Secret 27DON’T PLUNGE!
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After trading stocks and options for over thirty years, I have
found that the one glaring error made by both successful and unsuccessful
traders is that at one point in their life they plunged
into the market, betting everything on one position that they
considered a sure thing.
Of course, that sure thing didn’t pan out, and they lost almost
everything. In fact, the more sure you are about an event
occurring, the less likely it will happen—the basis of the contrary
theory.
For example, I had a good friend, a former financial advisor,
who was sure the market was going to crash in 1987, so he took
his whole portfolio and purchased put options with everything he
had. Well, the market did crash, and if it had crashed one week
earlier, he would have made millions. Unfortunately, all of his options
expired worthless, and he lost everything. Here, following
our secret of scaling, he could have saved some of the bacon.
Two years later, another friend, a financial planner, did the
same. He put all his cash into put options, betting the market
would crash, but the market reversed, and he watched all of his
options vanish.
Many of the top traders in the world have faced the same crisis
when they played in the market, chasing the “sure thing”. (I
suggest you read Market Wizards by Jack D. Schwager.)
These traders paid a high price for a valuable lesson. You
don’t have to pay this tuition if you don’t plunge. Spread out your
purchases over time and position, and never bet everything on
that sure thing.
THE NOTICE INVESTOR BLINDLY TAKES THE “ANY HORSE IN A BARN WILL DO” APPROACH TO
SELECTING OPTION STRATEGIES.
After trading stocks and options for over thirty years, I have
found that the one glaring error made by both successful and unsuccessful
traders is that at one point in their life they plunged
into the market, betting everything on one position that they
considered a sure thing.
Of course, that sure thing didn’t pan out, and they lost almost
everything. In fact, the more sure you are about an event
occurring, the less likely it will happen—the basis of the contrary
theory.
For example, I had a good friend, a former financial advisor,
who was sure the market was going to crash in 1987, so he took
his whole portfolio and purchased put options with everything he
had. Well, the market did crash, and if it had crashed one week
earlier, he would have made millions. Unfortunately, all of his options
expired worthless, and he lost everything. Here, following
our secret of scaling, he could have saved some of the bacon.
Two years later, another friend, a financial planner, did the
same. He put all his cash into put options, betting the market
would crash, but the market reversed, and he watched all of his
options vanish.
Many of the top traders in the world have faced the same crisis
when they played in the market, chasing the “sure thing”. (I
suggest you read Market Wizards by Jack D. Schwager.)
These traders paid a high price for a valuable lesson. You
don’t have to pay this tuition if you don’t plunge. Spread out your
purchases over time and position, and never bet everything on
that sure thing.
THE NOTICE INVESTOR BLINDLY TAKES THE “ANY HORSE IN A BARN WILL DO” APPROACH TO
SELECTING OPTION STRATEGIES.