This certainly was not the worst day I have traded in the SPX, but it is one that took me by surprise. I was trading happily along around lunch time then …. BOOM!

SPX just started to drop. I said, “OK”, there is plenty of room between the current price and some of my shorts. No big deal. Then, it went down some more. Still, no problem, I don’t see any news. No reason for it to go down. Probably just one of those weird market swings.

Then…it is down on top of one of my short positions. Now what? Do I keep saying, “No Problem”, or do I finally defend my trade. After much gnashing of teeth I decided to defend. I closed the position that was being threatened, even though I still believed that SPX would recover.

Guess what? It went down further! Good thing I followed my rules, although a little late, and closed my position. I took a loss of about 6x my potential gain which was, I was supposed to close at 3x my gain but I just could not believe what I was seeing. Fortunately, because I was trading an aggressive strategy that I do not even blog about, my position was relatively small.

The lesson here is I should have followed my plan and closed at a 3x loss instead of sitting in denial and waiting until it got to 6x to finally act!

Even those of us that have been doing this a while still screw up from time to time.