Picking A Strategy
I recently wrote a little about picking a stock and mentioned a few of the myriad ways in which an investor or trader might go about selecting a candidate. In my own trading life, as I review stocks, I find that the process becomes much more one of elimination than selection. . . . more . . .

Selecting a Stock
The most common question I am asked about trading is how I select what stock to trade. There are probably as many ways to select a stock as there are people searching for candidates. . . . more . . .

A Couple of Answers
This weekend I am going to discuss a couple of topics. The first deals with some trading issues raised by an email from a subscriber to one of the alerts and the second with a suggestion by a blog contributor that I provide some information about the differences between my two books, "Trade Your Way to Wealth" and "Smart Investors Money Machine". . . . more . . .

What Do We Really Want?
I remember my start in trading more than a decade ago. It began with a book I read that just hooked me. It talked about some amazing returns and exposed me to strategies that previously had been unknown to me; strategies like writing covered calls and buying LEAPS calls and selling naked puts. . . . more . . .

Reaction and Over-reaction
One seeming constant I have observed over my more than a decade of trading for my living is how the markets tend to react and often over-react to various events and news. Have you noticed, for example, how often a stock price will dip following an earnings announcement even when the announcement is good? . . . more . . .

Motivation
In recent articles, I have touched upon issues relating to the idea of knowing oneself as a trader; the necessity of careful self-analysis. One important area I believe many traders gloss over is the concept of motivation. . . . more . . .

How We Learn
After last weekend's article, a subscriber wrote an important and thought provoking note on the blog. He indicated that he was unable to learn very well by reading books or watching DVDs and believed the only way he could learn to trade was by actually doing it. . . . more . . .

What Are You Willing to Do to Become a Successful Trader?
Over the last couple of weeks, I have written about taking personal inventory and making the evaluations necessary to choose where you want to be as a trader. In this article, I would like to invite your attention to what you may or may not be willing to do to become a successful trader. . . . more . . .

Where Would You Like Your Trading to Go?
There are probably as many answers to the question "where would you like your trading to go" as there are people answering the question. Certainly everyone would like to see their trading be profitable and most, at least, would like their trading to be safe. . . . more . . .

What Have You Been Doing?
This article is the first in a series of three where I will raise the questions of where have you been with your trading, where would you like to be, and what are you willing to do to become a better trader. . . . more . . .

An Impediment to Profitable Trading
When we trade the markets, we have many hurdles to overcome if we are ultimately to be successful. Underlying all trades, for example, is the necessity to have knowledge. We need to know what we are doing and we need to know the specific risk(s) we are assuming. We need to understand the strategy we are employing and we should have an exit strategy. . . . more . . .

How Can a Trader Make Market Cliches Work?
One of the many enjoyable things for me in learning about and trading the markets is the variety of colorful cliches that point out some little piece of wisdom (mostly) or other. "You can't go broke makin' a profit," for example, can remind us that it may be a better idea to take profits at some time before they turn into losses. . . . more . . .

The Issue of Safety
Last weekend I wrote a little about what I consider to be the importance of establishing streams of income. I included the statement: "I believe that creation of diverse streams of income can be a critical element in assuring financial comfort." One anonymous blogger apparently mentally added the word "safe" to my statement when he (or she?) wrote: . . . more . . .

Investment Philosophies
The classic investment philosophy taught to preceding generations has been "buy and hold." There is little question that "buy and hold" worked well over long periods of time and those who bought stocks and held them for 20, 30, or 40 years often had a decent gain, even after inflation. . . . more . . .

Catching a Falling Knife?
Trying to pick a bottom on a falling stock or index can be a very difficult proposition and, in the trading business, has been likened to trying to catch a falling knife. . . . more . . .

What Does It Look Like
Perhaps the second most frequent question I am asked (right after how do I find a stock) is what do I think the market is going to do. When I answer, I want to avoid rudeness yet the simple fact is that whatever I may think the market is going to do is completely irrelevant at least in the sense that the market simply does not care what I think. . . . more . . .

