Trading Stories - Great Day, Wrong Option
After a rough two days of losses, I thought I was in the perfect trade.
This service is for general informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice. These are my opinions and observations only. I am not a financial advisor.
Have you ever had your emotions switch from peak optimism to absolute despair in a matter of seconds?
If you have been trading long enough, you definitely have experienced this.
Most of the time it is painful, sometimes funny, and always informative.
And usually this kind of mental torture is due to market moves or some unexpected news dropping that change the tone of the markets in a blink.
That is not what I’m talking about today. I almost wish I was because this story is a little embarassing if I’m honest.
That said, I thought you might enjoy both the lesson and the ridiculousness of this trade gone wrong.
Here’s my basic day trading setup. I use it when I trade the open and find it both efficient and effective.
I think that is what you want when entering and exiting trades by the minute. You want efficiency and effectivity.
Well I do anyway and here’s why.
With this set up I am trading options using the 1-minute and 5-minute time frames and can be in a trade for mere minutes to a couple of hours.
I keep the consistent left to right look of underlying charts of the 1 and 5 minute candles on the left, and a single call position followed by a single put position as you continue left to right.
The trading is simple.
When the underlying reacts in a way that I want before taking a long position, I am one click away from entering the trade using the call option in the middle of the screen.
Opposite of that, if I want to take a short position that is also available and is just one click away in the column on the right of the screen.
Add in the option charts at the bottom of each column for additional points of reference and you have a solid daytrading platform to work from.
What happened?
This trading story starts off with two consecutive days of losses. Something that can cause even the best of traders to deviate from their plans.
I was not deviating and staying disciplined looked ready to pay off in a big way.
It was just another trading day in early 2023, I don’t even remember the day of the week. I just remember needing to avoid a three-day losing streak and the mental anguish that would follow.
I took my time, set my levels like I always do, and set up the options contracts I wanted to trade for the underlying ticker SPY.
One call option, one put option. Ready for anything.
Ding! Ding! Ding!
The trading session opened and I was following my plan, waiting for the right set up and avoiding marginal trades.
Then it happened.
The candles set up perfectly for a short position. A clear rejection at a key level.
I immediately jumped into the put options.
Or so I thought.
The candles absolutely dumped. We were off to the races and about to start the day with huge gains from the short position.
But my account was not increasing in value, it was going the opposite direction.
I could not believe my eyes but sure enough, lower and lower it went.
I remember the panicked feeling of “What the heck is happening?!?”
You might have guessed it by now, I was in the call options not the put options.
When I set up for trading that morning, I was distracted and didn’t notice that I had put a call option in both the long and short columns.
I immediately closed the trade for a big loss and just shook my head in disbelief.
It wasn’t a choppy session or a set up that just didn’t work out. Everything was perfect. It was just my haste and lack of attention to detail that cost me.
The three day losing streak was cemented. I was in no mental condition to keep trading that day after that mistake.
The lesson I had reiterated that day is the importance of treating your trading with the same care and precision as you would if you were working a regular job that you depended on to make a living.
I hope you take away the same lesson but without the pain.
Take trading seriously, truly approach it like a profession even if you are only trading a couple of hours each week. I think you’ll be surprised by the changes you see.
Of course the markets are the markets and after I closed out my “misclick” trade for a loss, everything turned green and the call position actually recovered completely.
I had exited like I mentioned, so I only got the lesson reinforced.
You can learn through pain too. I don’t recommend it though.
I do recommend reading and studying and using other’s mistakes to help avoiding making them yourself.
I hope this helps you and your trading in some small way. If it did, be sure to share with others. I appreciate it very much!
Have a great weekend
-Nate