Online Investment Services, LP publishes a number of services including
Option Trader, $10 and Under Trader, and Trend Trader which I edit.
Whenever an alert is sent out notifying subscribers of some trade I have
made or that I am considering, it is accompanied by a disclaimer. The
first two sentences of the disclaimer read: "These notices of Mr.
Kraft's trading ideas are intended to provide opinions about and
analysis of the mentioned stock(s) and options. They are not intended
to provide personalized investment advice". There are many reasons for
those statements in the disclaimer. Primary among those reasons is the
fact that I cannot and do not give you specific individual investing
advice. I have no idea who you are, what your experience is, what your
risk tolerance may be, what your goals are, how much money you are using
to trade, or what financial education you may have. In addition, I am
neither a broker nor am I a financial planner. Taking all those
circumstances into consideration, it is important to realize that the
only thing I can offer you is my personal opinion and information about
trades I am entering or considering. You, in turn, have the opportunity
to see what I am doing and learn from both my successes and failures.
If you are considering entering the same trades as I do, you should not
do so blindly. If a strategy is new to you, you should trade it on
paper before ever considering investing real money. Unless you are a
seasoned trader, you should consult with your own financial advisor,
financial planner, and/or broker before entering any trade. Trading can
be very risky and losses are frequently incurred.
My purpose, in the services I edit, is to show you trades I do and try to expose you to a
variety of strategies. Since I trade for my livelihood, this
information may be helpful but it is certainly not infallible. It
should be nothing more than a starting point for you to conduct your own
investigation, make your own analysis, consult your own professional
advisor, and only after doing those things, make a decision. Nothing
makes me happier than receiving an email that questions a strategy or
criticizes my trade. Those comments demonstrate that the writer is
thinking and analyzing for himself. That person is the one who is
likely to improve his trading, to understand the process, educate
himself and ultimately succeed.
One of the major reasons that I am re-emphasizing these issues is that I
so often see a new subscriber avail himself of the free 30-day
subscription and then quit the first week if I have not immediately had
a successful trade. This activity suggests to me that the new
subscriber is missing the point. They are searching for the holy grail
of trading. Trust me, I am not the holy grail of trading. In fact, if
I am reasonably certain of anything, it is that there is no holy grail
of trading. Every trader is going to have losses as well as successes.
Bouncing from one subscription service to another accomplishes little if
anything.
I can tell you that as I write this article, I have closed 14
winning trades in a row for the $10 Trader and that I have only closed 1
loser since the service began. Impressive or lucky? That is history,
but it does not mean that I might not lose in the next 5 or 7 straight
trades. The value, it seems to me is to see how I made my entries and
what caused me to exit. What level of risk was I exposing myself to
when I entered a trade and what did I do to manage that risk? It is the
old story about giving someone a fish or teaching them how to fish. I
am not trying to give you a fish. That would only last a short time. I
want you to learn how to fish and, if you do, that can last you the rest
of your life. In order to learn how to fish, though, don't you think it
is important to see where the fisherman has made mistakes so that you
can try to avoid the same ones in the future? As I trade, let me urge
you to see the mistakes as well as the successes. That is the real
value of the service. I can offer no holy grail, only the opportunity
to see how I approach trading. Sometimes, that means you will see
mistakes mixed with success. Those mistakes can provide even more
important lessons than the successes.
Of the trades closed since I started editing Trend Trader, 71% have been
successful. Can you make money with a 71% success rate? Of course you
can. However, if you study the Trend Trader Table, you will see that I
took a couple of fairly large losses. The goal of every successful
trader is to cut losses and let profits run. It is important to learn
how to do that. Studying the Trend Trader trades could be very helpful
in seeing where I have succeeded and where I have failed. The most
common question I am asked about trading is how do I find the candidates
to trade. Let me suggest that the much more important question is how
do I set my exits for a trade. We have won or lost only after the trade
ends so the exit and the exit strategy are paramount in my estimation.
Money management is also critically important, and both exit strategy
and money management come way before what stock to pick in my judgment.
I have written earlier articles on both exits and money management, so
if you are interested, browse the archives.
Let me implore you to forget the quest for the holy grail of trading
and, instead, learn as much as you can about trading and then practice,
on paper, what you learn before you ever place your hard earned money at
risk. If you aren't willing to take the time and make the effort to
learn trading, you probably will not succeed. It is that simple.
Good Trading!
Bill Kraft
Mr. Kraft's past articles are posted on our website for your review.
-- by the Dividend Investor Team
