I received the following note the other day with the subject “I am desperate”:
Dear John. Thank you very much for your services, – you are doing a great job! The reason that I am writing you right now is that I am desperate to loosing a half of my modest $2000 option trading account after my subscription of one of the options gurus, JC. I did trust them and I lost. Those people have so much money that they do not care how much one can loose in a trade. Anyway, I need at list to restore my account to the starting point and I am looking for some advice what should I do?
First of all, let me address the comment about the guru not caring about how much one can lose. I don’t know who this guru is or anything about their service. Assuming they are legit and worthwhile (and even if they aren’t), I would suggest that risk management is the responsibility of the trader doing the trading. While the guru may offer up suggestions about where to put stops or otherwise limit the losses on a given position, they cannot (and should not be expected to) tell you how big to trade, or indeed whether you should even be doing a given trade. They simply do not have the proper information. That is your responsibility as a trader to sort out for yourself.
In this particular instance, I can’t help but wonder if the trader in question was simply not financially capable of following the trades of this particular guru. It may be the case where the guru has several positions on at a given time, expecting the odds to work in their favor by maximizing the opportunities for them to do so. If a trader is not sufficiently capitalized to do the same, they risk not matching the guru’s performance because they are trying to cherry pick.
As for making the account whole again, I would tell a trader in this situation to put that out of their mind. Either add more funds to the account or reset your mental state to the current account balance (which really should be done on a continuous basis anyway). DO NOT attempt to quickly make the money back. That’s a recipe for disaster. Take a systematic approach to build the account back up based on a clear trading plan, assuming you have one.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
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