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What You Want from Your Trading -- By: Bill Kraft
Copyright 2009, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor |
Before I launch into the subject of this weekend's article, I
hope all of you had a fantastic Thanksgiving. Traditionally, the
holiday is a time to give thanks for what we have and to reflect about
our lives. In that spirit of reflection, I thought it might be a good
idea to reflect on what we want from our trading.
Obviously, on the most basic level, we want to make money from
trading. I suggest, however, that there are considerations well
beyond the basic. Dr. Ari Kiev, a psychiatrist, an advisor to traders
and a prolific author of trading books suggests that more
self-examination is something that would benefit us ("Trading to Win,"
Wiley, 1998, p.7). I couldn't agree more. Few traders seem to take the
time to determine what they really want and how they might go about it.
It seems to me that one thing almost everyone would like is more
regular income. Before we can amass great fortunes, we need to pay
the bills each month so it makes sense to me to consider utilizing
trading strategies that provide regular streams of income. I devoted
a whole book, my recently released "Smart Investors Money Machine" ,
(Wiley,2009) to precisely that concept. The book sets out at least 16
different strategies through which a trader or investor can create
income flow beyond what he or she may earn through their employment.
I haven't been employed for years yet I am fortunate to live a
comfortable life and am able to enjoy many of the things life has to
offer with relatively little stress. One of the major reasons is that
I have developed a number of streams of income and while no single one
may be considered particularly large, together they provide more than
enough to cover my costs of living. It is only after those costs are
covered that we can look to increasing our net worth.
In my own case, I assign a portion of my assets to income
production and the remainder to efforts to appreciate capital. Once I
know expenses will be covered, I can be relatively relaxed and patient
in my efforts to accumulate more capital. I would suggest that may be
an important approach for many traders. As I have written before,
patience is a critically important factor in successful trading. One
of the impediments to trading I often have seen is the rush to make
money. Recently I heard a speaker discuss a strategy he was using and
as part of that strategy, he was taking profits at a specific target
even if the move was continuing in a favorable direction. I call that
cutting profits. The speaker admitted it was part of his personality
in that he did not want to stay too long in any position. I look at
things a little differently and would prefer not to stay too little
time in any position that is continuing to add money to my account as
time goes by.
The speaker to whom I refer may be an example of the trader who
hasn't conducted a self-examination at least to the level where he
recognizes that he is violating a cardinal rule of successful trading.
He is not letting profits run. The idea of exiting a trade quickly
just to be finished with it quickly does not appeal to me. It is hard
enough to find really good trades, and makes little sense to get out
of one that is still producing just because I want a trade to finish
quickly. It's like capping an oil well that is still a strong
producer in favor of drilling a new well in the hope that it will be
productive.
Self-examination might lead such traders to a conclusion that
they might improve the bottom line simply by staying with a trade
until it is no longer productive. All of that is to say that if one
knows precisely, not just generally what one wants, the results may
improve. As Dr. Kiev suggests, setting a goal (and then putting it in
the background) is often very helpful in getting where we want to be.
My own suggestion is that we first consider how we intend to get to
the goal once set. For many, I suspect that is the production of
regular income.
In "Smart Investors Money Machine" I include many ways to add
streams of income from simple concepts like investing for dividends to
writing covered calls to selling naked puts or creating iron condors
or investing in MLPs or bonds, annuities or even reverse mortgages for
those older than 62. Each of these strategies is explained in detail
and the reader is shown how each might be employed depending upon the
trader or investor's age, station in life, and resources. These
strategies can really help. I know; they've definitely helped me. In
addition to helping me pay the bills they have provided income that
permits me the luxury to be patient in my own trading.
Good Trading!
Bill Kraft
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Here's a look at a trade Bill is currently working on:
ITT Educational Services Inc. (ESI)
One of the bright notes on a dreary day for the bulls in
shortened trading on Friday, ESI bounced up off what appears to be a
relatively firm support around 90. As of Friday close, there was what
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Good Trading!
Bill Kraft
Editor of $10 Trader, Option Trader and Trend Trader
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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:
Synaptics Inc. (SYNA)
SYNA was able to stem the tide Friday as it added 1.4% and
continued its' positive movement. If I were to enter this one, I would
have a fairly close exit in the event the downward market pull
continues and takes some wind out of SYNA's sails.
Good Trading!
Bill Kraft
Editor of $10 Trader, Option Trader and Trend Trader
"Trade Your Way to Wealth" by Bill Kraft is an Amazon.com best seller!
"Smart Investors Money Machine" is Bill Kraft's most recent publication.
"Trading for Keeps: Making Money with Low Risk Option Trades" a trading DVD by Bill Kraft
Try our Trend Trader Real-Time Alert Service
and Get $50 off our Normal Website Rate!
$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:
Health Management Associates Inc. (HMA)
HMA looks like it may have found a level of support in the
$6 to $6.30 range. An entry around $6.30 with a planned exit in the
event it went the wrong way would give me a downside risk around 30
cents (assuming no gap down below that level) and a first target in
the $7.30 range for a potential reward to risk of a little better than
3:1.
Good Trading!
Bill Kraft
Editor of $10 Trader, Option Trader and Trend Trader
"Trade Your Way to Wealth" by Bill Kraft is an Amazon.com best seller!
"Smart Investors Money Machine" is Bill Kraft's most recent publication.
"Trading for Keeps: Making Money with Low Risk Option Trades" a trading DVD by Bill Kraft
Try our Under $10 Trader Real-Time Alert Service!
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