Everybody makes mistakes. It’s just a part of being human. In any worthwhile endeavor mistakes come with the territory.
The challenge isn’t making mistakes. The real issue is to learn from mistakes and have the knowledge to take corrective actions that put you back on course and move you in the direction of your goals, which, since you are following this blog, is to become a successful options trader. Right?
Mistakes are inevitable, when you begin to trade options. Options trading is hard work and it comes with many challenges. But that’s no different from anything you do. Think about it.
When you started your job, there were many things you didn’t know, but along the way and with help you were able to overcome the pitfalls and move ahead with confidence.
It’s the same with options trading. Confidence comes with having a set of procedures that form the basis of selecting a strategy, sizing it properly, executing and managing the trade.
The biggest mistake I made, when I first started trading options was failure to take losses. Now I know that will sound strange and you are probably asking yourself why I am talking about taking losses. You are not into trading options to have losses. You want to make profits. I understand.
One of the first things you need to respect is that trading is like breathing. You have to breathe in and out. You need to lose in order to win. Winning AND losing are just part of the game.
Instead of thinking about losses as a bad thing just underhand how to manage them. One of the best way I have found to manage losses is to practice position sizing. If you size your position correctly, losses become unimportant. And that is the key. Make the inevitable loss unimportant so you can focus your attention on the winners. We’ll discuss position sizing in a future post.
For now just keep in mind that trading is a learning experience that has definable rules with predictable outcomes. But like any endeavor, there are temporary setbacks. In trading, I call losses temporary setbacks. If you size your positions correctly, then losses will appear as just a bump in the road.