 Hey everyone welcome to another video lesson from navigation trading calm in this video I want to show you how we took a position that went Significantly against us to the point where we were down about ten thousand dollars on the trade and within a few months time We turned it into a winning trade The position that we had on was in ford slash cl, which is the oil futures contract And you know these contracts are pretty big from a standpoint of they use a lot of leverage and so when they move they're really going to move your P&L and We we put on a position initially and it went against us and and we went ahead and added a second position In our methodology we like to add up to three different positions You know in these contracts being as big as they are We definitely don't want to add more than two and in this case price went significantly against us And forced us to kind of manage our way out of the trade So I want to take you through the progression of the trade and show you what happened We started back here on October 19th was our first entry October 19th 2018 and we entered with a short strangle in ford slash cl Now you can see what happened as price just continued to slide to the downside And we went ahead and made an adjustment by rolling down our calls Just like we teach in our course and then a couple days later We went ahead and added another new centered Strangle around price at this point now as you can see what happened price just continued to slide big time and Each time you see the little bubble that means we made an adjustment But what you'll see here is that from the time that we got in to the low point that oil hit We had a 40% decline. So I get a lot of questions from members, you know, how does your strategy? How does your methodology hold up in you know, black swan events? You know, what if the market crashes? Well, 40% decline I'd consider that a crash and In 2008 when the financial crisis was going on and you know, Bear Stearns and Lehman brothers went out of business I mean that that's the biggest Catastrophe that we've seen in a long time in the market and that was around a you know 40% decline in stocks and so that's exactly what we saw here in oil And so I want to take you through how we manage this and we just continue to stay mechanical Rolled our calls down when we got down to around 21 days to expiration We rolled out to the next cycle and we just continue to stay mechanical and collect credits along the way Until I got down to here and then at this point just kind of remembering back We thought okay now we're getting a little bit of a bounce and we're getting a little bit of stabilization in price And so that started to help our positions, right? We got kind of Reback into center, but just continued to manage that position now the problem is look what happened next We had a huge rally So not only did we start blowing through our positions to the upside now, but we had a even larger climb We had a 57% climb in oil from where at bottom there around 42 Climbed all the way up to around 66 dollars per barrel, but what we didn't do is we didn't freak out what we didn't do is we didn't panic All we did was we stayed mechanical with exactly the way that we teach to make roles and adjustments In the course when it comes to these short strangles So every time you see a little bubble, that's when we made another adjustment Remember we've got two different sets of short strangles going on here So we just continue to make those adjustments as needed and then you can see then price reversed and it came back down And then on May 23rd of 2019 and May 29th We ended up closing out both positions So this was our first exit here on May 23rd So we closed that one set and then on May 29th. We closed out the second set Now at one point we were down around $10,000 on this trade like I said the oil contracts are very big We did one contract on the first entry and we did just one contract on the second entry And so you can see but when you have a massive massive one-directional move like that With the leverage that these options on futures with oil Specifically that we're looking at that P&L can really really run quickly And so at one point we are down about $10,000 But again, we positioned ourselves from the get-go It a size where we knew we could manage out of it And that's the key the people who get hurt in Trading like this or the people that are trading too large for their account size and that's so critical now When we got to the point where we're down $10,000, I mean that that's much bigger I mean this is a huge massive move and so that's a much bigger move than anything that was expected And so at that point even just with two contracts with two different sets with one contract each It felt like that was too big for the account that we were trading and we were trading that point about it anywhere between 80 and $90,000 account was our overall account size and we had all our other positions But by keeping our position size small enough not only did it allow us to manage out of this position But we still had enough cash in our account to make our other trades And that's critical too because if you get to the point where you get too large on a position You have to close out all your other positions just to manage this one. That's problematic as well So not only were we small enough to manage this one, but where you're still able to Book enter and close enter and close and book profits on our other positions Which helped make up for you know some of the open losses that we're seeing during this time But on this position alone like I said, we were down about $10,000 at one point Rallyed all the way back to a point and again it you know It took us from October to May to manage out of this position But keep in mind those are two massive massive moves a 40% decline a 57% climb and with our methodology the way that we trade We really like two-sided action, right? I mean that's where we really make our money and anytime you have an extended one directional move with very little Pullbacks like you saw on both of these moves. That's gonna be a very problematic Scenario to trade but again just by staying mechanical and doing exactly what we do with our roles and our adjustments Rolling the untested side rolling out in time to extend duration collecting credits along the way We were able to come back from a $10,000 loser all the way back to a profitable trade I'll pull up our trade tracker here This is a just a real simple spreadsheet that we use to calculate our adjustment So you can see starting back on 1019 and we just simply put it anytime we collected a credit That's a positive number anytime we bought back for a debit That's a negative number and just added these up over time and then when we got out on 529 You can see we have a total profit on the trade of $460 now you might be thinking okay, you went from a $10,000 loser to a $460 winner. That's not a good risk reward. Well, I agree with that from a standpoint of yeah That's not what we wanted to happen But the fact that we could take a trade that turned into a $10,000 loser within a month and turn that back into a winner That is a critical critical thing to be able to do when you're trading if you can turn your losers into winners And then just continue to book your profits on the easy ones. That's how you create consistent profits over time You know a lot of people in the trading industry, you know There's this old fallacy that they say cut your losers short and let your winners run That sounds good on paper. The big problem is it doesn't really work in actual trading You've got to limit your profitability, which gives you a higher probability of success We book our winners and we extend duration on our losers And that's the only way to trade and that's the only way to to become consistently profitable So I hope this was helpful, you know anytime that you're trading and you have Kind of a larger open loss Just remember it as long as you stay mechanical, you know price is going to be cyclical over time It's not going to go in one direction forever And we had a 40% move in one direction then a 57% move on top of that in the other direction And we are still able to manage back to a profitable trade and again Not to beat a dead horse, but the key to us being able to do this was the size of our position Okay, some people who traded larger They weren't able to hold on and manage out of this type of trade and that's because their position size was too large Relative to their account, but if you stay small you can manage out of anything and you can get back to profitability I hope this was helpful If you have any questions let us know if you want to check out everything we're doing go to navigation trading com see in the next video