Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to be talking about the inner and outer game of trading. I think this is a really important topic and I think it’s important because in this day and age, we are so bombarded with different messages and different streams of video and Facebook messages and friend likes and Instagram that it seems like we’re not moving at a fast enough pace. And so, what that causes us to do in many respects is it causes us to make decisions that create a lot of context switching between different strategies and investments and ideas. They invest in one thing and they don’t see a lot of success right way, so they immediately pull and do something else and it’s like we’re just throwing all of these lines in the water and as soon as we throw the line in the water and we’re trying to fish for a great investment or a great strategy, the second that the line hits the water, if we don’t catch a bite, then we yank it out and we try something different and we’re just not giving ourselves enough time to let the numbers and the systems work themselves out and I think it’s mainly driven by kind of the outside world to some degree, having these outside forces and such high expectations on everything that we do.
Now, that being said, I think as a personal retail trader like me and you, there’s two things that we have to contend with. There’s the outer game of trading which to me is just the actual mechanics of placing trades, executing positions, analyzing our portfolio, figuring out adjustments and rolls. That is maybe 10% of it. The inner game to me is 90%. That’s the mechanics and the behavioral biases. It’s the patience that’s required to do the same type of trading strategy day in and day out even when there’s all these new stories flying all over the place. 90% of your success, in my opinion, comes from mastering that inner trading game, having enough discipline to not do something on a really crazy day or on the other hand, having enough discipline to actually execute just that additional laddered entry when there’s a lot of new stories flying around and there’s a lot of people saying it’s not a good time to trade or you should wait until things calm down. That can be really tough. And so, having enough discipline and patience to go through a lot of those different market cycles is not easy and it takes time. It takes a lot of effort and a lot of self-reflection to make sure that you know what your big why is and where you’re going and the direction that you ultimately want to move towards.
When we look at options trading, the reason that I continue to run Option Alpha personally (this is very bias for me) is because it allows me to detach myself from my actual trades, so that I don’t overanalyze them. I’ve mentioned this so many times before that Option Alpha and running this business, helping other people trade makes me a better trader because I have to continuously reinforce the concepts that I teach and that I believe in, not only in the trades that I make, but also in my own mind because I continuously have to practice the patience that I require of so many different people. And so, that keeps my eyes I guess off of actually analyzing or overanalyzing so many different trades.
My suggestion today for you (if I could give you some advice) would be to take the outer game of trading and try to compress that down to 30 minutes per day. The actual order entries, the mechanics, choosing tickers, executing strategies, I don’t think it requires more than 30 minutes per day and that time crunch really will help you focus in on the most important aspects and then during the rest of the time, try to practice as much patience and discipline as possible. Use some sort of outlet (whatever that outlet ends up being for you) as the means to keep you away from overanalyzing your portfolio. You can paint, you can write, you can build, you can work your regular job, play with your kids. Do something else that takes you away from the market and helps you build a level of patience and discipline that we know is required to see long-term success. Hopefully this helps out. As always, if you guys have any questions, let us know. Head on over to optionalpha.com/ask. You can leave a voicemail there. I love getting voicemails of questions. That is the basis for what we do with these podcast and the content that we choose to release every single day. As always, if you guys need anything, let me know and until next time, happy trading.
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