Priorities in Trading
In the years that I have been trading, teaching trading, and writing about trading, probably the question I am most frequently asked is how do I find what stock to trade. While that obviously can be quite important, there are a number of other factors that, to my mind, are at least as important. . . . more . . .

How Long Will My Trade Be?
Recently, a subscriber to the Option Trader service wrote to ask why I bought LEAPS (that expire a year to three years out) when I only planned to be in a trade from 1 to 3 months. That is definitely a great question that raises what I consider to be some very important issues about all trading, whether stock or options. . . . more . . .

Keeping Records
One often neglected part of trading is record keeping. Active traders probably know that the IRS requires us to file a Schedule D-1 with our tax returns detailing both short term and long term capital gains and losses and including the date acquired, the date sold, the cost or other basis, the sales price and the gain or loss. . . . more . . .

Avoiding Impulse Trades
Last weekend, the Newsletter article began with several questions. I then went on to explain how important I believe it is to make decisions and how difficult it is for so many to make those decisions themselves. Somehow, at least one subscriber interpreted the article to suggest that I was advocating making trades on impulse. . . . more . . .

Decision Making
When we trade we need to make many decisions. What stock will I choose? What strategy will I use? When will I enter? Am I bullish or bearish? What is my exit strategy? Will I set a stop to buy? Will I set a stop loss once I have entered? What reward to risk do I seek to attain with the trade? Will I bother to create a trading plan? These are just a few of the decisions we must make as traders. . . . more . . .

Exuberance, Rational and Irrational
Many of us who have been around and trading for a while will remember former Fed Chairman Alan Greenspan's warning about irrational exuberance back in the time of the tech bubble. His warning proved to be prophetic in those circumstances, and I would suggest that irrational exuberance is something against which all traders should guard. . . . more . . .

Broadening Horizons
Experience has shown that many subscribers are like most retail traders in that their trading is limited to buying stock and hoping it will go up in price. As most regular readers know and as anyone who has read "Trade Your Way to Wealth" is aware, I am a believer in playing the direction the market is moving. . . . more . . .

Welcome 2009
I hate to see any year end because every one has provided wonderful experiences and pleasant memories. 2008 was no exception in those categories, but most of us are glad it is over from a market perspective, at least. . . . more . . .

Start from the Beginning
Over the past several months the markets have shown extraordinary volatility and we have been witnessing a serious bear market. During that time I have spoken to many traders and investors who have accumulated large losses. . . . more . . .

Aggressive or Conservative
Last weekend a couple of subscribers offered differing points of view regarding conservatism in trading. One, who comments with some regularity suggested that my investing approach was too conservative and defensive for his blood and mentioned that it was unlikely that I had made my money placing collars. Another subscriber and long time investor wrote and took the position that defense and conservatism is an important ingredient in successful investing. . . . more . . .

More on Being Careful About to Whom You Listen
Last weekend an anonymous subscriber wrote a caution on the blog in which he noted: "Not to be a cinic [sic], rather a realist, please recognize these blogs are solely published to drum up business for their paid advisory trading subscriptions, books, seminars or a variety or of other sales pitches. . . . more . . .

Selling Short
In the past couple of weeks, some subscribers have written and asked about shorting stock. The markets are currently dealing with levels of support that go back to 2003 and 2004 and we don't yet know whether we are going to see another downward move or whether the bottom has been hit. . . . more . . .

Buy and Hold Revisited
Around this time last year, I wrote an article in which I warned of the dangers of buy and hold investing. One critical response accused me of "shucking and jiving" and asked for academic publications supporting the value of trading options. . . . more . . .

Protecting Positions
Last weekend I wrote about the use of stops in general and in high volatility markets such as those we are currently facing. A reader pointed out that I didn't know what I was talking about since it was his view that stops don't work in high volatility markets and the only thing worthwhile to protect positions was the protective put. . . . more . . .

