I have to admit something in writing to myself today. I failed, but that’s okay. Most of life is realizing your failures, getting up, and trying again. I love trading stocks; but I got a little too anxious, and forgot my safety net. Sometimes stepping outside your comfort zone is not always good.

If you’re lacking in diversification the only letters you could end up getting will spell bad news for you. Remind yourself to protect against loss in everything you do. Let’s see what I did wrong.

I recently had some medical bills to pay, and so my savings were depleted. I was so upset about my lost stock pile that I made a risky move that hurt quite a bit. I’ve been trading options some time now with success. However, much more cautiously.

A small percentage was invested in options contracts, and the rest in different securities I was prepared to sit on for the long term (though many of them went up and I didn’t). This way my eggs were not all in one basket, but I was free to make riskier stock moves. This was good, and I should’ve kept doing it.

However, I was doing well with my options, and routinely making very nice returns every month. So, I got a bit ahead of myself, and did the unthinkable. I over invested in one security. This is never good for anything in life. It’s like driving a car with one tire. Sooner or later things are going to go south.

I did it because I didn’t have as much money to invest as I had previously. So, in order to return to where I was I made a move with unwarranted risk. When weighing risk and reward always make sure the reward greatly outweighs the risk.

Needless to say; I took a big hit. Which, is expected. If you want to play the game sometimes you have to lose. The only problem is I was not prepared. Had I made preperations it would not have been such a big blow. The reason I let this happen? I wasn’t thinking properly.

I was worried about being on this ‘schedule’ I had created for myself. I felt losing so much ground was unacceptable, and I needed to gain it back immediately. This was an unrealistic goal. Where as before my goal was a steady (but large) flow of returns that would keep me in the direction I needed to go.

This was stress doing the talking for me. When you are stressed, upset, and confused your thoughts will be the same. I let my emotions get the better of me, and I paid for it. So, my new exercise will be to stand back, and breathe. To make sure I am making sound judgment based on the long term; and tell my anxiety to cool itself off.

Now, I’m making slower steps to re-gain my ground. It will take a little longer, I’ll have to be a little craftier, but with a much more solid plan I have real goals to regain my footing.

Originally posted 2010-08-10 22:34:22. Republished by Blog Post Promoter