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The Cure For “Wydintijus”By Jeff ClarkThursday, July 20, 2006 At some point in every trader’s career, he or she comes down with a severe case of Wydintijus (pronounced wy-dint-i-jus).
Symptoms of this disease are loss of self-confidence, a nagging doubt of one’s ability to trade, and a chronic sense of frustration.
The first signs of the disease manifest themselves in a series of questions, such as…
Yesterday, I felt the disease coming on.
You see, four weeks ago I recommended that my Trade of the Week subscribers buy the Abbot Laboratories July 42.50 calls. We bought the calls for about $1 and sold them last week for $1.65.
That’s a 65% return in just three weeks. And, it’s hard to be disappointed with that. But yesterday I found myself asking, “Wydintijus hold them a little while longer?”
You see, the calls that I sold at $1.65 exploded to over $3.00 when ABT announced earnings that were better than expected. And I was kicking myself for not holding on to the trade.
But that’s an amateurish reaction.
Even if we had held on to the trade, we would have been stopped out at a much lower price. The calls traded all the way back down to $1 after we sold them. And holding an option trade into an earnings announcement is more of a gamble than a strategic speculation – as anyone who was long Yahoo! (YHOO) can tell you.
Also, anyone who generates a 65% profit over three weeks ought to be pleased with that result and move on from there.
Nonetheless, its human nature to look back and question, “What if?”
Traders have to eliminate that phrase from their vocabulary.
Traders have to focus on the current opportunities and put all previous trades behind them. You’re never going to buy a stock at the absolute low, and you’re never going to sell at the absolute high.
The best you can hope for is a winning percentage, and trying to squeeze the maximum profit out of every situation defeats that purpose.
On Tuesday I told you I was going to buy tech stocks into any weakness. And, I did.
But as the market exploded higher yesterday, and the semiconductor index lead the charge, I couldn’t help but ask myself, “Wydintijus put everything I have into the trade?”
The question I should have been asking is, “What am I going to do with these profits?”
Indeed, the cure for “Wydintijus” disease is simply a strong dose of perception.
As for what I'm doing with my profits... I'm holding on for further gains. But I'll be quick to take profits if this rally starts to fizzle.
Best Regards & Good Trading,
Jeff Clark
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Earnings today: D.R. Horton, Brookfield Homes, Google, Microsoft, Nokia.
Yahoo!’s giant plunge leaves it essentially flat for the past seven and a half years.
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