NOBODY feels bad for you when you blow up your trading account

Been there, done that – WILD PnL swings like you can’t believe

Early in my career:

• Made 7 figures in ’08 crisis
• Gave it back
• Learned from school of hard knocks

But nothing taught me more than today’s topic ☟

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➠ THE MINIMAX STRATEGY

σ The minimax strategy is a powerful concept that could change your trading game forever.

The minimax in a nutshell:

“In a zero-sum game, the best strategy against a sophisticated opponent is one that minimizes your maximum loss.”

It’s all about guarding yourself if worse comes to worst.

We always advocate accepting small losses but NOT large ones.

This approach helps manage risk and increase the chances of winning in the long run.

More on that later.

But first…

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σ Your trades should be only of 4 types:

𝟏❯ BIG WINS
𝟐❯ SMALL WINS
𝟑❯ BREAK EVENS
𝟒❯ SMALL LOSSES

Avoid BIG LOSSES at all costs!

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➠ MINIMAX IN ACTION

σ Say you sold an outright PUT OPTION expecting the underlying asset’s price to rise or stay above the strike price.

However, the price drops.

And drops.

And then drops some more…

Instead of waiting for the maximum loss (as the option moves towards expiration and loses value), exit the moment you have enough evidence that the trade didn’t do what you expected!

The point is to MINIMIZE THE DAMAGE!

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σ If you allow BIG LOSSES, the odds of having a negative PnL curve skyrocket.

Control your downside, and you’ll be better off.

Remember – a high win rate typically comes at the expense of losing big when the trade doesn’t play in your favor.

On the other hand, if one accepts the odds of winning are realistically around 50%, the best formula for success comes from controlling the downside.

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➠ THE PSYCHOLOGY BEHIND TAKING LOSSES

σ Why do we struggle with taking losses?

It’s due to our negative bias.

We’re wired to avoid painful experiences.

This leads us to hold onto losing trades longer than we should.

That’s where minimax comes in to help us overcome this flaw.

Bottom line:

Be obsessed about the loss, not the profit.

Keep your losses small.

The upside will sort itself out.

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➠ GAMBLER’S RUIN

Even if you have an edge, you need to minimize the difference between your limited amount of capital and the market’s infinite amount of capital.

Risking less gives you more chances to participate and lets your edge play out over time.

This must be an understanding you internalize to your core.

It lays out the fundamental reason retail traders should generally take on less risk.

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➠ MORAL OF THE STORY

Find a level of risk appropriate for your projected win rate and risk-reward ratio.

Aim for a 1-2% maximum risk per trade.

Even lower if your account is > 7 figures.

Minimax pays off!

Be obsessed with it – know when to draw the line and exit.

It’s the most robust foundation for embracing opportunities and creating a more prosperous trading career.

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That’s it for our lesson on the minimax strategy!

➠ By the way, don’t forget…

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Thank you for making it this far.

If you want to learn more about using options like pro, visit on our courses below!

Beginners | Real Vision’s Trading Options Course with Imran

Intermediate | SpotGamma’s 3-Part Series, The Hedge featuring Imran

Cheers!

Imran Lakha
Options Insight