There is no question in my mind that people who are serious
about their trading need to have accurate information. Without it, it
is even harder, if not impossible, to succeed in an already difficult
business. I wrote "Trade Your Way to Wealth" to try to help
disseminate what I believe to be important considerations every
potential trader and investor should take into account in their
efforts to become successful or more successful. In the book, I
included methodology and strategies that I have learned and used
successfully over the years to try to help others avoid re-inventing
the wheel.
Last week, for the first time, an unfavorable review of my book,
"Trade Your Way to Wealth" , appeared on Amazon.com. It was written, I
suppose not surprisingly, by someone who wrote anonymously, unwilling
to reveal their own identity. The critic claimed to have been trading
for 10 years, but failed to reveal whether successfully or not. I can
guess. In any event, under a heading, "The Bad," Sir Anonymous wrote:
"The book shows a few options trading strategies such as collar (as
risk free to low risk free), iron condor, spreads, etc." Sir Anonymous
found those strategies to be "very basic or introduced for novice
traders." In fact, the book, along with setting out how to create a
business plan and manage money specifically discusses 15 separate
stock and options strategies in depth and identifies the risk, capital
requirements, relative lengths of time each generally requires, the
level of monitoring required by the trader/investor and the market
direction to which each applies. The strategies set out are: buying
stock, writing covered calls, selling stock short, protective puts on
long stock, selling naked puts, protective calls on short stock,
buying calls, buying puts, bullish call spreads, bearish call spreads,
bullish put spreads, bearish put spreads, iron condors, collars,
straddles and strangles. In addition, there are discussions about
trading REITS and generating regular tax free monthly income on
vehicles like closed end funds.
Sir Anonymous says that one may not be able to make millions
using collars. Of course that is true. Whether a trader makes
millions or not depends on many factors including knowledge, risk
awareness, capital devoted to trading, ability to cut losses and so on
and so on. I should note that reportedly, the very wealthy use
collars as a device to significantly reduce and even eliminate risk in
trades while still leaving quite an attractive upside in many
situations. I certainly use them myself. Our critic also says it is
difficult to find a collar where you can get a credit on the option
legs at entry. I didn't say it was easy. Successful trading does
require work. I find many such collars during the course of a year.
When I was asked to speak at Traders Expo in New York last month, for
example, I wanted to illustrate a trade with an assured profit (and no
risk). The day before my talk, I did a little searching and found a
good one within 10 minutes.
I'll conclude my harangue by noting my belief in the critical
importance of formulating a business plan for yourself. Sir Anonymous
criticizes "Trade Your Way to Wealth" for failing to set out my own
personal business plan. In fact, I did not set out my personal plan
for a couple of reasons. First, a good business plan must be
constructed for the individual as I describe in the book. My goals,
capital, risk tolerance, choice of strategy, time spent studying and
trading, knowledge level, and experience are unique and undoubtedly
different from that of each reader. What I have done in "Trade Your Way to Wealth" is to set out a road map for you to create the plan
that fits you, not me. Second, as I note in the book, the traders
business plan is a living document, a work in progress. It can and
should change as you gain more knowledge, accumulate more capital or
suffer losses in your trading. You may practice new strategies and
add them to your trading arsenal. Copying someone else's plan when it
does not fit your knowledge, experience, goals, risk tolerance, etc.
would be absolutely foolhardy.
I have been fortunate and successful in my own trading. I
sincerely believe in making things as simple as possible and I believe
we all are better off if we study and completely understand the
critical basics of trading. Some of those basics, in my opinion, are
the understanding that successful trading isn't easy and we tend to
make it even harder than necessary, it does take work, it will not be
handed to us on a silver platter and there is no holy grail of
trading. In my teaching and coaching, I have found that two of the
most common faults of unsuccessful traders are a failure to understand
the real risk in the trade and a propensity to try to add complexity
to their trading. In "Trade Your Way to Wealth" , I have tried to
address those failings in an effort to help readers become better
traders and investors within the framework of their own lives and
personalities.
Good Trading!
Bill Kraft
Success Trading Group -- by the Success Trading Group Team
Our Success Trading service delivers quality trading ideas for the elite investor that has the financial wherewithal and market nimbleness to profit on small moves in a stock's price. Become a member and you will be provided with email and/or PDA alerts intended to provide you with the opportunity to make many, many profitable trades.
Here is a play from the Success Trading Group:
Consolidated Edison Inc. (ED)
Our Success Trading Group members scored another winning trade this week. We
traded in and out of Consolidated Edison (Ticker: ED) in less than a week.
We like ED at its current price for new positions as well.
Have a great weekend and we'll trade next week.
Success Trading Group Team
