A Trading Anecdote -- By: Bill Kraft
Copyright 2008, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor |
As you read this, I am sitting on a lanai in Kauai overlooking
magnificent Hanalei Bay. I'm not trying to make anyone envious, I only
want to point out the great surroundings I am enjoying because I
probably couldn't be doing what I am doing now unless I was in the
trading business. Last weekend I wrote about what I consider to be the
advisability of treating trading as a business and how I believe it can
increase the likelihood of success as compared to those who treat
trading as a hobby or as a gambling venture. Nothing guarantees success
in trading or, for that matter, any business, but the investor's
approach can make a real difference.
One of my early coaching students came to me after having lost a
huge sum of money when the tech bubble burst and the markets turned
down. Tears literally ran down his cheeks when he described his losses
and his hands shook when he spoke about trading. In spite of this, the
student claimed he wanted to be a full time trader. We spoke about the
necessity of getting his obvious emotions out of the way and
substituting discipline in their place. I suggested that the first step
would be the creation of a trading business and he was all for the
idea. We then began to go through the business plan elements I discuss
in "Trade Your Way to Wealth" in order to help this fellow develop a
plan that might fit his personality, risk tolerance, and needs. Our
discussions began well and he started to develop his plan. We then came
to the question of what his business hours would be. I believe it is
important for traders to set out time that they will specifically devote
to their trading business just as it was important for me when I was in
the law business to devote hours to the practice. I also believe it is
important to have time for oneself that is not devoted to the business.
Time to shake out cobwebs, time to enjoy other things in life can be
very important as well. My student absolutely refused to set hours for
himself. I explained that the hours he set originally always could be
changed because his business plan was never to be set in stone; it was
always a work in progress. Nevertheless he flatly refused. He came up
with a myriad of excuses even though he had no other fixed time
obligations since he had quit his job several years before when he began
trading (and before he lost the bundle). It was only after more
discussions with him that I began to realize that refusing to set
business hours was an excuse for his unwillingness to continue to
trade. I addressed that situation with him and suggested that trading
might not be for him. He disagreed vehemently so I asked him when he
had last made a trade. He had not made a trade in more than 2 years. I
suggested we find a stock that looked bullish in a bullish sector (the
market at the time was going up) and buy a single share. He began to
shake and to cry. He was unable to buy a single share of a $15 stock.
He told me he had to wait until the system he was working on was
perfected. Though he didn't use these words, he was working to create
the holy grail. I suggested he might be better off marketing his
system, but now, several years later, he is still working on the system
and he still has not made a single trade as far as I know. This poor
fellow is an example of the need to know ourselves. Some people are not
cut out to be traders and if he ever was he isn't now.
While a plan is very important to trading, my old student taught me
that something needs to come before the plan. Honest self evaluation is
critical. Anyone can be a happy trader when they are making money, but
first we need to know whether we can face the prospect of loss and
whether we can handle actual loss since there will be losses. In the
business sense, can we look at a loss and understand that it is a cost
of doing business or is it going to be devastating? If the prospect of
a loss is daunting, trading probably isn't for you. If you understand
that losses will occur and that risk is ever present but can be managed
with discipline, and if the idea of trading interests you, then maybe
you can start working on your plan.
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:
Hewlett-Packard Co. (HPQ)
Our Success Trading Group members closed another winning trade this week. We closed our recently opened
position in Hewlett-Packard Company (Ticker: HPQ). We have many stocks on our radar for upcoming trades.
Have a great weekend and we'll trade next week.
Success Trading Group Team
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Option Trader -- by Bill Kraft
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The Option Trader service utilizes standard trading in Puts and Calls as well as strategies using Leaps, Straddles, Credit Spreads, Calendar Spreads, and Naked Puts. But no matter how sophisticated a strategy may be, we ALWAYS know our downside potential on every trade.
Here's a look at a trade Bill is currently working on:
Diamond Offshore Drilling Inc. (DO)
This one looks like it may have formed a support just
below $100. It looks like this might offer an opportunity for a 95/90
bullish put spread.
Good Trading!
Bill Kraft
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Trend Trader -- by Bill Kraft
Trend trading as we try to practice it is a form of momentum trading. We prefer to try to capture profit out of the middle of the trend rather than try to catch reversal at bottoms and tops.
Here's a look at a trade Bill is currently working on:
Louisiana-Pacific Corp. (LPX)
LPX is in a short term uptrend and has a little resistance
around $11.50. I am following it to see if it can break that level at
which point I will consider an entry.
Good Trading!
Bill Kraft
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$10 Trader -- by Bill Kraft
We really enjoy trading stocks that are $10 and under. Often they provide the chance to enjoy high percentage gains and, of course, at worst, the risk is limited to what we paid for the stock.
Here's a look at a trade Bill is currently working on:
Advanced Battery Technologies Inc. (ABAT)
I played this one a little while back and it has now
retreated to support and looks as though it may form a double bottom
which will be reason for me to consider a new entry.
Good Trading!
Bill Kraft
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Dividend Investor -- by the Dividend Investor Team
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