Before launching into the subjects for this weekend, I want to thank
so many of you for your kind words about the Newsletter articles. I'm
really glad that so many of you are finding them educational and thought
provoking. I encourage those of you who are trading and who want to
trade to constantly expand your trading knowledge. Knowledge, of course,
can be gained in many ways such as attending classes, reading, and
observing the trades of others, particularly professional traders.
Those of you who have observed my trading over some period of time
have probably seen that I have had a fairly high ratio of winning trades
to losing trades, but I wonder how many of you notice that I try to
emphasize that I DO HAVE LOSING TRADES. That's part of the business of
being a trader. In my estimation, a great deal of knowledge can be
gained from a losing trade. Last week, I'm sorry to report, I had my
second worse dollar per share loss on a trade I have had since I began
trading for my living. Before I bought the stock, I noted my exit plan
in the event the stock turned against me. Unfortunately, the stock did
turn down, but I did not exit right away. Instead, I decided to stay in
the stock because I knew an earnings announcement was coming and I
expected good earnings news. The stock had remained above both
horizontal price support, the 200 day moving average, and another
uptrend support. I intended to exit on a break below the horizontal
price support and or the 200 day moving average. Earnings were
announced and the net income was up 63% over the same period the prior
year, earnings and revenue also were up. Great news. Guess what? The
stock plummeted. It gapped down $3.79 on the open the next morning and
it has continued to fall even as I write this piece. All this followed a
pretty good earnings report. I did get out that day and thankfully so
since it just continued to drop for the next couple of days.
What can I learn from this lousy experience? Well, I already knew I
was human and, therefore, fallible, but this trade certainly reminded me
that all trading involves risk. In this situation, I had bought no
protective puts since the stock has no options. I did not place a stop
loss order, instead, I placed an alert.. The fact is a stop loss order
would have done little good. When a stock gaps down as mine did, a
stop loss doesn't do much good since a stop sends the order to the
market as a market order once the price is hit or passed. Obviously,
the gap would take it through any stop I would have placed.
I learned that my more common practice of getting out of a position
before earnings are announced generally is a good practice. Here, the
earnings announced were good or even great yet my stock tanked. In the
future, it will be the rare case where I hold onto a stock through the
earnings announcement. Notice how often stocks drop right after an
announcement? If bullish, I think I'm better off not being there at the
time of the announcement. Naturally, I will miss a few big jumps, but
better isn't that better than taking a large loss.
I learned that I'm glad I stick to my money management plan because
my risk is always limited and even when I take a big dollar per share
loss I am still ok overall. That's why I have a money management plan.
I have also reinforced my knowledge that I want to stick with my first
exit. The adage is the first loss is the best loss. I am a confirmed
believer.
I've learned that a lot of subscribers quit when I have a bad
trade. I guess they think all my trades are supposed to be great
winners. Quite frankly, that is a very unrealistic expectation. The
object of the service is to show you what I am doing so you can make
your own analysis, talk to your financial advisor or broker about it and
get their thoughts, assess the risk I am undertaking and build your base
of knowledge. No trader, no matter how successful, is going to have
winners every time. In one of my articles, I showed how a trader could
make a profit through proper money management even if he lost 60% of his
trades. I hate losses and most of all, I hate big losses, but I know
what I am doing is risky, sometimes very risky. Successful trading
requires many things: patience, money management skill, knowledge of
strategies, risk awareness to name a few. It comes only with work and
persistence and even then it may not come to everyone.
Those of you who subscribe have the chance to see the risks I take,
how I take them, and some of the things I do when a play turns against
me. It is my money that I risk in a trade that I make and undoubtedly
my risk tolerance, trade size, financial status, knowledge and trading
experience will be different from each of yours. When you risk your
money in a trade, you need to assess each of those categories as it
applies to you and your personal business plan. Again, I urge you to
continue your education, paper trade before risking real dollars and
establish a relationship with your broker and/or financial advisor so
that you can discuss real money trades before you ever enter one.
Good Trading!
Bill Kraft
SUCCESS TRADING GROUP -- by the Success Trading Group Team
Our Success Trading service delivers quality trading ideas for the elite investor that has the financial wherewithal and market nimbleness to profit on small moves in a stock's price. Become a member and you will be provided with email and/or pager alerts intended to provide you with the opportunity to make many, many profitable trades.
Our Success Trading Group has closed over 260 winning trades and only 8 losing trades on our Main Trade Table.
Details Here.
OPTION TRADER -- by Bill Kraft
Our Option Trading Service is for conservative traders that understand leverage pricinciples. We focus on powerful option trading strategies that place volatility and momentum in your favor. And we pride ourselves on minimizing our losses. We always know our downside potential in a trade.
Details Here.
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.
Details Here.
$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.
Details Here.
COVERED CALL SERVICE -- by the Covered Call Team
Details Here.
