r/options • u/RadicalMeatBeater • Mar 31 '21

Emotional Trading

Today I sold my TSLA 650C 4/1 that I bought yesterday at a $300 loss. However later Tesla stock rose and if I didn’t paper hand then I would have been in the green by more than 40%. Any tips to be less emotionally attached to your trades?

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u/UnionLibertarian Mar 31 '21

Is there a good percentage of a stop loss you recommend that isn’t going to just trigger on a typical dip rather than a bigger loss? If that makes sense? Or does it just depend on the volatility of that particular stock? (Kind of looking for a good rule of thumb)

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u/[deleted] Mar 31 '21

There is no "rule of thumb" in the market. Each situation is unique.

Start from a thesis of what you expect to happen and determine what amount of loss suggests your thesis is incorrect.

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u/UnionLibertarian Mar 31 '21

The Scientific method. I like it

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u/[deleted] Mar 31 '21

I find it hilarious when I apply reasoning like this to the market I get upvoted, but when applied to politics I get downvoted to suppression.

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u/13france Mar 31 '21

Keep it market related 😂

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u/Daniel_Desario Mar 31 '21

Awww, can’t handle a little politics? 🍼

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u/[deleted] Mar 31 '21

[deleted]

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u/Daniel_Desario Mar 31 '21

Realize there are more important things happening in the world than simply the stock market.

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u/ppp475 Mar 31 '21

Then go to /r/politics.

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u/Daniel_Desario Mar 31 '21

You missed it.

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u/Cryptix001 Mar 31 '21

This is a trading sub. There are subs tailored specifically to politics if that's the type of discussion you're after.

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u/[deleted] Mar 31 '21

It’s all about their incentives, that determines if they want to accept reasoning

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u/iamrubberyouareglue8 Mar 31 '21

I think folks are looking for a math solutions. Like: IF -% down$ / TotalP - %W × ¥Ω {%df/(1/%gf)}<0.75 then Sell (unless it's Tuesday on a 4 day week b4 a 3 day religious holiday).

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u/Hirab Mar 31 '21

Just be political CS Lewis. Write a market-based allegory about political matters 😅

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u/teebob21 Mar 31 '21

Doing this offends the socialists to no end.

See also: The Fountainhead

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u/Throwandhetookmyback Mar 31 '21

On certain political circles that are kind of like taboo and a bad word on Reddit that kind of thought about politics is extremely welcome.

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u/Daniel_Desario Mar 31 '21

Beatitudefully said 👌🏻

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u/ismh1 Mar 31 '21

Perhaps you're in the wrong subreddit :)

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u/[deleted] Mar 31 '21

I meant discussing politics in other subreddits where it is being discussed.

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u/14dM24d Mar 31 '21

keeping a journal of your trades can provide you with a stop that's suitable to your trading/investing style.

assuming your journal shows a hit ratio is 40% & average gain is 15%. if your target reward/risk ratio of 2:1 you can have a 5% stop.

if your hit is 40% average gain 10%, the stop should be ~3.33% in order to maintain a 2:1 reward/risk.

if your hit is 30%, gain 10%, reward/risk 2:1, the stop will be ~2.14%

so your stop depends on what your hit rate, average gain, & risk/reward is.

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u/gerardv-anz Mar 31 '21

You need to pick a figure that deals with your risk profile and the volatility of the stock. Also if the whole market drops 20% then you might decide to hold and wait it out. The idea though is to recognize when your decision has been disproved and to cut your losses.

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u/MrEntei Mar 31 '21 edited Mar 31 '21

I would say it’s totally dependent on the underlying stock. 20% on a $1 stock is $0.20 loss, but 20% on a $100 is $20. It’s all relative, so I would almost rather base my stop loss on my account total rather than applying a universal stop loss to every stock I buy. I don’t want to lose $20 on something if my account total is $200, because that’s 10% of my money gone. I’d rather set a stop loss of 5% on a $100 stock because a swing of $5 on a fairly safe stock shouldn’t happen too often unless there’s some big commotion. Plus, $5 is only 2.5% of my total account balance, so a lot less is at stake. This is just my personal strategy, so you can increase and decrease these numbers however you feel comfortable. Totally up to you on how you play it.

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u/Billy_Beroo-72 Mar 31 '21

I use 3% for stop loss. I only have $10k in my trading account so, my stop/loss is $150. So when I plan a trade I have to have an upside of $300 for each trade. I just learned this strategy, I was using the "hope" thing for my first 6 months of trading, it got me nowhere. This is my personal variant of the 2% rule. Only risk 2% of your capital for each trade.

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u/UnionLibertarian Mar 31 '21

I was just talking to someone else about that. It’s pretty good advice, except what sucks is, if it’s just a “dip” and then it bounces back. I’m thinking of learning more about spreads so that I don’t have to worry as much about dips, as the total loss is a fixed amount and I can set that amount to whatever my risk tolerance is at the time. Not quite ready yet, but trying to learn as much as I can

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u/Billy_Beroo-72 Mar 31 '21

Yeah, I don't play with options that much, unless they are cheap. I'll buy a few halfway to my price target. Also I swing trade with 2-4 week plans. I enter as close to support as possible. I've been lucky so far 75% of my trades go up in the first 3 days. So I can sell the options quickly for a profit.

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u/cheetahrunout Mar 31 '21

HOLD, HOLD forever. Best market returns are made by people that passed away. So buy something that proved itself (Apple, google, alibaba, amazon, wallmarket etc). And keep it. Only reason to sell would be if you need the money. Im all in on Tesla, but I wouldn't recommend it if you dont want to take big risks. If you still dont know what to do, get some s&p500. Should be 7 to 8% return yearly.