The critical problem is what some have already stated and what is sometimes the hardest thing to do (just check the recent headlines) RISK MANAGEMENT! How many trades did it take you to get up $50K and how many did it take to lose almost half that, hence the reason for the posters concern. If you are working diligently all year and it only takes on trade to take away half the year's work, you are taking too much risk in each position. This is the difference between traders that trade and traders that manage a business as they trade. Like one has already stated, mean reversion is a bitch! Cutting your losses and keeping them small sounds what you need to work on. Hitting homers is nice, but swinging for the fences every time at the plate is hazardous to your health. There are old traders. There are bold traders. There are no bold old traders. Good Luck!
Thanks all for reply. I didn't sell volatility and I was always long gamma in my trading career. After analysing my situation, I was riding on my loss when I didn't know the technicality of the market. I made all my money from long gamma only. Volatility was not high enough when it should be as per volatility skew and I m managing delta neutral position. Options trader know this terminology. Neways I am not gonna give up and I am taking as my tutuin to trading and will keep always in mind how much I want to loose per trade. Thanks again, Have fun with trading.
I had a pretty odd an peculiar experience after I decided to combine different trading ideas from different books. After reading Profit Strategies by David Stendahl, I figured I would try to trade as a discretionary trader but act like a systems trader. Problem is, when SPWR started tanking I decided to insist on following the system (MACD on a six month chart with help of a tight moving average crossover system to act as a drawdown support, later learned I was doing something close to swing trading). Anyway, I got crushed trying to buy all the dips when the stock went from $164 to $109. I thought about what I read in the market wizards series by Jack Schwager and figured I should try to think of some trading rules to avoid that in the future. First one is, allow myself to over-ride the system if the situation changes in an important way. Second one is, instead of making all kinds of "adjustments" (trying to buy every freakin' dip), minimize your moves. In other words, I'd only buy like one option on a dip and refuse to buy more if the stock keeps on tanking. But, the part where I say I should allow myself to over-ride the system is where I'd come in an either get out, cut my position size or hedge myself.