Papale on Getting Better at Trading

I remember as most people probably do where I was when 9/11 happened.  I was getting ready for work when my sister in law called and told me to go watch TV.  I turned it on and pretty much did not leave the couch for the rest of the day and night.  It was surreal.  It’s hard to believe it’s been 13 years since that day.  My youngest son was only a few weeks old.  I remember wondering what things would be like for him when he grew up.  Here’s to the memory of that most horrific and solidifying  day.  We will never forget.

Back when I first started to trade a question was presented to me and the rest of my class.  What is more expensive – an option trading at $7 with an implied volatility of 15% or an option trading at $4 with an IV of 20%?  Since I had just joined the options program I really had no basis to answer the question.  I sensed there was a little more involved than simply comparing $7 with $4.  I was not sure what IV had to do with it but figured it was important.  I guessed and got it right but could not really back up my answer with sound theory.

As I went through the course work and watched trading every day I began to understand how options behaved in different market scenarios.   Repetition helped my understanding and being able to talk with traders and other students like myself allowed me to begin to make sense of all the greek (pun intended).  Finally I got the chance to put all the theory into practice and low and behold after a while I began to make money.

Most traders who came in the business back in those days were gone in 6 months.  Our program had I would say about a 90% success rate.  What was the difference?  I think it was structured education and conservative risk management.  We grinded it out day in and day out.  We were never the most profitable traders but always the most consistent.  And the partners and traders could sleep at night.  Sleep is a good thing.  In this business we are all going to get educated one way or another.  My suggestion is do it before you get into a trade you don’t fully understand.  You’ll sleep better.

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