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Rock Climbing - GLD

The most important thing in Rock Climbing is not to fall. That is why most professional climbers, that are still alive, use specialized climbing equipment to minimize the potential consequences resulting from a fall.

The same analogy fits trading. When I'm in a winning trade, and want to let it run, I always secure myself from big adverse moves. This helps my psychology, and enable me to recover from pullbacks and stay with the trade.

Here is an example of the GLD mountain climbing:


As the GLD started its parabolic move upside I protected my long position with Put171.


A few days later, as it continued to go up, I sold back Put171 and bought Put175:



Then a few day later, I sold back the Put 175 and bought Put 180:


And again, few days later, sold back Put180 and bought Put184:


And the next day again, 184 --> 188:



On Aug 11th the GLD fall of the cliff (-6%).

So instead a trying to figure out if I should get out or try to hold on to this position, I just looked at it with some indifference. Actually I was expecting some correction and I didn't need to take any decision when it happened. The ropes that I used, kept me safe from falling.


And what now?

I'm ready to start climbing again:


And if it was just the first pullback in this big move, I am positioned to profit again above 188.

A final warning:

Trading like that takes all the adrenaline away. So if it's adrenaline you are looking for, then go practice the real rock climbing...


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