Chapter 5

Naturally some trading positions start to fail. This is expected to happen, but less often than the successful trades.

Some people will be determined to make this trade work positively. The market is going the opposite way, and they are sure it will be coming back (probably a mistake).

A "Repair Strategy" is to keep the failing position and wait for the market to stop going the wrong way. When it finally turns back to their direction, they buy many more contracts (shares or options) for that same direction. Their original position has lost significant money. The idea is that now they are buying much more for "cheap" and when it gets back to their starting price, they will make a profit OR they can get out at no-loss about half way between the bottom and the starting position.

It's a good idea ONLY when the price is likely to move back to the starting point. However, sometimes the price seems to be turning around but it's actually only very fleeting before it keeps going the wrong way. This gets to be so expensive a loss that it can wipe out a good account. It doesn't happen often, but when it does, it's a disaster.

It's for these reasons (that can't be defended against) that small losses are preferred.

I must say there is a repair strategy that does work for selling options that can work. It's a bit complicated and has risks also. Hence, I like the simple "get out" strategy if it's not making you money. No stress for hours or days while agonizing over the situation. Small losses are small, manageable stresses. Losses WILL happen. "How big" is the loss is up to your exit rules.