Readymade vs Custom Strategies: Which is Better?

Options trading is a rewarding but complex trading domain, requiring well-planned strategies. Most traders are confused about two fundamental choices: should they utilize readymade strategies or custom strategies?

In this article, we'll delve deep into the advantages and drawbacks of both strategies, helping you to determine which would be the best solution for you. Let's dive in!

What are Readymade Strategies?

A readymade option trading strategy is a pre-defined and widely used approach designed to address specified market scenarios and trading objectives. These strategies are based on extensive research and analysis of market trends by experts. It includes strategies like Covered Calls, Protective Puts, and Iron Condors.

Readymade strategies are mainly used by beginners, as they have a more systematic approach with proven methods for generating profits and managing risks in the complex options market. However, these strategies lack the flexibility to adapt to unique and evolving market situations.

Advantages of Readymade Strategies

• Easy-to-implement: These strategies are very straightforward to implement and consist of pre-defined rules and conditions. Therefore, even a newbie or novice trader can use readymade strategies and make profits. Moreover, it also has certain defined entry and exit points, minimizing the need for constant decision-making.
• Backtest and Proven: Readymade strategies have been back-tested across multiple market conditions, providing insights into potential effectiveness.

Drawbacks of Readymade Strategies

• Limited Flexibility: Readymade strategies do not go well with unique or evolving market conditions. Hence, traders can not use it to specify the market perspective and risk tolerance.
• Potential for Saturation: These strategies are widely available to traders. Hence, the market may become saturated, reducing the effectiveness of strategies and generating superior returns.

What are Custom Strategies?

A custom trading strategy refers to a personalized or tailored approach developed specifically for an individual trader's unique needs, objectives, market outlook, and risk tolerance. Traders combine different options and parameters to create tailored strategies, allowing them to understand the risk-reward ratio and create winning strategies.

Moreover, custom strategies can be adjusted in real-time based on changing market dynamics and personal preferences. Therefore, it is generally best for experienced traders who are seeking a tailored approach to optimize trading outcomes.

Advantages of Custom Strategies

• Unique and Personalized: Custom strategies are designed based on an individual's specific goals, risk tolerance, and market outlook. This approach allows you to incorporate unique insights and market conditions that are not available in the readymade strategies.
• Flexibility and Adaptability: Another advantage of custom strategies is that you can adjust them in real time as per market changes or personal preferences. Moreover, this strategy allows traders to innovatively combine different options to create a winning trading strategy that may suit your needs and objectives.
• Potential Higher Rewards: A well-designed custom strategy can help traders achieve potentially higher returns.

Drawbacks of Custom Strategies

• Complex and Time-Consuming: Creating custom strategies requires substantial time and effort over the research and testing. It consists of complex calculations and sophisticated execution, which is generally challenging for beginners.
• Require Constant Monitoring: In the case of customized strategies, you may be required to constantly monitor the process and make the required adjustments based on market conditions.
• Higher Risk of Error: If you don't thoroughly understand or test the strategy, there may be a higher chance of making mistakes. Moreover, these strategies also do not have any past record to validate their effectiveness.

Which Strategy Should You Choose?

Choosing the best strategy among both options trading will depend on your individual goals, experience levels, and market outlooks.

Newbie traders or beginners can potentially opt for readymade strategies, as they can provide them with a solid foundation and proven track record. Most importantly, these strategies are simple to use and allow you to take market exposure with good risk management techniques.

In contrast, if you have a deep understanding of the market, have a higher risk tolerance, and seek tailored solutions for changing market conditions, you should opt for custom strategies. It will also help you generate competitive returns. You can use an option strategy builder for this.

Conclusion

In summary, a readymade strategy is for newbie traders to gain market exposure and allows them to strengthen their research and analysis. On the other hand, custom strategies benefit experienced traders with good market exposure. We hope this blog helps you understand which strategy best fits your current conditions and goals.