During the great crash we all watched as our portfolios dropped by 50%. Recently we've been excited at the 48% rise from the lowest lows, which puts most individual traders still in the red.
With all the stories of the great successes of "getting in at the bottom" and following it up, I do not believe that "many real people," but "just Wall Street" were able to take these massive gains. Now, as we see the market begin to fluctuate it's fun to see what I call the "new bears" come out of the woodwork.
Many traders held through this downturn in which they are hoping that "it will rebound", or "it will come back". It's partially done so.
But it leads us to trades with OEX Options, and to help us understand we have to manage losses while we manage gains.
Use the analogy of a stock: Say you buy it at $20.00, and it goes down to $8.00. To break even, you need a 150% gain. The odds are not with you.
This is not as true with options, but it is why we have strict stop loss rules in place, and while we teach to limit your exposures, and control your risk management. Many traders initially start with us, and often do not paper trade, thinking "real" is better, but "real time paper trading" can help the trader see the repercussions of "double down buys" to the opposing signal, that continue to go bad.
The key to successful option trading is following rules. Admittedly the extended range market we've experienced has been trying, as has the lack of volatility (VIX) as the market trades in ranges, but successful traders have watched the option itself, "fallen in love with it" (meaning: getting to know the nuances) and traded fast and tight for great profits.
It leads back to stocks. I'm sure we have subscribers that may have 4 or 5, or more "loser" stocks in their portfolios, that are down 40 or 50%,and the subscriber is waiting for it to come "back." Odds are they will not, and this is true of options we "want" to hold for the "extra time,", so that they come back.
I love being your pessimist. I got an email from a potential subscriber yesterday that sums it up well:
"Sir
I am interested in your OEX and Blue Chip services. I am only able to devote about an hour to trading each day, or to learning about it, and have a portfolio of $60,000 I would like to immediately begin to trade, buying your Level 3 service, with goals of being self employed and earning $10,000 a month clear from trading options within 6 months.
Will you service help me here?"
My response, and perhaps it will be helpful to our subscribers:
Thanks for writing. Sorry, I don't think our service is at all right for you, and I don't want you to waste your money. One cannot learn a trade such as buying or selling stocks or options in "one hour a day", nor can one expect such strong returns on your investment in a short term, and without investing in YOU first....taking the time to learn the skill.
I know we have frustrated subscribers when they read "26 straight call profits" and they were only able to trade 2 or 3 successfully, OR were so afraid the market could not go up any more that they continued to add and add to put positions. This is the "it will come back" syndrome coupled with "the market is wrong," and I know better.
We've all been there.
Trading is an art and a science. You must study. You must take time with our manual online, and study our videos. You must understand and USE the daily pre-market alert. IN other words, you must be the student, and not looking ever for the Holy Grail.
Now for the market:
Nothing happened. Yesterday was an example of a day far beyond "flat lining." The market lived in FEAR, and did not move. Nothing was trade oriented. But, something will, and we'll keep both new signals open.
Only at 4.00 p.m. sharp did the market drop enough to show any bias. We'll keep both signals open.
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