Some Considerations for Setting Stops in High Volatility Markets
It is certainly no secret that the recent past has demonstrated a period of historically high volatility in the markets. One of my very successful coaching students from this past year wrote last weekend and suggested that I write an article dealing with setting stops in this high volatility environment. . . . more . . .

Predictions
After stirring up the hornet's nest last weekend, I'm returning to some considerations for traders. Last weekend, I had the privilege to speak at the Trader's Library event in Chicago and was humbled to be in the company of legends like Dick Arms (creator of the Arms Index) who was inducted into the Trader's Hall of Fame and Charlie Kirkpatrick, a two time winner of the Charles Dow award. . . . more . . .

The Definition of Insanity
I just have to laugh. Now I remember why I stopped doing seminars and limited my teaching to speaking engagements and private coaching. Last weekend, I included a section in the Newsletter article asking if folks might be interested in a seminar in Scottsdale late this coming winter. . . . more . . .

Euphoria and Despair
The markets have certainly been on a wild ride this year. The Dow Industrials, for example, dropped 5250 points from the intra-day high in May to the intra-day low on October 10th. The Nasdaq Composite and the S&P 500 suffered similarly. Many traders and the investing public have taken a very disheartening ride. . . . more . . .

The Trouble with Calling a Bottom
Recently, I've heard a lot of chatter from various pundits about whether they are "calling a bottom" or not. Not surprisingly, some are saying we are at or near the bottom while others proclaim that we still have a ways to go. Who's right? Who knows? . . . more . . .

Volatility
What a wild market we've seen. Volatilities reached levels not seen for 5 or 6 years. The Dow was down almost 800 one day and up nearly 500 by the close of the following day. These have been hard, fast swings and they can be very difficult to trade. Straight directional trades have been dangerous. What can a trader do in circumstances like these to protect himself or herself? . . . more . . .

The Problem with Market Commentaries
A recent note from a subscriber alerted me to discuss what I am trying to do with the Newsletter articles and why I am doing it. The subscriber chastised me for failing to comment on the financial meltdown in last weekend's article and suggested that I did not write about those developments as every other Newsletter writer to whom he subscribed did. . . . more . . .

Pursuing a Trading Education
As many readers are probably aware, I am a great believer in advancing my trading knowledge and advocate ongoing trading education for anyone who wants to become and remain a successful trader. During the last week, I had a short dialog with a subscriber on the blog who adamantly takes the position that he is going to learn for himself. Good for him! . . . more . . .

A Trading Anecdote
As you read this, I am sitting on a lanai in Kauai overlooking magnificent Hanalei Bay. I'm not trying to make anyone envious, I only want to point out the great surroundings I am enjoying because I probably couldn't be doing what I am doing now unless I was in the trading business. . . . more . . .

Treating Trading as a Business
How do you think of your trading and investing? Is it a hobby? Is it gambling? Is it something you do when Uncle Fred gives you a tip or when you see something exciting about a company on television? Have you devoted time to learning strategies or do you just buy a stock when you "think" or "feel" it is going to go up? . . . more . . .

Times of the Year
As we reach Labor Day and the end of the summer vacation season, it occurred to me that it might be an appropriate time to examine some of the influences of the calendar on stock and option trading. While it may be surprising to some, time of year can actually have an influence on market behavior. . . . more . . .

Searching for the Key
Over the course of my trading career I have met a lot of people who were trading or trying to trade. I met them at seminars I took, in trading groups, at seminars I gave, and at events where I have spoken. If we are to believe the statistics, most of them were doomed to fail. . . . more . . .

The Insidious Nature of Greed
Most of us are probably aware that emotions can be the downfall of traders. The markets undoubtedly react to fear and greed. All we need do is recall the tech bubble of the late 1990's when traders were paying exorbitant prices for stocks of companies that had no earnings, and in some cases, barely a business plan. Greed fueled the fire and people bought positions with no thought that things might turn south. . . . more . . .

Standing Aside is a Strategy
Over the past several months, I have received a number of emails and heard from many traders how hard they consider the markets have been to trade. In talking to others, I have heard many sad tales about significant losses. . . . more . . .

