NoDoji

In early December 2008 I was trading POT, trying to time bounces as it was pretty much in free fall each day. My account was with Etrade and I paid $16 round trip on every trade, so scaling in and out of trades was cost prohibitive commission-wise. As a result I always traded 1000 shares of stocks, all in, all out, and did so regularly with POT as it continued its eternal fall from grace. Frustrated with trying to time the stock's bounce, I decided to buy POT $55 calls late in the day on 12/4/08 after POT had fallen 5 days in a row to below $50, figuring that was a ridiculous price for a stock which had traded 6 months earlier as high as $240. Surely it had to bounce and options gave me a couple weeks to take advantage of that with a fixed risk in place. The next day POT not only opened gapped down over a dollar, it continued to drop! I had a moment of irrational fear that it might go to $0, and I remembered that when you have that thought, it's almost always the time to buy. I had an appointment to go to, but figured I'd add to my option position before I left. So I opened my order entry window, selected the same calls I'd bought 5 of the day before and instinctively entered 1000 in the Qty field (remember, I'd been trading 1000 shares of everything for months). Just as I was about to transmit the order I thought it would be wiser to wait until I returned from my appointment to add to the position. At that moment I saw the 1000 in the Qty field and nearly had a seizure on the spot. Had I transmitted the order it would've gone through immediately at market, and I've no idea how much slippage 1000 contracts of even a highly liquid option would've incurred, but even if the entire position filled at the offer it would've been $5000 for the spread, plus $760 commission one way. If I'd transmitted the order, I really doubt I would've noticed the mistake because I was standing up at my desk in a hurry to leave for my appt and likely would've clicked and left, thinking I'd simply added 5 contracts, a very low risk move. So I return from my appt and see that POT bottomed out around $47, finally bounced a bit, putting my losing call position slightly in the green. Then price stalled and began pulling back. Oh, no, I thought, not another leg down! As the call premium moved back toward my break even point, I closed out the position for a net gain of $30 and decided I just wasn't going to trade POT for a while. Well, that day POT put in its 52-week low and over the next 2 weeks rallied to $83 a couple days before expiration. The premium on the calls I had went as high as $27, meaning 5 contract position that I paid $1000 for would've been worth over $13,000 had I held it. Then there's the other "coulda": If I'd transmitted the 1000-contract order, and held it through the rally, it would've produced a gain of close to $3 million.

Practice letting winners run. By letting smaller winners retrace and stop you out break even, instead of always grabbing anything that's green, you eventually learn to capture those big winners that can pay for several losing days in a single trade.