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What Do We Really Want? -- By: Bill Kraft
Copyright 2009, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor |
I remember my start in trading more than a decade ago. It began
with a book I read that just hooked me. It talked about some amazing
returns and exposed me to strategies that previously had been unknown to
me; strategies like writing covered calls and buying LEAPS calls and
selling naked puts. I suppose it was the amazing returns that first
attracted my attention, but it was only after trading a few years that I
realized that the returns the author used to illustrate his points were
annualized, not annual, returns. He would show a trade that produced a
30% return in a month and then discuss it as an annualized return of
360%. Some of the examples as I recall even referred to annualized
returns over 3000%! Definitely, that kind of trading was for me so I
embarked upon my career as a trader.
At that time, the market was a roaring bull and the tech bubble was
expanding. Quite frankly, it was pretty hard to make a very bad trade
as long as I entered a bullish position. Though I felt like I was doing
pretty well, I could not get annual returns anywhere near the 1000%
mark. My naivety was rapidly crushed when I learned that trades could
actually lose as well as win, especially when the market turned over and
rocketed downward. At that point I understood that if I intended to
continue as a trader I needed to do a few more things: I needed to learn
how to trade a down market and I needed to set aside the greed factor as
much as possible and figure out what I really was trying to do.
Figuring out what I was trying to do was not quite as easy as it
sounds. Obviously, the goal was to make money, but underlying that were
questions of what expectations were reasonable, what rewards would I
seek, what risks would I be willing to trade off in exchange, and how
would I go about it? Later, in talking with many seminar attendees and
private coaching students, I learned that most people fail to take those
things into consideration at first just as was the case with me. Most
jump into trading because they see the marvelous potential, but learn as
they go forward that though it may be simple it definitely isn't easy.
One of the questions is whether a trader is in it for the big hit
or whether he is willing to play the game steadily, being satisfied with
a relatively steady advance. I find that those seeking the big payday
only rarely achieve it and often take themselves out of the trading
business without ever achieving success through inattention to things
like reward to risk awareness and money management flaws.
My personal conclusion, and the decisions are personal to each of
us, is to treat the market as I would eat an elephant -- one bite at a
time. In other words, my primary focus is on regular, steady production
of income and increase of assets through a variety of strategies. My
secondary focus to which I devote less time, energy, and money is to
seek big hits. Those huge returns do come on occasion, but in my
experience they are relatively rare and are not frequent enough to
satisfy my financial needs and wants.
It is my sincere belief that almost all of us would be well served
to establish a variety of streams of income in addition to our own
labors. That is the reason I wrote and the material I discuss in my new
book, "Smart Investors Money Machine" . Most of us have differing
abilities and differing requirements, but we share a desire if not a
need to increase our assets. Before "Smart Investors Money Machine" was
released, some self-anointed critic on the blog suggested that the book
was just about diversifying, but he is wrong. While diverse methods to
create streams of income are an important part of the book, it goes
beyond that concept to illustrate how various methods and strategies can
be employed by people at various stages in life and with varying amounts
of time to devote. It is designed specifically to show the individual
reader how he or she might improve their financial lot using investing
and trading methods and devices that work best in their own lives. In
other words, "Smart Investors Money Machine" was written to help
interested readers decide not only what they really want, but also how
to get it.
Good Trading!
Bill Kraft
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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:
DryShips, Inc. (DRYS)
DRYS is one of several shipping industry stocks that have
shown some real strength recently moving up relatively sharply on high
volume. I like the in the money LEAPS calls on this one as the stock
looks like it has about $4 to move before reaching anything that looks
like particularly significant resistance.
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:
Canadian Solar Inc. (CSIQ)
Canadian Solar (CSIQ) has been showing some real strength on
strong volume. I am looking for an entry perhaps on a little pullback.
The stock has a lot of room to run to its 2008 highs that peaked over
$50 a share.
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:
GrafTech International Ltd. (GTI)
$10 Trader closed another profitable trade this past week
realizing an 11.7% return before commission in just 10 days on GTI. I
still like the stock if it can hammer out a support in the $10 range.
Next target appears to be in the $14 range to me.
Good Trading!
Bill Kraft
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