My early experiences on the trading floor taught me a lot. After being given the opportunity to pursue a career as a floor trader, I was excited and convinced that I could be very successful trading options if given a chance. It was, therefore, surprising to me that the two gentlemen who served as my early financial backers said they'd hire me on only one condition: I could keep the job if, after a six-month trial period, I had learned how to reach breakeven.
Their experience taught them that the key to longer-term success when trading options is not shooting for the stars. The important thing is not losing. Maintaining breakeven was obviously not a long-term goal, because the ultimate goal is to generate revenues from trading. But risk management and avoiding large losses were seen as the keys to longer-term viability.
I did a bit better than breakeven after my first six months, and after a few years of successful trading, I bought the other two gentlemen out and started trading for my own account. Forming the good habits in the early years helped me tremendously, and I spent a total of twenty-one years on the Chicago Board Options Exchange (CBOE) floor.
If I can avoid losing, my chances of winning improve. That's the philosophy that still drives my trading approach today. So, how do investors avoid losing, especially in the early days of their trading pursuits? What are the mistakes people sometimes make that set them back and limit their success? ...