Since no one reads my blog, I have to be answering my own question here.
Our contingency plan has to be better than our original plan, right?
Why did I even make AIG my Plan B? Was I mesmerised by the glamour and glitz of a 1:23 risk:reward ratio? In trading, if you start out mesmerised, you will be tantalised by profits that seem to always elude you.
Risk:reward is only one component of trading. If we fail to get the analysis right, we are trading on emotion as much as if we were trading based on coin flipping.
Analysis trumps risk:reward in my diva opinion.
My AIG analysis was frankly bimbo. I had even failed to do my due diligence very well here. The reverse split had obviously been a public announcement. Yet, I was mesmerised and chasing the risk:reward.
1. Start with sound analysis. Bimbo In = Bimbo Out
2. Then, look at risk:reward.
3. Remember to trail your stops. Slippage is evil.
Now, if you'll excuse me, I have to get back to the drawing board. I've got some trading wounds that need to be nursed. No more excuses. No more bandaids on broken ankles!
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