Now that so many readers have their blood boiling over the last few
articles on the subject of money, I am going to change gears and treat
the subject of trading knowledge. From the many emails I receive, I
know that readers include every category from beginner to professional
trader. No matter who you may be, I suspect you would not be reading
these articles unless you were seeking to add to your knowledge or
reinforce what you already know about trading.
This weekend, I have posed a few questions for your consideration.
As you answer them for yourselves, you may get a better feel for your
own strengths and weaknesses as a trader. In fact, simply taking the
time to answer them honestly actually may improve your trading or at
least may point you in the direction to impove quite rapidly. In the
next few weeks, I'll discuss some of these questions and provide some of
my own thoughts for whatever value that may have.
1. Rate the following strategies from least risky to riskiest:
a. Selling naked puts
b. Credit spread
c. Buying stock
d. Collar
e. Buying options
f. Selling naked calls
g. Writing covered calls
h. Straddle
2. Is there any zero risk trade, and, if so, how is it created?
3. If you are going to buy a stock, what leads you to decide on a
specific stock?
4. Do you sometimes enter a position based on a tip from a family
member, a friend, or someone at work?
5. Do you sometimes enter a position because it has been recommended by
a broker?
6. How do you decide when to enter a position?
7. Have you set out an exit strategy before you enter a position?
8. How do you decide how much money you will risk on any single position?
9. What steps did you take in choosing a broker?
10. Specifically, what led you to decide upon the broker you chose?
11. Do you do any paper trading or practice trading?
12. Are you making money in the markets?
13. Do you trade options? If so, why? If not, why not?
14. What tools do you use to assist you in trading?
15. How much time do you devote to your making your trading decisions?
16. When do you make your trading decisions?
17. How much time do you devote to increasing your trading knowledge?
18. What do you do to enhance your trading knowledge?
19. Have you committed a trading business plan to writing?
20. Do you use a reward to risk ratio and, if so, how do you calculate it?
Good Trading!
Bill Kraft
Mr. Kraft's past articles are posted on our website for your review.
