You look at your account. It is down a little today because the market is down. You have some winning positions, you’ve made some money in your trading. There are some losers there too. They will come back, you tell yourself.
I better sell the winners before they turn into losers.
I better hold onto the losers until the market turns around. Then they will recover.
I noticed in my post on trading mergers and acquisitions that I bought back BUD early. I remember thinking that I had made 62% of the premium already, why not take the trade off.
That is selling too soon.
In fact, when I look at my November trading, I earned 87%, 86%, 62%, and 54% on the options trades that I closed out before expiration. Some I earned 100% pf the premium, but those were the cases where the stock was put to me.
To solve this problem is simple. Enter the trade, sell the puts, once the puts are sold, enter a new conditional trade to buy them back at ten cents or ten percent of the premium earned. That way the decision is made and your emotions don’t shake you out of the trade too soon.
Definitely agree.
Discipline is so important.
The mistakes i have made are ones when i forgot the rules i had when i got into the trade.
When i follow the rules and execute in accordance, greed and fear seem to disappear and i sleep alot better!