Find That ‘One Thing’

Are you experiencing a series of small successes, and then WHAM! A major loss that all but wipes out your account? Then you replenish your account and do it all over again?

If this is you, find that “one thing”. That single reason it all goes to pieces. Drill down to find just what exactly throws you off. Honestly ask yourself:

• Do I jump the gun?
• Do I misread the indicators?
• Do I get overconfident because I am on a roll with a string of winners?
• Do I get greedy and not take modest gains, thinking the market will move in my favor forever?
• Do I push the envelope to squeeze just one more cent to resistance?
• Do I not have a plan?
• Do I have a plan but choose to ignore it?
• Do I get scared out when I should stay the course and allow the market to breathe?
• How do I feel when I enter the trade?
• Am I medicated?
• Am I under the influence or enjoying too many mimosas while on vacation?
• Did I have a fight with my spouse or kids in the morning and am not emotionally in total control?
• Do I get cocky, thinking I make so much money already that I could easily risk this?
• Do I feel the need to be in a trade just because the market is open?
• Do I place the trade too soon after my last one, not letting my emotions settle?
• Are my internet and other technical considerations not functioning well?
• Do I go in too deep and not practice good money management?

Do you see a pattern here? The focus is on “I”. It’s not someone else’s fault, not the market’s fault and not our fault. (Yes, we sometimes get blamed. Lol.)

The idea is to go back and analyze just what went so wrong that you could have lost so much that it impacted your account. And then, truthfully review the conditions that allowed it to happen. Even if the market turns against you, you should have an exit so you don’t materially destroy your account.

If you find and defeat “that one crucial thing” so it never happens again, imagine how much further along you will be. Your profits can soar, untethered by that one catastrophic calamity that sets you back.

Most major losses are due to a single event, be it human error or the market simply turning on you. For example, Investor’s Business Daily recently reported a major drop in the do-no-wrong AI company, Nvidia, for a $417.3 billion loss in shareholders’ wealth. After this trillion-dollar powerhouse reported stunning revenues, a 10-for-one stock split and dividends, the momentum turned the other way, shifting funds from the Magnificent Seven to lower-cap stocks. Big tech stock dumps followed, resulting in over $1.3 trillion market share loss on this epic implosion.

One client I spoke with lost thousands because, thinking SPY would continue up forever, he was heavy in same-day expiration call options. Had he bought time, traded small and traded often, he may have trimmed his losses significantly. No doubt, he will keep this in mind the next time he is lured by such aggressive market forces.

Another trader was also in calls but bailed out early when he saw the tides change. He did make smaller gains on the way up, racking up a dime here, a nickel there, multiple times. While he, too, lost when the market reversed, he was able to save most of his gains that day, opting to stop trading as he saw that something was horribly amiss. When I asked, he explained how he’s learned that lesson all too well. In his words, “If you continue to lose, that just means you haven’t lost enough yet!”

This is just one of the many things we talk about in our morning Trading Room. The benefits are immense and if you know what calls and puts are, you belong here with Ahren and myself. The Trading Room is hosted in the mornings, from 9:20 to 10:30 a.m., ET. Click here for details and to subscribe.

Not sure if options trading is for you? Join us at 8 p.m., ET, Sunday night for our weekly Intro to Trading / Week in Review. Click here to register.

Next week, I will tell you what MY ‘one thing’ was… that changed my fortune forever!

Create great trades!