Happy Friday, tradersâŚ
Letâs talk about one of the most expensive habits in tradingâŚ
Winning.
Sounds ridiculous, right? But Iâve seen it hundreds of times â an aspiring trader finally nails a nice win, and then immediately torches their gains on the next one.
Why? Because short-term success can make you complacent.
You stop listening to your rules. You get a little too sure of yourself. You chase something that looks âobviousâ â usually without a plan â and before you know it, youâre back where you started ⌠or worse.
Itâs that sneaky mix of overconfidence and adrenaline that wrecks accounts faster than any market move.
Sound familiar? I call it the post-win blind spot â and itâs the single biggest leak in most tradersâ performance.
Making money is one skill. But keeping it is a whole different game â and an even more important one.
But this is exactly why Iâve been consistently profitable over 27 years of professional trading. I use strict rules, systems, and strategies.
And my #1 strategy right now is Burn Notice tradesâŚ
Theyâre quick, overnight options plays that wonât overexpose you to broader market risk.
See how Burn Notices can deliver 100%+ wins ⌠overnight.
But thereâs something even more important than strategy in this environmentâŚ
Not feelings. Not luck. Not magic. Risk management.
So, let me show you how to manage your risk like a pro â and stop giving your money right back after youâve earned it.
The Secrets to Proper Risk Management
If I had to boil it down, proper risk management comes down to two things:
1. Define your risk.
2. Plan your trade â and actually stick to that plan.
Before you ever buy a call option for $1.00, you better know where youâll cut it if things go south. Letâs say $0.90. Thatâs a $0.10 risk.
Not ideal, but you wonât blow your account up doing itâŚ
Now ask yourself:
- Whatâs the most Iâm willing to lose here?
- Whatâs the best-case return Iâm targeting?
- Whereâs my stop-loss?
- Whatâs my price target?
Time decay is always working against you with options. If the stock just chops around, your contracts bleed like an ice cream cone on a hot summer day.
So you need enough âjuiceâ in every trade to make it worth it. I donât touch anything without at least a 2-to-1 reward-to-risk ratio. 3-to-1 is better.
How do you know what a contract is worth?
Watch the option premium throughout the day. Track the highs and lows. It gives you real context â so you know when youâre buying near the low end of the range.
And speaking of exits â thatâs where most of your money is made (or lost). You need a price target on both the stock and the contract.
Donât hesitate to put in a limit sell as soon as you open the trade. Lock in your profit the second it hits your number.
And always keep a stop-loss in place â whether itâs manual or trailing. Thatâs how you avoid turning a paper cut into a gushing wound.
The Biggest Risk Management Mistake
The biggest error you can make? Risking more than youâre willing to lose.
Read that again. Then tattoo it somewhere.
Oversizing your position is the fastest way to sabotage a good trade â or a good week, month, or year.
Whether you’re aggressive or conservative doesnât matter. You have to stay within your risk limits.
Thatâs why I always say: In the beginning, hit singles.
Small, consistent wins build your confidence and your bankroll. They keep you in the game long enough to level up.
And if youâre sizing your trades well, your worst-case loss should be something you can easily shrug off and move on from.
Risk Management Isnât Technical â Itâs Emotional
Thereâs a part of risk management no one wants to admit:
You can have the best spreadsheet in the world ⌠but if you panic in the heat of the moment, itâs all worthless.
Risk management is emotional. Itâs personal. Itâs not just about charts and contracts â itâs about how you react when your moneyâs on the line.
I canât tell you how much youâre comfortable risking.
That depends on your age, account size, income, and personality. A 50-year-old dad with two kids shouldnât be trading like a 22-year-old meme stock maniac.
But I can give you a few rules I live byâŚ
4 Risk Management Proverbs to Live By
1. If you canât sleep with the risk, youâre trading too big.
This oneâs simple. If a trade keeps you up at night, your size is out of whack. You should be able to lose on any single trade and barely feel it. Otherwise, you’re not trading â youâre gambling.
2. The exit is more important than the entry.
Anyone can hit âbuy.â But knowing when and how to sell is what separates consistent traders from lucky ones. Plan your exit before you ever get in â and stick to it.
3. Never let a small loss turn into a big one.
A lot of traders think they can âwait it outâ or âaverage downâ when a trade moves against them. Thatâs how small losses snowball into account killers. Take the loss, move on. Next trade.
4. Your goal isnât to win every trade â itâs to survive long enough to keep playing.
Forget perfection. This game is about staying in it. If you can protect your capital and keep your losses small, the wins will take care of themselves over time.
Go back and look at your last 10 trades. Ask yourself:
Did you manage the risk? Or did you take a shot and hope for the best?
Big difference. And itâs usually the difference between a trader who makes a fortune and one who blows up their account over and over again.
Which trader are you going to be?
Think about it,
Jeff Zananiri
P.S. Itâs only March and my GAMMA Code system has already given us multiple 100%+ setups this yearâŚ*
But if you want to start getting in on these trades before they take off, thereâs only one place to startâŚ
TODAY, March 28 at 4:00 p.m. EST, the great Danny Phee is hosting a LIVE WORKSHOP to reveal the top GAMMA setups for next week.
Let AI help you find triple-digit winners* â Click here to reserve your seat!
*Past performance does not indicate future results