gym, it’s eating right, it’s not having sweets, it’s not doing X, Y, Z.

That’s the difference between being successful and not.” And the reality is that options trading is just a game of math. I’ve said it a million times until I’m red in the fact that it’s just a game of math and probabilities. Therefore, the only way we win long-term is by being consistent and persistent.

My two favourite words in this business are being consistent and persistent. You have to be consistent in how you place trades at the same probability of success level, on the right side of volatility, using the right strategy with the right position size.

And then you have to be persistent in doing that over and over and over and over again. It’s usually not hard for people to understand what to do, that you have to be an option seller, that you have to do X, Y, Z position size. That’s the easy thing.

The hard part is being persistent in doing that over and over and over again. And hopefully, we can help talk you through developing your own trading routine today that will help you get to that next level.

Aristotle once said, “We are what we repeatedly do. That excellence then is not an act, but it’s a habit.” And I truly, truly believe this.

I’m actually a big student of learning about habits and psychology and what makes people tick and think, including myself. Now, here’s the reality though. Our brains cannot actually distinguish between good or bad habits. Most people don’t know that. Most people think that it’s some psychological thing that, “Oh, it’s just a habit that I smoke or that I do something.

” It’s not that.

Your brain has no ability to distinguish between habits. All it’s trying to do is use up as much energy or use as little energy as possible to complete outcomes. Now, you have to forcefully create different habit loops if you want to change your outcome or your circumstances. And it basically works like this and all habits work in this 3-part reward or habit loop cycle.

The first thing that starts off this habit loop is the cue. Now, the cue is everything that the brain uses to automatically trigger a series of events, so like you don’t actually think about in the morning maybe necessarily brushing your teeth and the actual brushstrokes that you have and brushing your back teeth and then your front teeth or whatever. You don’t think about it. That’s the routine. That’s the physical or mental or emotional sequence of events that your brain has automatically done.

But it only does that after it’s been cued to do something. For example, your routine of brushing your teeth might come after you wake up in the morning or after you eat breakfast or whatever the case is, or the routine of going and checking your email in the morning might come when you turn on your phone.

It doesn’t really matter. What you have to understand is that the most important aspect of this entire loop is understanding what your cue is. What is the thing that makes you do whatever you do?

As a trader, some of these cues might be a drop in the market or a position going bad or some earnings announcement. A drop in the market might cue you into a routine because you’re so used to it of not doing anything, of selling your positions, of getting out, of going in cash or a million different other things. But the cue is that you have to understand, is that the drop in the market might have been your cue. That’s what you historically use to then develop this routine of doing whatever you do that maybe doesn’t work. That’s why you’re here at Option Alpha.

You have to understand this cue and routine process. The last thing that you have to understand is that everything has a reward at the end of it. This is what your brain is telling you. This is why it’s worth the routine. This is the endgame and your brain or your emotions have to have some sort of reward.

And it doesn’t have to be monetary, but it can be a feeling that you have or an emotional response or something like that. To use that brushing our teeth example – If we wake up in the morning, that’s our cue to brush out teeth, we go through the routine of brushing our teeth, our reward is that we feel good that our teeth and mouth feel clean, that we smile, that we don’t have that film on our teeth. That’s the reward. If you’re a trader and the market drops and that’s your cue to then sell all of your positions, well then your reward is comfort or is some sort of emotional response that you are comfortable because now you’ve done something and you’ve acted on it. It may not have been the right thing, but your reward might not have been monetary in this case, but it may have been some comfort or emotional response that you’re now feeling safe or steady or secure or something like that.

You have to understand how these things work and realize that options trading is just a game of math and that if we can control our habits and our routines with how we place trades, manage trades and execute trades, then we can really predict the outcome that we want as far as monetary or quitting your job or whatever you want to do at the end of the day.

That’s the important thing. Now, make no mistake though. Everything you have either done or haven’t done in your life can likely be traced back to some habit or routine. Your brain doesn’t distinguish between good or bad, so if you’ve done something bad in your life or you haven’t done something that you wanted to do, it’s likely because you haven’t developed the habit or the routine to do it.

And it’s no different when it comes to options trading, investing, whatever you want to call it that we’re trying to teach you how to do here.

Now, the good news is that you can recognize and change it. That’s really good. The bad news is yeah, it takes a lot of hard work and it’s tough. This is something that most people don’t want to do because they realize it takes a lot of work.

It’s not easy to understand how options work. It’s not easy to go into the market every single day and look for trades. But the reward is worth it at the end of the day when you can control your own portfolio when you’re not dependent upon the market moving up just to make money when you can generate a consistent stream of income with your options trading on a limited amount of capital.

It is worth in my opinion, the work and the hard effort that you have to put into it, but you do have to recognize and change some of the habits that you’re currently in right now. Now, I’m not saying that the routine that we’re going to talk about is the perfect example.

