Townhall – When It Comes To Your Trading, Play The Long Game – 07.30.2018

The following example is based on a short term (1 week) Option Trade.

Let’s say you really like AAPL above 195.

The stock crosses 195 and as it’s moving towards 196, you buy the 195 call for $2.

All of a sudden, AAPL goes from looking great to terrible.

The stock drops from 196 to 194 and time is running out on this trade.

Your options are only worth $1.30.

You just lost .70 per contract.

The emotional trader says “I’m in it to win it” and presses on, likely losing the remaining $1.30.

The Long Term Trader recognizes their level (195) has been broken and takes the loss.

A week later, the same trade appears again and you buy AAPL at 195 for $2.

This time AAPL keeps going and you exit at $3.20  for a nice quick profit.

The Emotional Trader lost $2 and made $1.20. They are down .80.

On 10 contracts, they are down $800.

The Long Term Trader lost .70 and made 1.20. They are up .50.

On 10 contracts, they are up $500.

Now imagine this scenario, week after week and month after month.

Of course, sometimes the stock will come back but not enough to make it worthwhile.

Continue Reading At Townhall

Newsletter Sign-up

Get Exclusive Invitations To Weekly Training Session, World Class Market Analysis, and Exclusive Subscriber Online Events… All FREE!

Your contact information is completely safe with us. We use state of the are encryption and digital security. We will never spam you. We hate spam as much as you do.