Priorities in Trading -- By: Bill Kraft
Copyright 2009, CutLoss, Inc., All Rights Reserved
Bill Kraft
Editor |
In the years that I have been trading, teaching trading, and
writing about trading, probably the question I am most frequently
asked is how to I find what stock to trade. While that obviously can
be quite important, there are a number of other factors that, to my
mind, are at least as important. As anyone who has undergone private
coaching with me will tell you, there is much greater emphasis on
formulating an overall plan, formulating a plan for a specific trade,
money management, reward to risk analysis, exit strategy, and
discipline. Even if we aren't a particularly great stock picker, those
other elements can serve to save the day and make a trader profitable
if used properly.
In my book, "Trade Your Way to Wealth" for example, I go over
those elements in some detail, and emphasize the importance of risk
awareness and risk management. Shortly, my new book, "Smart Investors
Money Machine," will be released, and in it I emphasize the need to
create multiple streams of income and discuss quite a number of ways
to do just that. Some individuals have suggested that my approach may
not lead to fast wealth. I won't dispute that although I will say
that some of the strategies I use and about which I write definitely
can and do lead to wealth when used appropriately. I am a firm
believer, however, that first we need to look to protect capital.
There are many ways to do that, but I fear that most retail traders
fail to make that a top priority.
Sadly, many of the calls I get inquiring about coaching are from
people who have already lost large sums and are looking for ways to
stop the bleeding. While "better late than never" is certainly
apropos, I earnestly suggest that traders and investors make it an
early priority to gain the knowledge of how to protect against
catastrophic loss and how to minimize losses in their trading before
heading off to put their money at risk. I don't mean you have to call
me or hire me for coaching. There is plenty of information available
on the internet, in books, and in DVDs that will help in that regard.
So many of us jump in with the hope and expectation of
accumulating riches only to have our dreams dashed because we forget
that trades can lose as well as win. We have no plan or strategy to
protect us if things go the wrong way. We fail to employ a discipline
or realize that we must expect that a fair number of trades are going
to go the other way. What we need to understand is that we can still
make money even when a signigicant number of trades are losers as long
as we pay attention to important things like money management and
reward to risk ratios.
I have often said, and I'll say it again, what we need to do to
succeed is take our eye off the money and concentrate on making good
trades. A good trade can actually lose money if we have followed our
plan, employed a reasonable reward to risk ratio, and followed a
pre-determined exit strategy to cut losses. A trade that makes money
can actually be a not-so-good trade if we fail to follow our plan and
cut our profits prematurely because we didn't utilize discipline, but
rather followed our emotions.
Good Trading!
Bill Kraft
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Here's a look at a trade Bill is currently working on:
Permian Basin Royalty Trust (PBT)
PBT gapped up on Friday on very high volume and looks
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debit spread offered a potential return of over 400% if the stock
could climb above $15 by September expiration.
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:
Penn Virginia GP Holdings LP (PVG)
This Master Limited Partnership (trades like a stock) has
been providing an annual yield through distributions of more than 14%
at current prices. It has just bounced up off a level of support and
may offer a good 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:
Exide Technologies (XIDE)
XIDE is now coming up off a double bottom. I closed a
profitable $10 Trader trade back in January and suggested this one
might offer a re-entry down the road. It looks like that may be
approaching.
Good Trading!
Bill Kraft
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