Have you ever had a trading win so significant that it put your account into an entirely different category?
Many traders haven’t. I’ll be the first to admit, it’s a good problem to have. However……
After a grand slam like the one I recently hit on the ProShares Bitcoin Strategy ETF (NYSEARCA: BITO) — where I turned less than $50,000 into $280,000+ over a weekend — it could be tempting to get overconfident.
Think about it. In a few days, I made more money than most people make in several years. If I’m not careful, I could let it get to my head and start feeling invincible.
But I didn’t make nearly $4 million in trading profits by making such foolish mistakes. After 10+ years in the markets, I know that losing perspective after a big win is one of the worst things a trader can do.
That said, I can’t tell you how many times I’ve seen promising young traders nail a single big win, only to get cocky and quickly squander it all.
They let the money cloud their judgment. After one lucky YOLO, they think they’re the next Warren Buffett.
At the end of the day, the difference between these clowns and the small % of traders who WIN is staying humble. You must do so if you plan on having a long and successful trading career.
Keep reading and I’ll show you how I stay humble while making millions…
Expect the Best But Be Prepared for the Worst
When you’re developing a trade thesis — or studying the technicals of a setup — you should prepare your trade for the best possible outcome.
In other words, make sure your sizing, timing, and execution are all perfectly calibrated. That way, if the market conditions lead your setup to success, you’ll be prepared to extract maximum value from the trade.
That said, the stock market is infamously unpredictable. You can be exactly right about a setup — technically and fundamentally — only for some wacky headline to completely shift trader sentiment and RUIN your play entirely.
And you must be prepared for these unfortunate outcomes or you’ll be in for many demoralizing surprises later in your career.
This has been even more true in 2022 as the news-driven bear market has made options trading particularly difficult to time and execute.
So, expect that your hard work will lead to the best possible outcome … but ALWAYS BE PREPARED for the times when the worst possible outcomes will occur.
Never feel like you’re invincible. If you fall into this mental trap, the markets will eventually humble you until your account is empty.
Don’t Count Gains Before You Make Them
I’ve known traders who seem to have a fascination with counting their gains before they’ve even locked them in.
They view setups in a vacuum, the only thing that matters is the potential return. The reward.
But this personality type falls victim to another mortal trading sin — losing track of the risk.
There’s a great old movie called “The Treasure of the Sierra Madre.” Spoiler alert: Three guys strike gold, then squander their entire fortune by miscalculating the mental and physical risks involved in keeping their score.
I think of some of these gain-hungry newbie traders like the sad sacks in that movie.
They haven’t thought about the delicate balance of risk and reward … only about the reward.
And this can be even more tempting for options traders. You can pull up a way out-of-the-money contract, project the returns, and see the dollar signs light up in your eyes.
But please, avoid doing this. The chances that these YOLO plays will ever pay out are about as high as you winning the Mega Powerball.
Stick to building a consistent strategy with measured risk. If you do this successfully, there’s no limit on the amount of money you can make in the options market.
On the other hand, if you don’t carefully consider your risk profile as well, you’ll be out of the game before you can count any gains at all.