Oh boy, here it goes…why I can’t make money trading

I’ve been trading off and on since about 2008 but only taken it seriously for the past couple of years. I started off creating covered call positions. That’s when you buy shares in multiples of 100 and sell a call option against it.

I remember my first trade. I funded my Options Xpress account with all the money I had, about $2.5k, purchased 100 shares of STX (Seagate), and sold a call option against it. The idea was to collect the premium from selling the call by letting it expire worthless.

Believing I could make more money off this position that month,  I ended up buying back the call at a lower price as the stock declined and then selling another call against it.

I netted a win of about 3.5% if I remember correctly, but in hindsight, I would have made a little more had I just let the original call expire. I was greedy and impatient to make money.

This is when I started to get ancy and make more mistakes.

STX really started to pullback and drop more. I held. I just “knew” if would come back eventually.

Nope. At least…not anytime soon.

I can’t remember when I finally got out, but it was probably a 25% decline in my account value before I did.

These are the types of mistakes I’ve made for years. Why can’t I make money trading? Exiting Too Early and Bag Holding

1. Exiting Too Early

When I come up with a trade idea and execute an order, I frequently have trouble sticking with the original plan for the trade.

I often exit too early, taking everything off and cutting my runners short before my strategy tells me to exit. Sometimes, with micro positions of one contract or one share of a higher price ticker, I don’t have to option to take half a position off and I’m scared to keep it on (for fear of mistake #2), knowing the position could gap down the next day.

I SHOULD TAKE THIS OFF AND SAVE MY .5% WIN SO I DON’T LOSE 6% TOMORROW

This is what goes through my head. I recently had a position on GUSH. I got in near the beginning of the day 12/9/19 and sold two days later. Yeah…I made 6.2% on the position in 2 days. GREAT!

Also…I could have made several times that…

GUSH - make money trading

GUSH. Trade in GREEN

2. Holding Too Long

“Bag Holding” is a very common problem among novice traders like myself and has been the biggest reason for my failures so far. It’s the subject of many a trading meme.

Sometimes, I’m overconfident in my positions and believe that rather than been completely wrong, I’m just too early. 

YEAH THAT’S IT! I’M JUST TOO EARLY IN THE TRADE BUT I’LL MAKE MONEY ON IT EVENTUALLY!

Yeah, maybe, probably not though, because my own trading psychology is so out of whack that I’m very likely to buy at the top and sell at the bottom.

Here’s when I tried to buy back in to WORK. Afterall…I love the software…I use it at work. It’s gonna explode after the IPO, right?

WORK - make money trading

WORK. Not the best bag hold example but clearly the direction was going down.

 

I’m not special when it comes to these “deficiencies” as millions of traders have the same issues, but that’s not an excuse. If I want to make money in the markets, it means I must master my individual psychology to the point I will can let a winner run without worry and cut a loser without a second thought. These could still result in losses, but intellectually I know mastering both of these will save me far more money than they will cost me over the long term. I might even make money trading. How about that?