2022-05-06-trade-management-A-1

While we have this lull, let me offer this as well – here is the catch-22 – I, and other traders like me, can weather significant drawdowns on a position, and truly let it run while leaning on major technical support.  We can do this with positions of substantial size so that when they do reverse there is enough profit to make the risk worthwhile. And to be blunt about it, the reason we can do this is because we have enough money in our accounts to weather those storms without blinking.  I know, for example, AMZN has support at around 2260, so I am fine with it.  So, how do traders without a lot of money counter this? Well, the answer is always the same – reduce position size proportionally, right? If you are dealing with 1% of you account, and I am dealing with 1% of mine, then it is technically the same risk comparatively.   Except here is the problem – let’s say trader A with a small account went long AAPL during that uptick and bought 10 shares for $1,580 – and trader B also went long AAPL but bought 2,000 shares.  How much money can trader A really expect to make here on a reversal? $10? $15?  So instead of buying shares, they buy options – and now Trader A has 2 Options for next week, they bought for $7.80, while trader B still has 2,000 shares.    Trader B can sit on those shares and wait, but trader A is watching his options get drained so they take the loss.  Trader B holds and eventually walks away with $2K profit.  See the problem?