This is a rebroadcast of OICs webinar panel. In this deep dive discussion, Frank Fahey (representing...
My #1 Options Trading Strategy: Don't Let a Trade Define You
11/26/2014 8:00 am EST
Bob Lang, of ExplosiveOptions.net, explains how options trading is not about how many wins are racked up, or for that matter, even how many losses, it’s about longevity and the ability of a successful options trader to harness and control emotions and not the other way around.
As traders and investors, we often judge ourselves by the wins and losses we rack up while buying and selling. Yet, while the results do matter, they are only a small part of the overall success we will achieve.
Many traders are destined to succeed based on their account growth, but others (like myself) equate success with longevity (staying in the game). Regardless of what you consider success, do not let your net worth overtake your self worth. Your bottom line, or even your last trade, cannot define who you are as a person.
It is often said that “you are only as good as your last trade,” and for those who need to be humbled, well, that is certainly the case. However, I prefer to look at an entire body of work to judge the success of an investor or trader. While we certainly need to rack up more wins than losses, the length of your career is far more important in my book.
There will always be losses in trading—it’s the nature of the game—but suffering a loss doesn’t mean you are inadequate or a failure. You need to learn how to manage your mind so you can handle setbacks, big or small. In options trading, you can still be successful with a negative win/loss ratio. Much like a baseball player who is considered a success when he hits the ball seven out of ten times at bat, an options trader can fail 60-70% of the time (on individual trades) and still positively grow an account.
Recently, a subscriber in our chat room was going to give up trading entirely after a bad loss. This young man (who, yes, is new at options trading) watched his account move up nicely until a recent draw down pulled him back. To compensate, he started to over-size trades, something we talk about often as the wrong thing to do. He was really upset—to the point that—his trading results affected his attitude at home.
I decided to talk to him further about it, and, as it turned out, he made some mistakes that were correctable. When I pointed this out to him, he started to feel much better and regain much of the confidence he had lost. He made some changes to his approach and his very next trade was a win, yet he knew enough not to feel invincible.
This brings me to my #1 options trading strategy: Don’t let a trade define you. There will always be highs and lows with trading. Learn to manage you emotions and just focus on the task at hand. If you can do that, you will find yourself moving forward, staying in the game for the long haul, feeling much better about yourself every step of the way.
By Bob Lang of ExplosiveOptions.net
Related Articles on OPTIONS
Roma Colwell-Steinke of CBOEs Options Institute joins Joe Burgoyne in a conversation about strategy ...
This is a rebroadcast of OIC’s webinar panel where you can take a deep dive into options Greek...
Host Joe Burgoyne answers listener questions about mini-options and investor resources. Then on Stra...