The title should have tipped you off that this post will indeed discuss timing and more specifically, emotionally charged trade timing. That’s a head scratcher but let’s get into this because I know all to well (wink wink) just how important trade timing can be.
A tale of Emotionally Charged Trading…or is it Trade Timing?
By: Jeff “OptionBoxer”
Today I pulled up my chair in front of my computer, anxious to place a trade after having suffered a gut wrenching loss at the hands of Twitter just over a week ago. Reeling from that loss, in two accounts no less, I’d decided to take a few days away to let emotions subside.
But…first let me back up and tell you about this Twitter fiasco.
Ok, so, about a month ago I’d decided to open an iron condor on Twitter. At that time, Twitter had entered a range bound pattern after a strong bullish month just before. If any of you read my posts or have purchased any of my courses you know I prefer opening iron condor trades when volatility is high and after a strong bullish or bearish move. So, I opened the iron condor trade without hesitation.
Then…it happened…from clear out in left field the S&P 500 decided to add Twitter to their list. You guessed it, the stock soared. In an effort to recapture lost profits I analyzed Twitter again after 3 weeks of unstoppable gains and decided to purchase some puts for what I believed was an inevitable pullback. After all, Twitter hadn’t done anything different from a business perspective, they were simply benefiting from increased notoriety. But you guessed it, the pullback never came and as of this writing still hasn’t come. So I’ll stop there before I throw the chair I’m sitting in across the room.
Now that you have some history, let me get back to today. I pulled up my chair, cool, calm, and collected, I was ready to start moving on from the whole Twitter debacle. I opened the scan tab and commenced my analyses, valiantly looking for opportunities. Of course, it didn’t take long before I found an asset I thought looked like a suitable candidate. However, what I hadn’t realized is that Twitter was still very much impacting my judgment. So I stopped to ask myself why? I’d lost money before, heck I’d even lost more than this before. Why did this bother me so much?
What I concluded is that I wasn’t mad it was added to the S&P, I was mad about when it was added. I was offended and it was affecting my ability even more than a week later. So much so, that I nearly entered into a short put trade on $AMD. Which is currently experiencing its lowest level of volatility in more than a year and very clearly in an extremely overbought state. I don’t think I need to say it but this doesn’t benefit a short put. In short, my timing was way off and my emotions had thrown the steering wheel right out the window.
The moral of that story…have good trade timing. The point of the story…emotions will derail everything, especially good trade timing.
Scenarios just like this one happen everyday in the financial markets and the story above proves it happens to everyone.
The question then becomes, will it happen to you?
May God bless and keep your trading profitable,