5 Patience-Testing Occurrences Every New Options Trader Must Endure
Practical tips to handle pressure situations in option trading!
Every time my trading system goes through a drawdown, it feels terrible.
But then, going through such drawdown phases repeatedly, I have internalized that options trading is not a sprint. It's a marathon!
In this newsletter, I will share 5 trading scenarios that will test your patience as an options trader.
Let's dive in!
Losing streaks: Persist through them!
These are periods when you have consecutive losing trades, no matter what you do.
They happen to everyone, even the best traders in the world. They are part of the game.
The key is to persist through them and not give up.
How?
Don't change your strategy or risk parameters just because you're losing.
Stay calm and rational.
Analyze what went wrong and what went right.
Sometimes, the best thing to do is to step away from the market for a while.
"You don't need to know what is going to happen next in order to make money… Every moment in the market is unique."
- Mark Douglas, the author of Trading in the Zone.
Losing streaks are temporary. Persist through them, and you'll come out stronger.
Winning streaks: Stay grounded!
Winning streaks are incredible! They make you feel confident, happy, and booming!
But like losing, a winning streak is another part of the game.
The key is to stay grounded and not get carried away.
Like this:
Remember that the market can change at any time and humble you.
Don't increase your position size, and respect your limits.
Keep studying the market.
"You just stay focused on what you have to do. Exactly."
- Jack Schwager, the author of Market Wizards
Winning streaks will end. Stay grounded, and you'll go further.
Overtrading: Less is more!
This is when you trade too much, too often, or impulsively.
However, it is avoidable. It's a matter of choice and discipline.
The key is to trade less and trade better.
Here are some tips:
Define your entry, exit, and risk criteria for each trade.
Record your trades and track your results.
Only trade when you're prepared and focused.
"After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!"
- Jesse Livermore, the legendary trader
Overtrading is costly. Less is more in trading.
FOMO on missed moves: Stay disciplined!
This is when you fear missing out on a big move in the market that you didn't catch.
It happens to everyone, especially in volatile instruments like options.
But it's not a reason to chase the market. It's a trap. It's a distraction.
The key is to stay disciplined and not get distracted.
How do you do that?
Don't compare yourself to others or follow their trades.
Don't obsess over the outcome or the profit.
Trade what you see and what you know.
Don't regret what you missed or what you could have done.
"The stock market is a device for transferring money from the impatient to the patient."
- Warren Buffett, legendary investor
FOMO on missed moves is wasteful. Stay disciplined, and you'll save more.
Fighting the trend: Wait for reversals!
This is when you trade against the dominant direction of the market, hoping for a reversal.
It can result in significant losses, reduced odds, and increased frustration.
It's a mistake. It's a misunderstanding.
The key is to trade with the trend and wait for reversals.
Some tips:
Use technical analysis tools such as price action support and resistance zones to determine the market direction.
Use option strategies that protect your profits when the market is undergoing consolidation.
Use indicators to have confirmatory signals for trend change before entering a counter-trend trade.
"It can be very expensive to try to convince the markets you are right."
― Ed Seykota
Fighting the trend is futile. Trade with the trend and wait for reversals.
That's it for today!
Reply with one patience-testing incident you encountered in your trading and how you handled it!
If you enjoyed this newsletter, please share it with your friends and fellow traders.
To your profitability,
Pratik
Your Systemized Trading Coach
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