Investing for the long term is relatively straightforward: you let time and compounding work in your favor, and you simply wait. As Warren Buffett famously said, "The stock market is designed to transfer money from the active to the patient."
But what if you could make trading more passive?
At Good Kids Trading, we emphasize having a plan that leverages a high probability of profit while using math to your advantage.
Does it work every time? Absolutely not! Nothing does. However, there are some similarities in math-based options trading and longer-term investing that I just can’t ignore, and I don’t think you should either!
Do you remember when you were a kid and you wanted to go outside and play, but your mom said you had to clean your room first? You’d throw all the clothes and toys under your bed, then proudly proclaim “done!”
That happens with traders, too. You see the “profit porn” all over social and trading communities: bragging about doubling their accounts, talking about how well their funded accounts are working for them. But you don’t see what’s under their bed, or the pile of losses stuffed in their closet.
Short-term trading can be emotionally taxing as you buy and sell on a quicker timeframe. Some traders consistently profit over the years, but many realize that buying low and selling high in the shorter timeframe isn’t quite as easy as it seems.
If you invest in a company that is growing and making money, over time you’ll likely make money as the shares appreciate (and possibly collect dividends).
Trading on a shorter timeframe does have the potential for more wins, but you can also incur greater losses.
Every time you lose, your next trade needs to make up for the losses before you start making profits. This is why we stress looking for more than a 1:1 reward-to-risk ratio on trades.
If you want to be a day trader, no problem. I've explained why day trading is not for me. But don’t hide all your losses in the closet and keep adding more money as the hole gets deeper quickly, leading you to think trading is impossible.
Consider combining statistics and probabilities, aka math-based option trading, to find an edge. Selling puts is my favorite strategy because I can be wrong on a trade and still get a second chance since shares never expire. Even if the put sale goes against you, all you have done is bought a stock lower than you would have initially.
As the legendary investor Charlie Munger put it, "The big money is not in the buying or selling, but in the waiting." When you have trades that benefit from theta decay, you get paid to wait! If you incorporate trades like put sales into your toolkit, you get a second chance.
I believe there's a better way than solely investing for the long term, but it depends on your time horizon and your willingness to learn and execute a trading plan you believe in.
To be a profitable trader, you have to avoid the trap of hiding your losses under the bed so you can go outside and play with your friends.
If you're interested in learning more about math-based options trading, you’re in the right place. Good Kids Trading is focused on making trading simple and profitable for people who are busy living life! We aren’t chasing huge returns or trying to time every trade perfectly.
We’re focused on trading for passive income and living our best life.
If you need help reach out to me, join our community. I’ll see you here next week, hopefully I’ll catch you in our Discord much sooner than that!
Happy Trading Good Kids!
Disclaimer: this is NOT financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!
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