Powerful reasoning
The above image was trotted out relating to the Republican administration in the US this week. But….. this is a key component of trading failure. This trader is a case in point: the market has hit new highs therefore it has to drop soon. Wrong. The market is a ‘wiggly line on a chart’. It is independent of logic, ‘predictive powers’, economics or coin flipping statistics. The esteemed Van Tharp http://www.vantharp.com prefaces his info with:’ We trade our beliefs about the market’. I love this simple truism, it has saved me from rage/ruin/ridicule/revenge trading- but not alliteration! I cannot overstate the importance of how to deal with losses. Take it badly, and your clarity is blurred your emotional state is heightened, your pride is damaged. More importantly you will miss the next trading opportunity.
Our emotions are always a part of trading, but the effects need to be reined in. We can do this by having rule based trading. If the price hits ‘X’ we buy/sell/adjust. Our rules might be wrong but they might save us from ruin. Cutting losses hurts. Running losses? That’s where ruin lies, nearly always. Some options traders roll into the future months, and good luck to them. Sometimes you have to roll for 24 months!
I’m Still Finding My Feet
I’m still finding new things-after 17 years. We grow, we learn. Sometimes we get it right, and make good profits, but we only learn from mistakes ( called experience in other words).There are NO shortcuts in the long term. I’m still here poised each month to embark on the new adventure of a fresh options trade.
