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Basics -- By: Bill Kraft
Copyright 2009, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor |
As far as I am concerned, successful trading can be very simple,
but, by that, I don't mean to suggest that it is easy. I am
constantly amazed by the trading talks I've heard and the concepts
avowed that involve endless complexities.
It is my opinion that far too many traders fail or at least fail
to succeed because they try to make their trading too complex. I
agree that it is important to have rules by which to trade because
that introduces discipline to the trading, but I don't believe those
rules need to be particularly complex. In fact, with the prior
history of coaching students who later come to me I have frequently
seen their previous trading go from pretty good to not so hot as they
began to add layer upon layer of complexity. My advice in those
situations often is to keep your trading simple but if you want more
complexity go study nuclear physics.
Unfortunately keeping it simple can be very hard to do. I know
of traders, for example, who have developed a very successful trading
methodology, but they persist in day trading different strategies that
break even or lose money because they feel they need to be doing
something else. Someone once suggested that they followed that
pattern because it seemed to easy just to make money with a simple
strategy that worked and they felt some element of guilt so they
expended more effort even though it was not financially productive.
Logically, of course, that makes little sense, but psychologically
there is probably something to it. When we step back and think about
it, after all, the markets well may be more about the psychological
than the logical.
I guess it would only be fair to ask me what I mean by making
trading simple. In "Trade Your Way to Wealth" I've discussed in depth
the creation of an individual's personal trading plan. It includes
money management. One thing that each trader should do in my view is
have some specific plan of how much to assign to each trade. There
are several ways to do that as discussed in "Trade Your Way to Wealth"
and the works of other authors. None is terribly complex, but it is
important to pick one. After the method of money management is
decided a trader might establish a minimum reward to risk that must
appear before any trade will be entered. Finally, an exit and entry
strategy should be chosen and, in my estimation, in that order. For
example, a trader with a longer time horizon might decide that he will
use a 50 day moving average as both initial entry and initial exit.
If the share price crosses above the 50 day MA he might decide to buy
the stock and will use a cross below the same 50 day as the exit. He
might continue the trade for a short or very long time, but the method
of exit is in place; a cross below the moving average.
Is such a strategy the best? No one can ever tell until a trade
is finished, but it is simple and it can be effective. One problem
with moving average entries and exits is that one can get whipsawed
when a stock is trading in a relatively tight range. Another is that
the exit becomes pretty far away if using a fairly long term moving
average like the 50, but once there has been a move in the right
direction the trader can then use Part B of his plan and move stops up
to attempt to protect additional profit.
Anyway, there is an example of simplicity. 1.Money management
plan 2.Reward to risk requirement 3. Initial exit/entry strategy 4.
Method to move exit strategy in direction of move. Now, off to
nuclear physics class.
Good Trading!
Bill Kraft
Success Trading Group -- by Success Trading Team
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Bristol-Myers Squibb Co. (BMY)
Our Success Trading Group members closed two winning trades this week including a trade on Bristol-Myers Squibb (Ticker: BMY). We have several stocks on our radar and are looking forward to trading next week.
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Option Trader -- by Bill Kraft
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Here's a look at a trade Bill is currently working on:
SPDR Gold Shares (GLD)
Option Trader closed a spread on GLD this week that
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spread on GLD in recent trading. Meanwhile, GLD fell back on Friday
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an upturn.
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!
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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:
Avery Dennison Corporation (AVY)
After a test of support AVY may well have returned to the
uptrend with a real body candlestick gap up on high volume on Friday.
At this level, there is a relatively convenient loss cut exit on a
close below the 20 day EMA.
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:
Symmetry Medical, Inc. (SMA)
SMA bounced up off support around the $7.50 level and has
been channeling between that level and about $8.50 since it gapped
down following an earnings warning in late October. The first target
level for me would be around the $8.50 level with an initial exit
somewhere below but near support. Since there is a nice gap up to
$9.50, a move above the $8.50 resistance could signal another dollar
move.
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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Here is a play from the Dividend Trader Team:
Altria Group Inc. (MO)
Our Dividend Traders closed another winning Trade this week. We like Altria Group (Ticker: MO) as an Invest position at $19.05.
Have a great weekend and we'll trade next week.
Dividend Trader Team
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