close
  • Home
  • Options Insights Blog
    • Options Trading Charts
    • Options Trading Strategies
    • Stock Market Analysis
    • Options Trading Webinars
  • Trading Service
    • Membership
    • Combination Memberships
    • Explosive Options Trading Results
    • EO Spread Trader
    • Spread Trader Results
  • Trading Resources
    • Chart of the Week
    • Options Trading eBooks
      • 4 Essential Rules
      • Yes You Do Have Options
      • The Art of Selling: Options Trading eBook
      • Trading Stories from the Trenches
    • Options Insights Webinar
    • Options Trading FAQs
    • What Is Spread Trading?
    • Options Trading Glossary
  • About Us
    • What We Do
    • Meet Bob Lang
    • Bob Lang Live
    • Explosive Options Testimonials
    • Contact Explosive Options
  • Member Login
  •  Facebook
  •  Twitter
  •  LinkedIn
  •  Google +
  •  YouTube
Explosive Options Trading Service
  • Menu
  • Home
  • Options Insights Blog
    • Options Trading Charts
    • Options Trading Strategies
    • Stock Market Analysis
    • Options Trading Webinars
  • Trading Service
    • Membership
    • Combination Memberships
    • Explosive Options Trading Results
    • EO Spread Trader
    • Spread Trader Results
  • Trading Resources
    • Chart of the Week
    • Options Trading eBooks
      • 4 Essential Rules
      • Yes You Do Have Options
      • The Art of Selling: Options Trading eBook
      • Trading Stories from the Trenches
    • Options Insights Webinar
    • Options Trading FAQs
    • What Is Spread Trading?
    • Options Trading Glossary
  • About Us
    • What We Do
    • Meet Bob Lang
    • Bob Lang Live
    • Explosive Options Testimonials
    • Contact Explosive Options
  • Member Login

The Number One Rule of Risk Management: Trade Within Your Means

By Explosive Options,

July 17, 2017
risk management
I am asked quite often how I have managed to stick around as an options trader for as long as I have – more than fifteen years and counting. The long answer is that I’ve studied my successes and failures along the way and learned how I behave under certain conditions and deal with adversity. The short answer is that I’ve embraced the number one rule of risk management.

Always trade within your means.

Practicing risk management is easier said than done

Think of it this way: trading is a metaphor for life. If you see opportunity in front of you, your mind races to the greed side of the emotional spectrum (fear is on the other side). Because the opportunity window is often narrow, your natural reaction is to strike fast before it disappears. That’s a good idea – except when you’re wrong. If you’re wrong often – especially when it comes to money – you’ll soon be in the poor house.

However, if you have control over your behavior, then you are in charge of your portfolio/money/accounts. That control – that risk management – determines how much you win or lose in specific trading situations. I have seen more traders lose it all from mistakenly taking too much size on a trade, risking too much capital altogether or foolishly going “all in”.

While it may be fun to show off, you will eventually get pounded. It is those traders who establish strict rules of risk management who not only survive but succeed in this difficult and intriguing world of trading. For me, success is a long-term endeavor. My biggest and best gains have never come from large bets. Instead, they were sized appropriately for my risk tolerance.

Always trade within your means so you can sleep at night (or take a peaceful nap). Don’t be seduced by the perceived guarantee of a big win, whether it’s you or someone else who discovers the trade. Remember that there are no guarantees in trading, so don’t break your risk management rules. If you win, terrific. If you don’t, then you will survive to trade another day.

Copyright: vadimgozhda / 123RF Stock Photo

Tagged:feargreedposition sizingpsychology of tradingrisk management

Post navigation

← PreviousWhere to Invest, Earnings, Tax Reform and More – Webinar Recap
NextDramatic Changes in the Retail Sector – Webinar Recap →

Categories

  • Options Trading Charts
  • Options Trading Strategies
  • Options Trading Webinars
  • Stock Market Analysis

Tags

aapl banks bernanke bonds broker bull put spreads central banks chart analysis chart of the week crisis debt earnings faz fear financials futures gold goog index ETFs investors jim cramer Mad Money market market analysis market timing mcClellan nflx Off the Charts option premium options options trading strategies options trading webinar psychology of trading QE risk management selling premium SPX stocks Suz Smith technicals The Fed VIX volatility volume weekly webinar

Explosive Options

  • Home
  • Options Insights Blog
  • Options Trading Service Membership
  • Options Trading Resources
  • About Explosive Options
  • Member Login
  • Privacy Policy
  • Terms of Service

Contact Us

Contact Explosive Options

© Aztec Capital LLC