Joe(Place holder name) works 160 hours a month to make 4000 dollars. Joe wanted to make more money and started trading stocks. He found some success in directional moves with help of some basic charting. Stocks need lot of capital so he looked at options to increase his chances of making big money.
List of wrong approaches and my comments:
a) Joe started playing Options weeklies. Joe was able to spot a breakout on company xyz hourly chart and immediately bought call options worth 500 dollars expiring same week. He made 1000 dollars in 2 hours and locked profit. But Stock continued to move higher which means Joe would have made 20k if he held few more hours.
My comments: Joe locked 1k because he has to work 1 week or 40 hours to make that amount of money. so Money is relative to our situations. someone who makes 20k a month may hold position for more time. Train our money(monkey) mind. Be Happy with profits. Remember cash is king.
b) The following week, Joe spotted breakout in company ABC and he invested 500 dollars expiring same week. He saw 1000 dollar profit again in 1 hour but this time Joe did not lock profits based on past week experience. Stock whipsawed and later moved down so much that Joe option premium is almost 0.
My comments: Unless there is a catalyst news in a day or two, there is no reason to not lock it since he is a short term trader. Above mistake may cause some impact in his personal life as well. Feelings/Emotions: Miserable, Frustrated, losing hope and confidence.
c) Joe makes good trades, able to generate profits but Joe lives off his account.
My comments: Very tough situation. There are no room for mistakes. Joe should take a long term approach, secure enough capital and then try short term trading.
d) Joe makes profits on his trades but uneven investment in each bet is making him small % win on big investment and good % win on small investment.
My comments: I recommend using standard capital like 1k until account crosses 25k. This way there is consistent rise in account capital.
e) Joe makes good money in bull markets but his account is busted in choppy markets.
My Comments: Anyone can make money in Bull Markets. Real test is how they survive in choppy and Bear Markets. Joe should work on his criteria, adjust his model according to Market situations.
f) Joe makes good money for 4 months only to give away everything when market sell off is so steep like March 2020.
My Comments: This is because Joe never adjusted his system according to market situation.
End of year, people like Joe never make good money. Because of these sharp volatility moves, Joe loses confidence in markets and adds more stress in his life.
My advice is do not waste your time trading ripples. Go for Tides!
Disclaimer: This Post is not investment advice. All posts are my personal opinions only.