I will admit, I have an advantage.
When I sell strangles with my plan, I don’t have to look at stock charts; I depend entirely on the probabilities suggested by the option prices. I also sell cash secured puts in my IRA. . . . and even there, I never look at charts.
In fact, I’ve found through experience that my portfolio performs measurably better the less I look at charts. How can this be? Well, if my strategy depends on probabilities and numbers, trying to add chart reading into the equation starts throwing the probabilities off. If I trade based on the belief that I “know something,” or see something in the chart, what I lose is my consistency.
And I’ve seen it happen with countless other traders as well. They want to trade the probabilities, but they can’t stop chasing the charts and end up chasing their tail.
Granted, it took many years to break my chart habit. For the longest time, I’d still open up a 3 month or 1 month chart and try to make an “assumption.” But eventually, I noticed that I no longer even bother to look at them. I realized all I need is the option chain and IV rank—looking back, that is when everything started running like clockwork.
That’s when my trading became a business—a repeatable process of execution based on a few simple numbers.
Of course, sometimes it’s hard to trust the probabilities the option greeks give you. Some might say that simply selling options doesn’t tilt the odds in one’s favor enough—that implied volatility overstatement isn’t enough of an edge. That may be true. Which is why a trading plan must have specific guidelines on trade defense, as well as exit strategies that take profits early and cut off trades that have become stinkers poised to cause more trouble than they are worth. Everything and anything possible should be done to tilt the odds even further in your favor. Why do it any other way?
At the same time, I’m not trying to put down the technical analysts. Every trader has to find their own way. I have found mine.
Good luck to all traders, and be careful out there.