Happy Friday, Evolvers!
If you don’t know the drill here it is, on Friday’s I like to dig into the mail bag and address questions from you, the reader.
Soon I’ll be setting up a submission form on Evolved Trader for you to drop your questions in.
That way, even if you miss a webinar, you can shoot me any questions you may have (and I’ll do my best to answer them here).
It’s difficult for me to get to everyone’s questions on stream (and I know you have a lot of topics you’d like me to cover).
Keep your eyes peeled for it…and please, don’t be shy. Ask away!
In the meantime, you can always tweet your questions to @TheHonestCroock.
Enough small talk. Let’s get to your questions…
‘It feels like whenever I pull the trigger, the trade goes nowhere. But every time I pass on a play, it ends up going to the moon. What am I doing wrong?’
Sorry to hear about your frustrations. If it makes you feel any better, I’ve had a few snags of my own recently as well…
While it’s hard for me to know exactly what’s going on here without more detail, it sounds like you may be falling victim to the fear of losing.
It’s okay. We’ve all been there. Nobody likes to lose money, and that fear can constantly live in the subconscious of traders.
If you’re passing on winning plays, you need to take a step back and examine your mindset going into the trade.
Even if you have a solid win rate, the fear of losing can occasionally cause you to second-guess a good setup.
Don’t let this happen — trust your gut.
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On the other hand, if you’re losing money on the plays you are trading, it’s important to ask yourself some questions…
Did you consider your maximum loss tolerance? Did you have an exit plan? Did you hold the position longer than you should’ve?
I find that most of these problems can be addressed by giving yourself honest answers to these questions (and improving on any mistakes in the future).
‘I’ve noticed you’re usually in and out of options pretty quickly. Do you ever hold contracts until their expiration dates?’
No, I NEVER bag hold contracts all the way to their expiration dates. This is a recipe for disaster.
Anyone who holds contracts until expiration is probably down on the position, praying that some miracle turns the trade in their favor at the last second.
Experienced options traders rarely do this, especially if they’re trafficking in short-dated options (like I usually am).
On the other hand, if you’re up big in unrealized gains — take the win and close the position out.
Don’t get greedy on the way up, holding out for even more profits that may never come.
Bottom line: Don’t be a hold-and-hoper!
‘If you could give a brand new student only one piece of advice, what would it be (and why)?’
This one’s easy. I’d tell them to cut losses immediately — it’s Tim Sykes’ #1 rule for a reason!
Remember that 90% of traders FAIL.
But most of these quitters don’t give up because their account isn’t growing fast enough … they give up because they lose all of the money in their account.
How can you avoid losing money? By cutting losses quickly.
This is why my account has never had a massive drawdown. I’m extremely disciplined about cutting losing trades before I lose more than I’m willing to.
Beyond that, you’ve gotta be patient. Just because you aren’t losing money doesn’t mean you’re earning enough to say you’ve ‘made it’ as a trader.
Your trading journey will probably be long and challenging. That’s okay. It’s actually what you should hope for…
But if you get tunnel vision and fail to cut your losses quickly, your career will probably be short and tragic instead.
Thanks for the questions … I LOVE hearing from my students!
I want everyone to get some rest this weekend, but don’t forget to study.
There’s CRAZY volatility in the markets right now.
It’s important that we’re all prepared for anything come Monday morning.