I'm sure that you have been able to at least make the connection between the name of my website and my trading style. Yes, I am an Option Addict. Due to the overwhelming request for my trading rules, questions on which strategies I trade, and questions on how I approach the market, I am laying it all on the line in hopes that you will find all the answers to everything you are looking for.

Good luck, and Godspeed.

Disclaimer: My trading style is not suitable for individuals with heart problems, bad attitudes, lack of emotional stability, or lack of gratitude. All the details contained here are suitable for me, not necessarily suitable for you.

I am a fairly young, good looking individual with a long life ahead of me. Therefore, I am naturally a much bigger risk taker, and more aggressive in my approach than you are. Plus, I have a longer time frame to reach my financial goals than the inquiring minds that want to know.

I am also a fairly active trader, which means I have a lot of things going at any given time. My personality and mental condition is such that I have this distorted perception that I need to always be involved in the next big move, or have enough trades going to balance my bottom line. The only downside that I have found is what I pay at the end of the year in commissions.

I am a directional trader by nature, which means that I take trades which will be profitable upon the price movement of the underlying instrument. I prefer the low probability/high reward trade over the high probability/low reward trade any day of the week. As I have researched all the greatest traders that have paved the way before me, I have found that we share this common thread. The traders of the high probability/low reward trades are usually the ones that suffer the biggest blow-ups. That style was never meant for me.

One of my best qualities is that I am a trader, not an investor. It is crucial that you realize this up front, as I may be in and out of a trade by the time you are able to check the going offer. The main difference between a trader and an investor is the duration for which the person holds the asset. The time frame of a typical trade for me is usually over a period of days to weeks, depending on the market conditions. As a market trends, I am likely to stay with a trade for a longer period of time. In choppier or more volatile conditions, I am likely to take profits after a reasonable objective has been reached.

My next best attribute is that I am a technician, not a fundamentalist. Yes, I am lazy...so what! I believe that fundamentals are already priced into the market, and have no impact on short term price action. I dare you to get into that argument with me.

While my trades are based solely on technicals, I never lose sight of market conditions, strength of the economy, intermarket analysis, or sector rotation. I am a trend follower by nature and focus specifically on things such as relative strength, price patterns, strong trends, reversals, breakouts, breakdowns, and support/resistance reaction points. Honestly, that pretty well sums it up.

I don't want to sound arrogant, but I'll come right out and tell you that I consider myself to be an amazing stock picker, which is not something that many people can claim. While many successful traders get their fame and fortune by staying "connected" to the inside of the market, I have gained a visual interpretation of the market through my years of experience that is uncanny at times. Thousands of readers can attest to this.

Speaking of stock picking, I am very selective and "picky" in what I trade. I will not trade a vehicle that won't test the limits when it comes to price movements. I will only trade those instruments that make substantial price moves. The ones that don't are not worth my money nor the risk. Since I am so selective in what I trade, if there is anything in question, in doubt, or anything that I need to try and justify before entry, no thanks. Any trade that is questionable is a risk I would rather not try to force. I go for the easy money.

Speaking of risk, I am very focused on risk management. The reason most directional traders fail at this sport is that they fail to respect and manage risk. The ones that have proven to turn a low probability trading system into millions is that they manage risk first, worry about profits second. I encourage you to do the same.

I focus on every element of risk, such as total account risk, individual trade risk, market risk, opportunity risk, etc. I am always thinking about what I stand to lose first, then what I could possibly win, second. I have learned a great deal over the years, but none more important than risk management. Part of this stems from how I enter a trade, the other part comes from how I position size and allocate funds. Both of which I will cover.

My trade entries have always been based on support & resistance. I try to enter a position at the same point I would exit it had it turned against me. For example, If I can identify support at a certain price level, and a break below this level would trigger an exit, I want to take the trade as close to that level as I possibly can. I have taught this concept for many years and it has become a very popular strategy here in the community.

Next is asset allocation. I claim to be an Option Addict, which I am considering the overwhelming amount of transactions I make, but I don't limit myself to only trading the options market. I trade a powerful mixture of stocks, options and futures. I am a big believer in diversification, especially when it comes to asset allocation.

How I allocate my funds depends on several factors, mainly market conditions and performance. On a typical day, here is how I spread out my money... 

• Equities- 20-25%
• ETF's- 5-10%
• Options- 35-40%
• Futures- 10%
• Hedging- 5-10%
• Cash- 10-20%

My assets classes are also very diversified. For example, my allocation for options trading is usually diversified between calls and puts. For example, if I am very biased about the market direction, I might be balanced at a rate of 75% calls, 25% puts if I am very bullish on the market. If I am neutral, I will trade near a 50-50 balance.

Each trade I take, regardless of the instrument is taken using a carefully determined position size. My position size will fluctuate based on market conditions, recent performance, and overall portfolio risk. My individual trades will have no less than .5% risked, and no more than 4% at risk. If I am in a losing streak, I start to decrease my position size. As I am winning I like to increase my position size. When the market gets all out of whack, I reduce my trading size, and typically the number of transactions.

Many times I will do what I call "nibble" at a trade first, meaning I start with a small portion of contracts or shares, and add as the position increases in value. This is a very complicated methodology and one that I do not recommend everyone jump into. This approach is by far the most complicated part of my trading approach.

At the same token, if I have a full position going that has reached a reasonable price level, I start to slowly sell out of the position a few contracts at a time. This is used primarily to lock in profits, while still attempting to let my winners run. This way there are no surprises if I wake up and one of the stocks I own goes against me.

I avoid the use of stops at all costs, so don't ask.

As an option trader, I buy a lot of out-the-money options on highly volatile, high probability set-ups, such as breakouts. I also trade a lot of in-the-money options on highly volatile, but lower probability set-ups such as a support/resistance bounces in a strong trend. I have a short term bias, which means I hate the idea of buying long dated options. If you ever catch me buying an option dated longer than 3 months, without a good reason, check my mental condition as it is not fit for trading.

I focus a lot on how options are priced in my selection process. I prefer to buy cheap options, which is a product of a liquid market, and reasonable levels of volatility. Occasionally I will sell expensive options as opposed to buying them, but most of the time I would rather avoid options selling strategies. Typically the only option selling I participate in are selling options against an existing position, to offset a pullback in the stock price, and/or to take advantage of free premium. My archives go into every detail about options pricing, greeks, selecting the most appropriate option, and how I analyze options in general.

That generally covers my approach to trading. If you are left with questions, good. These are the questions you will need to answer on your own. No two traders or trading styles are going to be alike. This is the point of my blog. I illustrate day in and day out how I react and make a living in the market, and navigate a community of traders and help them to determine their own rules and ideas. As you work towards creating your own trading style, I hope that my approach has given you a few ideas to start with.

Good luck!