Have you ever experienced sitting in front of your trading computer, ready to pull the trigger on a well-researched trade, only to find that you simply can’t push the button? Let’s face it, we are emotional beings – and there is definitely an emotional component to trading and investing that can be just as challenging to master as the process of choosing and researching equities to invest in. For some of us, working with these emotions is the greatest trading obstacle we face.
Let’s say you have spent adequate time doing due diligence – looking at fundamental, technical and sentimental metrics to determine the direction an equity is likely to head in the future. Before you place a trade, doubt begins to creep into your decision, so you decide to do more research in order to “justify” additional reasons to make the trade. Almost inevitably, you will come across information that will create even more pause – no stock is perfect after all! It is not long before you talk yourself out of the trade entirely only to find that your initial analysis was correct, and the equity moves in your determined direction and you’ve missed the whole thing.
Now you promise yourself that you will not let this happen again. So the next time around, after you have found another equity that may not be as solid as the first, but seems o.k. – you decide to go for it. After all, last time around you missed out, and you don’t want to see that happen again! You place the trade even though you have the same unease as before. This time, the stock moves against your trade immediately after placing it, and you are left feeling regret over your decision. You wonder how you missed the potential danger signs on this trade. You are now in a vicious cycle of fear and regret that holds you hostage to better trading results. You tell yourself that you will be even more diligent in your analysis next time around which leads you back to the beginning of the cycle – information overload and self-doubt – and the emotional roller-coaster sets in.
Is there a way to stop this cycle and take your trading results to the next level? Absolutely! It all begins with a solid methodology in place to initiate and manage your trades. At OptionsAnimal, we teach our students a 6 step process for trade success. It is a “lather-rinse-repeat” process that we utilize each and every time we trade. We help to overcome fear and doubt in trading through thorough planning of the trades that includes an “escape hatch” if things do not go as anticipated along the way. This planning process removes the fear and doubt you experience in pulling the trigger because you have a plan in place for bringing a trade around to success that doesn’t always run smoothly the entire time.
Through the use of options, you can control risk while allowing excellent return potential if things go according to plan. If your trades involve the purchase of shares, for example, you can place a long put alongside the shares as an insurance policy on that share ownership. You can limit your risk to a small percentage of your entire investment in shares while allowing profitability as shares rise. Through the use of spread trades – buying and selling options within one trade structure – you can profit from multiple trend scenarios with limited, well-defined risk and excellent reward potential. Our methodology for adjusting broken trades allows the confidence to place trades and make adjustments when necessary. Bringing losing trades around to profitability time and time again not only breeds trading confidence but takes your portfolio returns to the next level of success. The knowledge that you can trade any trend successfully gives you a multitude of opportunities in all market scenarios. As an instructor here at OptionsAnimal, I have the privilege of watching individuals achieve greater levels of trading success than they previously thought possible by employing the methodology they learn here. That is what I call a worthwhile enterprise!