Next to final analysis

In going over all of my trading since starting with the daytrading options in March I have come to a conclusion that explains my entire problem with this rather huge draw down.

Over confidence mixed with a little greed.

My posts outline my plan and therefore my problem in that I kept trying to increase my position sizing in a maximum profit plan... which is a maximum risk scenario as it turns out. I failed to recognize this important fact and I was considering potential profits mixed in with my current trading. Mixing the future with the present is not prudent in trading as the future is really only speculation.

Seeing as I was doing so well I projected my success into the future and failed to take into account projected losing trades as I increased my position sizing according to potential profits. I should have (always the should haves) optimized according to a smaller trading capital and left a larger buffer so that, in the case where a bunch of swing trades went south at once, I would be able to continue with my trading at the exact same size as I had all along. This would have served to mitigate the losses as we have booked enough wins that I would have more than made up for the losses.

Also, had I known ahead of time that the swings were going to be swings (for the held daytrades anyway) I would not have loaded up on them as I did knowing that we may be recommended to add to them. So my plan could have been to close all but a small portion of the position once it was determined that we were going to hold them thus realizing a small loss on that portion while allowing the balance to run in case it worked out. Either that or just set a GTC stop loss on the whole thing at 20-30%.

Playing a lot smaller would have reduced my profits on the winners while reducing my losses on the losers and stopping out of swings for a smaller loss would stop the 100% large losers altogether. I could have stayed larger with the daytrades and only managed the swings as mentioned above as my daytrades are closed each day and with the win rate I would be MUCH farther ahead.

Now I have no choice but play smaller as a result of my blunders.

Having said that I made a swing trade of one contract two days ago that I just closed for $201 profit. Next Week we will be playing mostly SPY options and the like, lots of liquidity so many traders cannot affect the prices to the detriment of the rest of the group... too many rogue traders right now to worry about with thinly traded options. That suites me just fine as it was a suggestion of mine to play these each day anyway.

Jeff.