top of page

Trade Smart: Plan for Losing Trades

Hey Good Kids! A common issue I see new traders make is not accounting for what they should do if a trade goes wrong. We all think about profits and this blurs the bigger picture of our trade plan. If you don’t have a plan for each trade, or if you are just following someone else’s trade, and it goes against you it’s easy for you to exit the trade at the worst possible time. I know this because I’ve also done it. I see people do this all the time and today I want to remind you of how important it is to avoid large losses by not having a plan when a trade goes against your initial plan!

I love to sell puts. As we've seen over the past couple of weeks, the market has pulled back, causing my short puts to suffer. When you see the p/l on a short put growing - a topic I've written about previously (do check it out!) - it's all too easy to let fear and anxiety take the reins. Remember, losing trades are so normal. Emotions run high, yes, but it's essential to keep them in check by having a plan ahead of time. Emotions, in these situations, prove to be a trader's worst enemy. Following a well-thought-out plan can often prevent the pain of witnessing a max loss.

As the market retraces, it's no surprise that the puts I've sold are under pressure. I always account for this, it’s not fun but not panicking is the biggest key to my success. I often choose my put levels based on my comfort with owning the corresponding stock. If holding 100 shares of a stock seems daunting, consider setting up a stop loss on your puts. Alternatively, opt for spreads over naked puts to modify the risk profile.

In light of the current market scenario, I am:

  • Considering 'rolling for hope', extending them over time for credits and thus reducing the cost basis.

  • Determining which puts to let expire ITM, leading to an assignment of 100 shares for each put sold.

  • Waiting until 0 DTE for specific puts before making a final decision.

I cannot stress this enough: always be prepared on how you will handle a trade when it’s a loser. No single strategy or method guarantees success across all market conditions. Stocks don't go straight up. It's crucial to arm yourself with a plan for when trades don't go your way.

If you found this useful let me know! I love talking to people interested in trading (a quick thanks is always nice too). If you want more information you should join the GKT discord to discuss these tips in more detail and connect with like minded people who trade the stock market!

Keep Calm and Let Theta Do the Work! Until next time happy trading Good Kids!

14 views0 comments


Brown Modern Coffee Shop LinkedIn Banner
bottom of page