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Anyone else hammering AEO puts?
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Anyone going in on VNET?
Sundial Growers 🏄🏻♂️🏄🏻♂️🏄🏻♂️
Potential opp on the short side for TSLA?
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BC - do you buy/sell more puts or calls?
5/28 Thread (General):
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Read “Trading in the zone” by Mark Douglas. Game changer for me
That’s part of the evolution of a trader. But the insight is important.
You need to define entry and exit rules. The first step is limiting yourself to trades that are actually good setups for you. Be patient and know it’s fine to not be fully invested if you’re not seeing good trades. Then, set a max stop loss for every trade to limit down side risks and stick to those stops.
Finally, know your first sales point and raise your stops periodically to lock in profits. Mark Miravini has some good coaching on this.
This is such an important and it’s made a big difference in my performance so I’ll share some more detail on how I manage this.
1) I set a risk budget each month to put circuit breakers in place in case I have a bad streak or the market goes haywire. This will keep me from loosing too much too fast.
2) For each trade I define the max dollar amount I’m willing to allocate to the position. This is based on the asset class with low volatility assets (like currencies or bond ETFs) getting higher allocations and high volatility assets (like crypto) getting smaller allocations.
3) Then I determine the stop loss for the trade. You can use technical analysis, a set loss amount, or some other approach, but you need a stop loss.
4) Based on the distance between the current price and the stop loss, you risk allocation tells you how many shares or contracts you can buy. Obviously if that distance is small you can buy more shares and have a larger position. If the distance is larger, using the risk allocation approach means your position will be smaller.
5) Determine your first sell point. (If you’re not buying indexes and holding for decades, you’re an active trader and the ‘never sell’ BS doesn’t apply. Even Warren Buffet sells.) I set my first sell at a gain at least 2x above the potential stop loss. So if my stop loss is $5/share below by buy point, I want to hold the full position until I get at least $10/share in profit.
6) Finally, you manage the position. If the trade does well and crosses above your first sell point you can either sell or trim the position or you can raise your stop to you cost basis to ensure you don’t lose money on the trade. If the trade moves against you, close the position when the stop loss is violated.
If you’re struggling with psychology then set up rules like this and track how often you follow them. Use a stop loss amount of 3-5% for equities to start (40-45% for options positions, which should be much, much smaller) and really focus on a) waiting for good setups and b) not touching the trade until the stop loss or first sells point are crossed.
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VP is saying it right. Just here to support what they said. I was going to say very similar things.
There are several studies showing individual investors that "just put money in an index and forget it" underperformed the index by 8% annually. Because it is hard to ignore emotions. If you can do that, you can do well.
You have to learn celebrating following your rules, not how brilliant your trades were. Then, you analyze your rules.
I have a great bear trade in DJT. BUT, I'm also happy my rules only allow 20% of an allocation limit (mine is currently 5%) to speculative trades. Could I have made more? Absolutely. But my rule created a limit based on risk.
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If only you had included that “claim” (a materially important term here) part in your original post, we could have avoided this back and forth but alas.
No worries - I’ve always had a knack for these things when folks write one thing but really meant something else… 😉