It’s what has worked for me and hopefully, it gets you thinking a little bit more about your own trading routine. Now, the first thing that we’re going to do here is talk about my routine in the morning.

Now, I can tell you honestly that this entire routine that we’re going to talk about from basically step #1 or the first thing that I do, all the way to the 5th thing that I do basically takes no more than maybe 15, 20 minutes at the most. That’s about as close to or sort of a timeframe as I can possibly make, about 15 to 20 minutes to go through steps 1 through 7. And the whole idea here is that you’re developing cues and habits of sequential sequences or processes that you go through.

And this is just an example and I want to lay this out for you, so that you can start to develop your own because likely, what you’re doing right now is maybe a little scattered. You might have your own routine about what you do, but it might be a little bit scattered. You can probably hone in and focus on a more efficient process.

The first thing that I do in the morning right away is check futures. Now, this is where I want to see where the market is likely to open.

Is it higher, lower or the same as yesterday? Now, when I say the first thing I do in the morning, this is not the first thing I do when I wake up. The first thing I do when I wake up is getting my kids up, get my wife up, sit and have coffee, talk with them, go through the day, plan our day, whatever, have breakfast, whatever you do in the morning.

I do not wake up and check markets. That’s crazy.

I don’t wake up and then check markets. But about 15 minutes before the market opens, I’ll check futures. That’s when my day really starts. The second thing that I’ll do is I’ll quickly scan the headlines. Now, this is important.

I’m not reading the news. I’m scanning the headlines because I want to see what are the major news stories driving the market. Did someone get bought out? Did someone file for bankruptcy? Did two companies merge?

Is some company accused of insider trading or fraud or accounting or did some company buy a new product or get a new endorsement? What is really moving the market? What do I need to be concerned about or aware of as I enter the trading day? Because it’s not that I have to be necessarily attached to that new story and know exactly what’s happening, but if I know that somebody basically got bought out or went bankrupt, maybe I might know how that might affect my portfolio.

The third thing that I do after I’ve looked at the futures, checked and scanned the headlines which can literally take 3 minutes or less, is look at the impact of whatever I’ve just learned on my portfolio or on individual positions.

If for example some company goes bankrupt or gets bought out or merged or whatever the case is and I have a position in there, I should probably know that that’s happening.

And that can be as simple as just scanning the headlines and knowing what’s going on. But it’s also important to know – How does all this stuff impact my portfolio? Is my portfolio balanced, meaning that if the market opens up higher, then that’s still good for my portfolio or maybe my portfolio is a little too bearish right now, I’ve got too many bearish positions, so if the market opens up higher, that’s maybe a bad thing and I need to start thinking about that? It’s just asking yourself what is the impact on your portfolio.

Most of the time for what we do here since we’re neutral traders and we have a neutral portfolio, if the market opens up 1% or 2% higher in either direction, it’s not going to dramatically impact our portfolio. And as long as we don’t see a huge pop in the market or a huge drop, we’re going to be in good shape to move forward. And those are some of the things that we’ll talk about as we get further through Track #3 here. The fourth thing that I look at is my trade hierarchy. And I look at trades and positions in this order and that is closing positions first, then adjustments, then new trade entries.

And it’s in that order for a reason. This is usually now after the market has opened up, maybe 30 minutes after the markets opened up or 15 minutes after the markets opened up.

I first am going to look at which positions can I take off, so which positions have now reached a profit target or at an acceptable level that I feel like I can take those trades off. I’m first going to bank some profits and clear positions that need to be cleared off if there are any, then I will look at adjustments to any trades that might need adjustment. Now, hopefully, I’ve already had trades on the horizon that I know are starting to go against me or that started to move against me, then I’ll start looking at adjusting those trades and I’ll work through adjusting those trades quickly.

I’ll quickly close trades then I’ll quickly go through and adjust any trades that need to be adjusted. And usually, if we’re making adjustments, it’s already something that we’ve been thinking about and looking at.

And then finally, we’re going to look at new trade entries. And the reason that we look at new trade entries last is we want to see what the impact of closing and/or adjusting other trades first has on our overall portfolio, so now we get a clear picture of where we are at the current moment moving forward and what new trades we should be looking for. Should we be looking for new bullish trades, new bearish trades, some strangles, some straddles, iron condors, credit spreads, calendars?

What should we be looking for now that we’ve closed out things that are profitable, now that we’ve adjusted things that might be going against us? This is what we can be focusing on. That’s why in my case, that’s the trading hierarchy because it forces me to before I look at new trades to check my overall portfolio balance and Beta weight it. Number five or the fifth thing that we do is walk away. Now, I can tell you right now that you have to get up and walk away from the computer.

