Life with options #5

Cooling off...

Photo by Seth Doyle on Unsplash

Sometimes it’s good to take “stock” (pardon the pun). As I’ve mentioned before trading can become very absorbing and consuming. The chase to recoup the losses or the chase for more gains can rapidly mesh into a web of confusion and potential error. I have to keep reminding myself that options trading will have ups and downs and it’s all about the longer-term scope. By taking a step back you invite being in the present forward, giving you a clearer mind for your next moves.

Options trading can be very frustrating. I find it’s not good to be frustrated when making trades. It has lured me into placing poor trades when I look back on them. Hindsight is always 20/20, but there are definitely some that clearly shouldn’t have happened had I been thinking clearer. Gaining an extra $500 temporarily isn’t worth, the now obviously unavoidable future loss, of say $1500, that ultimately happens. By not placing that trade and letting your mind move to greener pastures actually makes you more money in the long run. You also get the added bonus of less stress!

On the other side of the coin trading can be very gratifying. I can find myself with an inflated sense of ego and invincibility when I seem to be getting everything right. This is also an opportunity to take a step back. Yes it’s good to capitalise on a good run, but it’s equally important to make sure you cash in on the run. I find myself struggling to keep to my advice on this, as it’s extremely easy to get carried away. But I recognise the importance to check and double check where the holes are imminently going to arise in the current strategy. Harnessing this quality in trading, I imagine, must be the equivalent to harnessing the power of a Shaolin monk — difficult to say the least.

Both sides of this coin can lead to the inescapable phenomenon over trading. Over trading can be a common fault of traders and I am no exception. My definition of over trading is being too involved when your focus has been misaligned. By this I mean placing trades with the wrong mindset and misunderstanding of why you are placing a trade.

Tipping towards either end of the emotions spectrum, as stated earlier, can make you fall unknowingly into over trading’s grasp. Sometimes the foot on the pedal needs to ease off and a more sensible speed applied. This is something I’m currently working on. I try to find new activities, interests or ongoing hobbies to ground my mind into a healthier head space.

Personally, I find running a useful thinking space to shuffle the Rubik’s cube of my strategies in order to reason out new improved ideas. I’ve also used gardening as a way to fill time when the markets are open to get away from the computer and be somewhere more peaceful and not have to think about options. Everyone will have different outlets, mine are merely two examples of what I have tried, as long as it offers you a new way of thinking the type of activity is, sort of, meaningless.

Having said all this, my advice, admittedly can be a little contradictory to what I actually do. Yes, I try and take a step back, use other activities for outlets and keep my trading in check, but I still fall victim to the opposite of what I preach. It’s through these contradictions I have learned the lessons. Everyone will. No matter who tells you to not over trade, you will. It’s like an unassuming addiction that tricks you into self denial that you ever did it.

This has been my battle within the bounds of my own brain. The notorious angel and devil sitting on either shoulder, both reasoning valid opinions on what they think I should do. But just because this chatter always occurs does not mean the counter to quieten it down will be futile. I am on my path to reining it in and becoming more and more neutral and passive towards my trading, which in turn will make my general life more positive and fruitful. In my case this is my overall goal beyond the financial aspect.

A life with options doesn’t stop at only trading them. It encompasses all other aspects of your life. Scrutinising and evaluating your decisions in trading is vital to keep sane in an arguably insane world. So, remember to take time off and bring yourself back to centre.