{"id":9811,"date":"2011-02-10T11:13:13","date_gmt":"2011-02-10T16:13:13","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=9811"},"modified":"2021-05-06T15:19:12","modified_gmt":"2021-05-06T19:19:12","slug":"irrational-pessimism","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/irrational-pessimism","title":{"rendered":"Irrational Pessimism"},"content":{"rendered":"

While being irrationally exuberant over a short winning streak of options trades leads many traders to recklessly ramp up their capital levels leading to devastating, or even fatal, losses,\u00a0there is an opposite problem, which is not necessarily fatal, but certainly leads to futility.<\/p>\n

\u201cIrrational pessimism\u201d is when you lose confidence in your\u00a0trading strategy when there is no good reason to do so. This is the flip side of irrational exuberance and it can lead to a faulty decision to abandon a great strategy.<\/p>\n

Instead of wallowing in a loss of confidence about a strategy after a loss, I recommend to my options mentoring students that they sit down and challenge<\/em> their doubts about the strategy with questions like these:<\/p>\n

    \n
  1. How many winning months did I have under my belt before I experienced this loss? If I made money employing this strategy in the majority of the months in the past, why would I think that only this<\/em> month is valid and all of the winning months are dismissed?<\/li>\n
  2. Did I back test this trade for at least three years, with realistic \u00a0and honest assumptions for slippage and commission and was it a highly profitable strategy during the period back tested? If the answer is yes, then why would you suddenly think that the strategy is invalid because of one losing month?<\/li>\n
  3. \u00a0In live trading, paper trading or back testing \u00a0this winning strategy were there losing months in every year traded?\u00a0If so, why do you allow yourself to lose faith in the strategy when something completely expected occurs?<\/li>\n<\/ol>\n

    Options income trading is a business<\/em>. I don\u2019t know of any business model that involves all revenues and no expenses. Do you? If we can all agree on that and if you realize that losing months are just \u201cpaying the bills\u201d for an otherwise great business, then we\u2019ll have the courage to trade with confidence in the next expiration cycle and continue to employ our winning strategies.<\/p>\n","protected":false},"excerpt":{"rendered":"

    While being irrationally exuberant over a short winning streak of options trades leads many traders to recklessly ramp up their capital levels leading to devastating, or even fatal, losses,\u00a0there is an opposite problem, which is not necessarily fatal, but certainly leads to futility. \u201cIrrational pessimism\u201d is when you lose confidence in your\u00a0trading strategy when there is no good reason to … Read More<\/a><\/p>\n","protected":false},"author":741,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,1584],"tags":[1614,1613,4688,1612,1259,81],"class_list":["post-9811","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","category-seth-freudbergs-blogs","tag-income-trading","tag-options-coach","tag-options-education","tag-options-mentor","tag-options-trading","tag-smb-training","no-post-thumbnail"],"yoast_head":"\nIrrational Pessimism | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/irrational-pessimism\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Irrational Pessimism | SMB Training\" \/>\n<meta property=\"og:description\" content=\"While being irrationally exuberant over a short winning streak of options trades leads many traders to recklessly ramp up their capital levels leading to devastating, or even fatal, losses,\u00a0there is an opposite problem, which is not necessarily fatal, but certainly leads to futility. \u201cIrrational pessimism\u201d is when you lose confidence in your\u00a0trading strategy when there is no good reason to ... 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