How to Avoid ‘Driving Into a Ditch’ With Your Trading

How to Avoid ‘Driving Into a Ditch’ With Your Trading

Posted On May 12, 2021 3:49 pm

Last month, I wrote about seeing my kids after a 14-month Covid-induced separation, which provided me with some trading lessons; mainly about patience, perspective, and most importantly, staying the course.  Today, I’m going to use a few anecdotes from it to delve a bit deeper into the psychology of trading.  

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First off, we had a great time, engaging in relaxing activities including simply laying on the beach to kayaking along the intercoastal.  But, the moments that will stick with me and that were true learning experiences came with some tension. The first being playing tennis; my son’s a pure beginner. I’m a solid intermediate but with no real credentials to be giving lessons. Frustrations broke out on both sides as I let my own inadequacy lead to impatience over his failure to listen to instructions and/or even try to practice the basic strokes — square the shoulders, bring the racquet back, rotate, etc.  He just wanted to smash the ball. It came to the point where I fired some balls at high velocity into the fence behind him, to which he responded by calling me an “a**hole.” 

I didn’t disagree. Once that was out in the air, the quality of play improved. From that point on, we hugged it out and it became a great bonding experience; one for our memory banks. His takeaway was: Don’t let his desire to be good, and ensuing frustration in the learning curve get in the way of putting in the work needed for long-term success. 

I’ve been trading for over 30 years and running the Options360 newsletter service for nearly 7 years since 2015.  And I’m proud to say that each and every year, the Options360 Concierge Trading Service has posted positive returns, often far outpacing the S&P 500 Index. 

However, every single year I’m disappointed in some fashion. But, I view this as a healthy sense of self-competition.  I want and expect, to always do better. I need to channel that emotion into being productive, whether that’s pouring through charts, reading earnings reports, or going back to some of the classic options trading books such as Sheldon Natenberg’s Option Volatility and Pricing.  What I can’t do is let frustration lead to making ‘revenge’ trades, which come in all shapes, sizes, and forms, but are akin to smacking balls into (or over) the back fence.  

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I bring up this anecdote as a simple reminder that angrily doing anything, or trying to find shortcuts to success can break your spirit and destroy your financial freedom.  

The second anecdote is letting my son, who just turned 14, drive my car. Some of the reasoning was that his sister, who just turned 16, is getting her learner’s permit so she needs some time behind the wheel, which living in Manhattan and not owning a car is hard to come by.  

Anyway, long story short, he almost drove us into a ditch. Even though we barely went 5mph, the ditch was deep enough that it would have totaled the car. I cranked the wheel and threw the shift into park; disaster avoided. 

Ironic, being that it was the day before that Ethan had cursed at me for losing my cool on the tennis court. Now, after his temper simmered down, he couldn’t stop thanking me for not yelling, screaming, blaming him, or losing my cool in any fashion. 

I explained the difference; on the tennis court, he wasn’t trying or listening and I was upset by his outburst.  Ultimately, it was his choice to put in the effort to improve and he wasn’t doing it. 

By contrast, putting him behind the wheel was my choice and my responsibility. He did nothing wrong. He was trying his best to learn in what was a relatively safe and controlled environment.  Though he was indeed a bit mystified at why the wipers were going — as I told him: “That’s called panic son,” which not only applies to pushing pedals and switches, but also to making random trades.

The big takeaway from this is that my son now has appropriate respect for the need to “learn’ to drive,” realizes that reality isn’t a Grand Theft Auto video game and will listen to what he needs to while working towards earning a license — one day. 

Personally, I’ll never be done learning, when it comes to the nuances of trading.  But, I’ve pricelessly learned to avoid disasters. 

One of the most satisfying aspects of my job, especially running the Options360 Concierge Trading Service, is being a co-pilot to my many members.  In addition to the webinars, they have the ability to email anytime, with any question, and get an almost immediate response; preventing them from driving into a financial ditch. 

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About author

Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.