You’ve got to find something to do, you’ve got to schedule it now or you’ll never cut the cord. Now, some of you out there that are watching this video know exactly who I’m talking about because you love looking at the markets all day. But the reality is that the more you look at the markets, the more you “see things that aren’t really there.” And we all know we’ve done this before, myself included.

In my case, what I do is I get up and I go play with my kids or I go on a walk with my wife or we go to the gym in the morning.

More often than not, we’ll usually schedule a time to go to the gym around 10:00, 10:30. That forces me to get up and go away from my office, away from the computer, away from the markets.

And for me because I love the market so much because I love trading so much, I love doing this, I have to have something that forces me to get away, that is on my calendar as something I need to do a priority and that’s my cue to then develop a new routine to get away from the markets. I think that’s really, really important. Now, the sixth thing that we do and the last thing that we do in our routine or I do in my routine is my end of the day review or EOD review.

And I can tell you this honestly. Most of the time that the markets are open, I’m not watching, I don’t care. We are not day-traders. I don’t care if the market is up 10 points and then down 10 points. I just don’t care because at the end of the day.

What I do is once I’ve made my trades in the morning, do what works around my schedule with my kids and my wife, then I will come back in later at the end of the day, usually 45 minutes to an hour before the close of the day and basically ask myself a couple of questions like, “What’s changed during the day? What’s changed from the morning to the afternoon?” I don’t have to watch the market all day to see what’s changed.

I can see if the markets rallied or maybe not rally or rallied early and then it fell or whatever the case is. What’s moving?

What’s moving late in the day? Is there anything that is new that we could be trading? Did implied volatility pop in something that could create a trading opportunity? I can adjust my order. Any orders that I had placed earlier in the day to enter a new position or close a position or adjust the position, I can tweak or adjust those orders if needed.

I can look at new trades and I could look at new exits because sometimes there’ll be an opportunity that’ll come up in the afternoon that wasn’t there in the morning. And likewise, you might have an opportunity to close a trade in the afternoon that wasn’t an opportunity in the morning. Now, the whole process here is to be in, make some changes, make some adjustments, some trades, whatever you need to do and then get out of the markets.

Not get out of your trades, but get out in front of your screen or log out of your broker platform, whatever you need to do to get out of being in this routine of being sucked to the screen and our eyeballs glued to each and every chart. In my personal opinion, I think that I do this well because I setup time in the morning to go through my trades and my positions and then I get away from the computer by going to the gym or going on a walk with my wife or going to the park with my kids or whatever the case is, and then in the afternoon, I forcefully come in before the close of the day so that the close of the day becomes my ending time for the markets or even earlier if I don’t need to do anything.

Here’s the deal. I realized that if I get too emotional and attached, I’ll make stupid decisions and that’s just the reality. I’m self-aware in that sense and I know that if I get too emotional or attached to the markets, I’m just going to make really, really bad trading decisions. I deliberately limit my analysis and trading time to force myself into rational, habit-based, non-emotional decisions. And I feel like most successful traders can tell you that this is exactly how they work as well.

It all has to be rational, habit-based. You got to do the consistent things that we talk about, high probability trades, low order size, etcetera, etcetera, great pricing, etcetera, etcetera. Now, if you are currently working full-time, you actually have a huge advantage because your job will force you to make efficient decisions quickly. And frankly speaking, there is no excuse why you can’t be successful working full-time. I basically work full-time as a dad and running this website, coaching people and doing software updates and writing articles and doing videos like this.

I do not spend the full amount of time that I have in the day actually trading.

Selfishly like I’ve said, this is also one of the reasons why I run this website because it keeps me occupied helping others which I love to do. Otherwise, I would just be staring at charts all day long until I saw what I wanted to see. And again, do whatever you want to do, have something that you like to do, have a hobby that you like to do. You do not need to be at this misconception that’s out there that you have to be staring at the screens all day and you have to understand every little movement in the market.

You don’t. It’s just a number and probability game. And you have to actually develop a habit to keep yourself away from the market because as traders, we’re tied to the market, we’re attracted to it, we love it. You have to develop a habit to get away from it. Again, try to remember cue routine and reward cycle or this habit loop because it’s really, really important to understand what has gotten you into the routines that you’re in right now and how you can change those.

Try different cues in the morning. Try using my process. Use a kitchen timer to time the number of minutes that you have to analyze the markets. Do you know what I mean? Just give yourself 10 minutes and then turn off your computer or whatever the case is.

But you got to try something different to get into a new routine. In my opinion, I think the best traders that are out there have very efficient routines to keep themselves rational and math-based in their approach. And they don’t really care where the markets go as long as they’re making money because their portfolio is neutral and their position sizes are small.

That’s what I think is really important as you start developing your own trading routine and daily routine.

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