want to share a thought with an example
nifty cmp=11435
let's assume that your trading system indicates that market will move up 150 points.
let's also assume that you therefore buy 10 lots of 11500 CE for 82.60 each (82.60x75x10=61950)
now, consider a situation when the market has moved in your anticipated direction by 50 points and 11500 CE value has increased from 82.60 to 101 (say)
you are sitting on a profit of 13575. that is good money.
assume (not very difficult to imagine) that you are struck by the fear of losing this profit. you were reasonably sure of the market reaching your target which is still 100 points away.
what if you chicken out, book the "handsome" profit?
that will embolden and harden your fear of losing the profit even further resulting in you almost never be able to go beyond your "comfort" level.
and the beauty is that you are likely to be proven right atleast 50% of the times, generally. that should make you proud and relieved of your decision not to have succumbed to greed.
hold on...
there is other side of the 50% probability also, let's consider that as well before we reach any conclusion...
assume that you are foolhardy and decide to carry on for the next 100 points as well (taking your total market journey of 150 points).
what would you make then?
11500 CE would have turned into 160 approx. resulting into a profit of 58,050!
even if i assume that you would be proven wrong 50% of the time in your decision to go all the way. even then you will be getting 58050/2=28025, that is more than double your initial 13575 which you would have gained every time you quitted after those 50 points heat!
so, here's my point.
you stand to gain double by not succumbing to your fears even when you are proved wrong 50% of the times when you actually decide to continue till the end as per your system.
fear will never let you advance to the next stage of trading success.
