After 2 years of trading safe on reliable set-ups, I fell into a mental mindtrap this week that I haven't had for a long time.  And I got burned.   I have a few tried and true set-ups: Reverse Split bounces/Ramp ups (#2 and #3, as well as #5 of the 7-step framework); the morning momentum trade on breaking news (I have a screener for this set-up); momentum trading on Large Cap via options (usually surrounding news events, but also following trendline direction in either direction).

Last year was my first significant profitable year - nothing crazy, but close $10,000.  this has helped me gain confidence in the set-ups I've been trading and that I finally kind of "know" what I'm doing.  With some fairly consistent gains of 30% - 100%.  Rarely do I let a trade lose me more than 15% these days, but it happens.  One of my keys to finally being profitable is that my most common position size is between $600-$1000. Occassionally I'll take a larger size on something, but it's for a quick snap and I get out.  By keeping this consistent size, my goals have been gains between $180-$250.  My losses have generally been around $60-90. I'm comfortable with this.  Especially with reverse splits - the MOST predictable set-up I have ever tracked.

So where did I go wrong this week and lose half my month's gains?  FUCKING Options.  

I LOVE OPTIONS TRADING. I bought into Mark Croock's course years ago.  And I have had some HUGE wins on options.  Bought $300 in Blackrock calls once and woke up with $5000 in my account the next day.  Some crazy volatility, and very addicting because the Options Chains basically tell you how much money you'll make on your bias, if your bias is correct.  So that becomes the immediate trap.  You see the potential you can make if the stock gets to your goal.  This is why options are addicting.  For me, this leads to a gambling mindset.  Visualizing the number (goal) versus watching price action and volume and/or watching trendlines patterns.

My trap began last week on a bias with the California Fires.  Thesis was simple that insurance companies are going to take it in the shorts on these fires.  So I looked through some of the insurance companies for California and bet against TRV.  I made a huge profit overnight.  And took profits too soon.  Trap 1.  The spike made a pullback and spiked, where I got out and made 25%.  Then it dumped and I left about $4000+ on the table.  It's those occasional trades that really help to push the account up.  And I got FOMO...I wanted back in because my bias was right.  After it panicked all day, there was the bounce.  I wanted to "short" (thru Puts) that bounce.  And I did.  With Size - Trap 2.  The problem?  I poorly chose the expiration that expired that week and I bought puts out of the money.  The reason I did well the first time was I had over a week left on the expiration and I bought puts in the money which didn't depreciate as much as out of the money.  But, that simple mistake cost me huge.  The reason I did this?  I focused on the potential gain from seeing the price my option COULD get to if it just reached my price. Unfortunately, big money is aware of this, and for those hedgefunds that have huge positions in the commons, they can sell calls or puts on a whim, and just collect the premium.  And they do.  Especially on low volume tickers, they can buy and sell the commons to keep it elevated at a certain price all they want.  Harder to do on NVDA, META, TSLA...but a less traded company, sure they can do this.

SO...my premium was burning fast, but I got stuck on stupid.  "It'll gap down tomorrow."  Dumb mindset. It no longer was trending my direction.  And a good options trader knows that by Wednesday, the premium burn for options expiring that week increases exponentially.  So by Thursday, I salvaged that last few dollars I could and cut the trade.  The large size was ridiculous - I kept my traditional position size to $600 because if I even lost half, then I could make back $300 within 2-3 trades without a problem.  To top it off, I did the same thing trading NEE puts.  Formed a bias, and was dead wrong.  Too large size and poorly chose this weeks expiring puts.  And I held.  Just dumb.

My 3d trap - a growing options herd mindset.  A friend recently got into an options trading group, and they're doing well.  Trading small size daily for overnight swings.  Their win rate is ridiculously high. So I started trading with them too.  The problem is they are in ALOT of trades simultaneously.  I've been doing well with a few trades concurrently, but I have a full time job that starts before market open, so I have to be choosy on my options trades.  This was my undoing.  They're used to some small pullbacks with their small position sizes, but I was going in a little larger.  Luckily, this was a one time thing for me...I started doing these trades this week and recognized quickly I was falling in the trap. So I cut all the trades on Thursday.  Some for small losses, some for medium losses.  I didn't care.  I needed to not follow the Herd Mindset. 

4th Trap.  Overtrading.  Which is pretty much obvious from all the above and my profit.ly. I've not traded this much in a very long time.  And it's dangerous because I get into the mindset that I know what I am doing; and since my usual profit is 20-30%, then I feel all my trades will make me those gains.  They don't.  It's a failed logic.  More is not better.  Wait for the best set-ups, wait for prices to come to you.  I can definitely do that with reverse splits.  Random tickers and entries yield random results.

I've gotten profitable by doing my own thing.  I still listen to the Sykes, Bohen, and Wolf videos.  Ben is good too.  I'm proud of Jackaroo, but he's a one off.  He's a fabulous trader, but ton of ego.  I'll just admire his skill from a far.  I like keeping up with the market sentiment by listening to these guys when I can.  What's working for me for now are the set-ups I stated at the start of this post.  I got to a point of sizing up on these set-ups, and I plan to continue that.  I put myself in a time out yesterday from options. 

I did still trade PRZO because it met MY conditions for a trade and I made some profit.  Nothing crazy, but it was a safe trade.  I'm in a few swings that I'm comfortable with - both on size, position, thesis.  I'm still in a TRV put position, because my overall thesis is the same, but I'm next month's expiration so less prone to depreciation.  They do have earnings coming up on Wednesday, so I'll likely be out of most of my position by then.  I don't expect them to do as well as expected, but they broke the downward trendline.  They're still under resistance, so this could dump well, based on how badly they'll lose profits from the CA wildfire.  But I'm a daytrader, I use fundamentals to an extend, but I'm not a finance guru, so who knows, they could also skyrocket.  I'm just gonna keep trading safe to stay alive. 

This is the year that I breakout.  I will not get back into old traps.  And I want to actually journal this year and not be embarrassed by my wreckless behavior or losses.  I don't expect to be a millionaire this year...but I would definitely like to be at least up $20k-50K by the end of the year.  

Wishing the best luck to all of us Challenge students...would love to see folks at one of these foreign trips with Sykes one day.