All It Takes Is One Bad Trade

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 |  Includes: DBA, DIA, EEM, EFA, EPI, EWJ, EWY, EWZ, FXI, GDX, GLD, IBB, IWM, IYR, OIH, QQQ, SDS, SLV, SPY, SSO, TBT, TNA, TZA, UNG, UUP, XLB, XLE, XLF, XLI, XLU, XLV, XLY
by: Andrew Crowder

I came across a great article ("All It Takes Is One Bad Trade") on the one bad trade syndrome. Several months ago, Slopers (Tim Knight's Band of Followers), were privy to a real-life blow-up in which a trader essentially risked all of his trading capital on essentially one trade(disregarded the importance of position-sizing). I want to make sure that I never make the same mistake. Currently, my positions are teetering on max pain (stop-loss). My outlook remains with the pullback scenario that I have mentioned repeatedly the past few weeks - short-term bearish.

For those of you who have not been reading my posts the past several weeks, I have been reminding my loyal readers of the following: "The Rally That Never Stops," "Up, Up and Away, Not if History Has a Say," and "How to Recognize a Bear Market Rally."

Don't Be a Hero When Trading Options

Options trading seems to create a "get rick quick mentality" that attracts the "speculative gamblers" out there. To me this approach seems short-sighted, unless that is your goal and you are willing to take the risk. I prefer to take the "long-term" approach that attempts to beat the market over an extended period of time. Admittedly, I "go for the gold" sometimes and place a highly speculative trade. But those are few and far between and I would never allocate a large portion of my portfolio to a trade like this. It is just too risky for my blood after what I have experienced as a trader. Take the loss and move on. Think in terms of probabilities. Use a scientific approach. Losses are a cost of doing business. It is how your account compares to the benchmarks after a long-period of time that defines your success. Any Joe options trader can make a bundle on a trade. It is how Joe performs over the long-term that defines his success.


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Disclosure: I am short SPY, QQQ.