While there are the perfect traders who seemingly never have a losing trade, for us mere mortals, there are times when every single trade we make goes the wrong way. Even worse, we fail to accept that the trade is going against us. We cling to the notion that the trade will perform a stunning and miraculous 360 degree reversal to head exactly where we thought it would when we opened the position. Instead of suffering minor losses by exiting the position, we watch every tick, focusing our telepathic powers on moving the stock they way "it was supposed to move". Rest assured money moves stocks, not telepathy.
They say over 90% of traders fail over the long term. It's easy to see why. Emotions, arrogance, discipline, recklessness, exuberance, stupidity are some things standing in the way of making a profit in this market.
When do you take your profits? When do you take your losses? When do you sit on your hands? All are great questions that run through a traders head and most traders on average have the wrong answer. They sell too soon, hang on to losing positions too long, and buy at the wrong price. They have little patience, they come into the trade with no gameplan, and they expect every trade they make to be a winner.
It gets worse when you are talking about short time duration stock options. Profits can erode in minutes, losses can pile on in a hurry. On the flip side, gains can explode 200-300% in a matter of minutes. It's an exciting way to live and can be tremendously invigorating, rewarding, and profitable. But when the trades aren't going your way you can see your investment account shrink in a hurry.
2014 has been a great year personally for me. Earlier this year I had a few excellent trades including $NUS and $BIG and more recently $FIVE calls and $WYNN puts. Due to my success this year, my confidence has been soaring, which is not a good thing. When I am trading successfully I am grounded, not too high, and not too low.
When I think every trade I make will turn a profit.... that is were the buck stops. The first few days of this week have been a gut check for me. I got too cocky, too arrogant, and expected all my trades to go my way. The market smacked me in the face.
The key is dusting yourself off and getting back to work. I am not the perfect trader. As long as I can keep my mistakes and losses in check I'll be just fine.
It happens to the best of us. We go through a rut, our confidence gets shattered, and we don't see the market as clearly as we did when things were going good. A short break to clear your head could be one of the best things to do. Take a day off, go golfing, don't look at the market the entire day. Get back to it fresh the next morning.
Grow that investment account.