Expensive lessons indeed...I have had a few myself. When I first started, I wiped out my account...about 10k of seed money. But through the years I have learned from my mistakes and spent a LOT of time paper trading since it took a while to get seed money back. I still have much to learn, but I can easily say I have made back my losses and then some on a grander scale. There are some key points to trading...
Learn the technicals so you feel confident in the trade by your own standards and not just someone else's. Make sure you get confirmation by several technical indicators as well as charts and not just one alone. The more they all agree, the more liekly they will be right.
Cut your losses when they go against you in a bad way.
Allocation, allocation, allocation! Never put the bulk of your money into one position, especially into options. The profit potential is huge in options, but so are the losses. My initial purchase of options totaled 150 and I never exceeded that, though I probably could have initially bought well over 1500 making my purchase worth literally tens of millions of dollars if it played out. I figure between $5000-10,000 is a good amount for any option play.
Greed will kill you every time.
Always remember to profit often. When you have a gain, take some off the table, again, especially in options. Some profit is always better than none and that big win may not come.
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These are some of the things I try to keep in mind all the time and it has saved my butt on numerous occasions. Though even today, I still take an occasional loss, and it bites...especially if it is for more than $1000. But there is always another trade and that $1000 loss could easily have been $10,000 if I didn't follow my rules. |
