Sep 8, 2010


Everyone loves to earn profits when trading.  After all, that's the purpose of entering an order and making a trade.  One aspect of being profitable is that it brings confidence.  That's a good thing.  When you believe you understand what you are doing and that you are making good trades, that gives you the encouragement to continue doing as you are doing.

The problem arises when the new trader believes that it's a personal gift and that he/she just has a talent for making money in the market.  Thus, it's easy to get sloppy, do less research, spend less time making a trade plan, and in short - abandon or greatly reduce the time spent on the very items that made the trades successful.

While it is financially rewarding to begin a trading career with a string of winning trades, I believe it's not as beneficial as it seems.  Most traders would be better off if they earned some money, but their trades should include some winners and some losers.  The danger of becoming overconfident and getting careless with future trading is very real.  When the process includes some wins and some losses, it's far more likely that the trader is going to make a serious effort to determine why some trades worked out better than others.

The work ethic is maintained.  Research continues.  From my perspective, if you begin trading by making too much money too quickly, you will come to regret it.  Thus, if you do have the 'good' fortune to begin trading with a string of successes, try to recognize what went into the trade decisions and the effort involved.  Don't make the mistake of believing that no one else could have done what you did.

Mark D Wolfinger

Expiring Monthly: The Option Traders Journal