Friday, August 12, 2005

Don't be Greedy

Mistake #2 - Buying back the option when you just profited from selling it.

You know, there are 2 emotions which you would need to control in trading - fear and greed. This mistake is about greed. Have you ever bought a option contract and it gapped (up or down) on certain news alert or from an anticipated event. You were elated when your option gained some profit from this sudden movement and you promptly sold the option.

After selling your option, you thought there's no harm looking at development of the stock which you've just sold your option. But your smile turned to frustration as the stock you just sold off your option keeps going up steeply and you saw the option keeps gaining money which you could have potentially gained if you didn't sell off too soon.

So, you know what, greed stepped in and twisted your thinking. Thinking that you are a moron for selling too fast, you impulsively buy back the option (which could be quite expensive after gaining much value in such a short time) and felt so proud thinking you could reap further gains from this re-buying. But sometimes life just luvs to play tricks on us. The moment you buy the option, the stock starts to drop, and fast too. UUUHHHH !! Oh No !! Your earlier profits were erased from this stupid dip. NOW you STUBBORNLY refused to sell your option because you just couldn't take the reality that your nice little gain is wiped off. "I HAVE TO WIN IT BACK!!!". You keep telling yourself that. But alas the stock keeps dropping and you finally woke up and sell the option at a loss.

The solution is : Once you sold an option for whatever profit, be contended with it. To rid yourself of the emotional ups & downs of selling too early if it keeps going according to your trend, set a trailing stop so that you could keep riding on the profit if it trends favourably. If there is a reversal of trend and your trailing stop loss is triggered, at least you would still exit with a nice profit. As long as the market is alive, you have tonnes of opportunities to gain more profits from other counters in another day; as long as you applied the technique consistently which would help you pick winning options trades.

6 comments:

Anonymous said...

I just came across your blog, and wanted to drop you a note telling you how impressed I was with the information you have posted here. I also have a free stock trading software blog, so I know what I'm talking about when I say your site is top-notch! Keep up the great work, you are providing a great resource on the Internet here!

. said...

I just came across your blog, and wanted to drop you a note telling you how impressed I was with the information you have posted here. I also have a day trading stock online blog, so I know what I'm talking about when I say your site is top-notch! Keep up the great work, you are providing a great resource on the Internet here!

Rick J said...

I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
the indexes easily.

Take a look at Wallstreetwinnersonline.com

RickJ

Rick J said...

I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
the indexes easily.

Take a look at Wallstreetwinnersonline.com

RickJ

Anonymous said...

[b][url=http://cheap-car-insurance.quickfreehost.com] low car insurance [/url][/b]
[b][url=http://seoguide.ws] auto cheap insurance [/url][/b]
[b][url=http://nutritionguide.ws] aarp car insurance [/url][/b]
[b][url=http://affiliaterevenueguide.ws] car insurance rate [/url][/b]
[b][url=http://careeremploymentguide.com] car insurance cost [/url][/b]
[b][url=http://fitnessequipmentguide.net] car insurance [/url][/b]
[b][url=http://inetmarketingguide.ws] teen car insurance [/url][/b]
[b][url=http://interiordecorguide.ws] car insurance cost [/url][/b]
[b][url=http://landscapingguide.ws] car insurance comparison [/url][/b]
[b][url=http://mortgageguide.ws] norwich union car insurance [/url][/b]
[b][url=http://personalfinanceguide.ws] aarp car insurance [/url][/b]
[b][url=http://trafficbuildingguide.net] california car insurance [/url][/b]
[b][url=http://vacationrentalsguide.ws] geico car insurance [/url][/b]
[b][url=http://wealthbuildingguide.net] nationwide car insurance [/url][/b]
[b][url=http://progressive-car-insurance.wealthbuildingguide.net] online car insurance [/url][/b]
[b][url=http://compare-car-insurance.vacationrentalsguide.ws] online car insurance rate [/url][/b]
[b][url=http://cheapest-car-insurance.trafficbuildingguide.net] florida car insurance [/url][/b]
[b][url=http://classic-car-insurance.personalfinanceguide.ws] car insurance n [/url][/b]
[b][url=http://free-car-insurance-quote.mortgageguide.ws] allstate car insurance [/url][/b]
[b][url=http://cheap-car-insurance-quote.landscapingguide.ws] auto insurance quote [/url][/b]
[b][url=http://low-cost-car-insurance.interiordecorguide.ws] instant car insurance quote [/url][/b]
[b][url=http://car-insurance-quote.inetmarketingguide.ws] free car insurance quote [/url][/b]
[b][url=http://car-insurance-rates.homeimprovementguide.ws] car insurance estimate [/url][/b]
[b][url=http://new-york-insurance.fitnessequipmentguide.net] cheap car insurance online [/url][/b]
[b][url=http://california-car-insurance.estateguide.ws] aig car insurance [/url][/b]
[b][url=http://car-insurance-rate.careeremploymentguide.com] aig car insurance [/url][/b]
[b][url=http://auto-insurance-company.affiliaterevenueguide.ws] admiral car insurance [/url][/b]
[b][url=http://online-car-insurance.acneguide.ws] infinity car insurance [/url][/b]
[b][url=http://auto-cheap-insurance.nutritionguide.ws] car
insurance philadelphia [/url][/b]
[b][url=http://auto-insurance-quote.seoguide.ws] free online car insurance quote [/url][/b]

http://cheap-car-insurance.quickfreehost.com

Random Keyword: :)
[b]cheap car insurance rate[/b]

Yeast Infection said...

You are an inspiration to all other blog owners, i can honestly say i enjoyed reading your content and i look forward to visiting again soon... If you find the time i would appreciate it if you come and visit my site on Yeast Infection