Where Would You Like Your Trading to Go? -- By: Bill Kraft
Copyright 2009, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor |
In the article last weekend, I suggested some serious
introspection and self-evaluation to determine how you were doing with
your trading. To me that means going well beyond whether I am making
a profit or loss. It means I need to understand how I behaved in a
trade to determine what influence my action or inaction had on the
ultimate outcome of the trade. Obviously, I can't control a market
and I can't make a stock do what I want it to do, but I can act to do
things like cut losses by placing stop loss orders or by buying
protective puts and I can decide not to pull the plug when something
is still going my way. Recognition of how I acted and reacted can
profoundly affect my future trading as can failure to understand why
I've acted in certain ways.
There are probably as many answers to the question "where would
you like your trading to go" as there are people answering the
question. Certainly everyone would like to see their trading be
profitable and most, at least, would like their trading to be safe.
But answers will begin to differ when we ask: how profitable? or how
safe? Are we satisfied if we make 1% in a year or do we need to make
15% or 50% to be satisfied. What is safety in a trade, and what
reward can we reasonably expect relative to the "safety" we want?
Recently, a coaching student wrote reminding that most people
seek high rewards, safety, and liquidity. Unfortunately, though we
may find two out of three in a trade, it would be exceedingly rare to
find all three in one specific investment. From the outset it is
important to recognize that almost all trades and all trading involves
compromise of one sort or another. For example, often when looking
for a large reward we may need to take on high risk. Conversely if we
set up a trade that is relatively safe, we may find that we may need
to limit the potential reward to achieve the safety.
As each of us decides where we want our trading to go, we must
both understand and make compromises that can lead us to the results
we seek. In next weekend's article, I'll discuss some of the things I
believe are essential for a trader to do in order to achieve success.
For now, however, the first step is to decide where you want your
trading to go. Is it to be a gambling venture where you buy a stock
that someone mentioned at a cocktail party with the hope it will go up
or do you want it to be your full time occupation? Do you want your
trading to provide a regular stream of income as I discuss in my new
book "Smart Investors Money Machine," or is it sufficient to dabble
occasionally with the hope of snatching a profit here and there?
All the choices are yours. I only suggest that you not be too
cavalier in deciding your approach to your trading. Trading can offer
very significant possibilities to enhance financial success and it can
leave you broke. Either of these possibilities carry serious
consequences deserving of careful consideration. Those who may be
unlearned or unsophisticated in trading may believe that I have put
too much emphasis on this self-analysis, but I am confident that
self-knowledge is an absolute necessity for anyone who intends to
achieve regular success in the markets. We are often our own worst
enemies in entering and exiting our trades. If we start with a
specific understanding of where we want our trading to go, I believe
we have a good beginning. If we don't have that specific
understanding, it might be good to go back to square one and make the
effort to understand ourselves and what we are willing to do to become
better traders.
Good Trading!
Bill Kraft
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Here's a look at a trade Bill is currently working on:
RadioShack Corp. (RSH)
Movement in RSH enabled me to first buy some LEAPS calls
then reduce my cost by selling other calls to create a spread that I
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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:
Copano Energy LLC (CPNO)
This MLP (Master Limited Partnership - trades like a
stock) has been trending up since late December, providing a number of
good entries and exits along the way. Last week, Trend Trader closed a
position to capture a 9.4% gain before commission. I continue to watch
CPNO both for the high distributions it has been paying as well as for
additional price appreciation.
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:
Bare Escentuals, Inc. (BARE)
After breaking out of a modified cup and handle and
breaking resistance both at the $4 and $5.50 levels, BARE has
continued to glisten. I'm looking for entries on dips and see a target
in the $19+ range.
Good Trading!
Bill Kraft
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