A common mistake that many traders make is thinking they need to time a trade perfectly to be successful. Good Kids Trading (GKT) wants to remind you that you don’t have to catch the exact bottom or top to be profitable. We’ve made a lot of money just by catching small sections of a bigger move. Let’s discuss having the perspective to not get overly granular or too precise when setting up our trades.
Although GKT focuses a lot on options trading, we also trade and invest in shares. Remember, to make money, you just need to buy the shares lower than you sell them; it’s the same with options. This sounds obvious, but far too often, traders try to overcomplicate, overanalyze, and maybe even try to outsmart the market.
Do you remember the article I wrote on pyramiding into shares? You do not have to buy all your shares at one time. And you certainly don’t have to wait for all-time highs to sell all your shares. There is an old adage: “No one gets hurt taking a profit,” but I do see people getting hurt trying to catch the bottom and tops.
Similarly with options trading, when we sell an option, we collect money upfront (called premium). If we buy an option, we are paying a debit. All too often, traders get too hung up on a specific amount. Maybe you sell an option and collect $100, but you start trying to push it and try to get an extra $5.
You might see us joking in our discord chat about getting more premium than someone else on the same trade, but this is just for fun. It doesn't really matter if you make a few dollars more or less than someone else.
What really matters is that you make the trade, and then you go do other things. You don't have to sit in front of the screen and watch the market all day. You can enjoy your time freedom and your passive income. Trading doesn't have to be hard. It can be easy and fun when you use math and time to your advantage.
We don’t suggest just blindly making trades, of course. We are looking for high probability trades with at least the minimum amount of premium to make the risk-to-reward worth it. Remember, I told you that the broker actually shows us the probability of profitability for options trades. You can see the risk and reward in the broker as well. Then we let probability and time do the work while we live our lives.
When we take trades that have a high probability of hitting profit and we trade frequently, we increase our profits through the number of occurrences. This is why trading frequently with a high probability of profit is a great combination for building passive income.
Do not get hung up on trying to squeeze out a couple of extra dollars or trying to time the trade perfectly. Of course, there are times when you might want to be more picky about your trades, but not when the probability is in your favor. A much larger mistake is trying to collect $105 in premium instead of $100, and the trader ends up missing the entire trade. Try not to get too caught up in the smaller details. It’s better to be in the trade than trying to catch the exact bottom or top. Ignore the jokes about someone making a couple of extra dollars and remember you don't need to be perfect to be profitable. You just need to be smart and consistent.
That's it for today. I hope you keep this in mind when you set up your next trades. If you have any questions or comments, join our Discord chat and visit our website. We have a lot of resources and friendly people to help you.
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!