Play the Market at Hand
In recent weeks, I have received a number of emails from traders who have been suffering a high percentage of losses in their accounts and who wonder what they are doing wrong. In many cases the answer is that they are playing a market that does not exist right now. . . . more . . .

Pitfalls Encountered with Emotional Trades
At one time or another, most traders, including myself, have traded by emotion. In coaching sessions and in conversation with many traders over the years, I have seen countless examples of emotional trades and emotional trading. There has been one constant in those observations and it is that those who continue to trade with emotion without some discipline fail. . . . more . . .

The Anger Amazes Me, But Proves the Point
Last weekend I wrote a little article suggesting that perception, not necessarily actuality, moves the markets. In the article I quoted -- yes, quoted, not made up or voiced my opinion -- some positive facts about the economy taken from front page articles in Investors Business Daily. . . . more . . .

Perceptions
Suppose you were watching the TV news last week and learned that Personal income jumped 1.9% last month; Disposable income was up 5.7%, the sharpest gain in 33 years; in the last 20 years, the average lifespan has increased by 3 full years. . . . more . . .

How Many Positions to Hold
Last weekend, in response to a subscriber's question, I discussed the issue of how much money a trader needs in a trading account. As is often the case with trading, the answer is "it depends" on the individual and his or her goals, needs, risk tolerance, time available to trade, and so on. That same subscriber had also asked how many positions to hold in order to have a good mix of issues. Again, the answer is completely dependent upon the individual. . . . more . . .

Some Thought Provoking Questions
After the article in the last Newsletter, I received some interesting questions on the blog. One full time trader asked a couple of questions I frequently hear from both full time and part time traders. The first question is how much money does a full time trader need to trade? I should add that this question is also an important one for part time traders as well. . . . more . . .

Managing Trading Account Money
A couple of weeks ago, a subscriber wrote asking how someone who trades for a living manages money in their trading account. The subscriber was interested in whether profits are plowed back into the account or taken out or exactly how the money is managed. . . . more . . .

Identifying the Emotion in Trading
Most of us have learned that emotions can be a serious enemy of successful trading. Unfortunately, all too often, trades are entered and exited solely because of emotion. Thoughts like "if I buy XYZ, I'll make a bundle," or "XYZ went down 50 cents today, I better get out" are examples of entering for greed and exiting for fear without any pre-planning or underlying discipline. . . . more . . .

A Little More on "Entitlements"
I think I received more comments last week about the Social Security issue than on any other article I have ever written for the Newsletter. As might have been predicted, the commentaries ran a very wide gamut. . . . more . . .

Social Security - Where from Here?
Among my random thoughts last weekend I mentioned Social Security and was not surprised to receive a couple of comments on the subject. I guess I was surprised that I didn't get more comments. All of us are in one category or another -- we are either receiving the 'benefits' or we are paying for them.
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Random Thoughts for Traders on a Holiday Weekend
As an advocate of discipline in trading, I am a firm believer in having a precise exit strategy in place before I ever enter a trade. I try to do that in my own trading and believe it is important to actually exit according to that plan rather than relying on that little voice in my head that tells me: "Don't worry, hang in there, it'll come back." One of my random thoughts this weekend is whether everyone has that little voice. . . . more . . .

Certainty
Ever since I began trading I have encountered many statements seemingly made with great certainty. I have heard people say that a specific stock price is going to jump up on the earnings announcement. It didn't. . . . more . . .

Do Traders Really Die Broke?
Last week, in response to my invitation to submit market sayings, one anonymous commentator who identified himself as one who had spent 16 years on the floor of the NYSE suggested a saying he attributed to folks who worked there. The saying is: "Traders die broke." . . . more . . .

More Market Sayings
Last weekend I wrote about some market cliches so we could think about their efficacy. While these sayings have become conventional wisdom, the real question for us as traders and investors is are they complete and do they work; do they produce the intended result? . . . more . . .

Market Cliches
When I first was drawn to trading I was a little intimidated by parts of the new language (e.g. diagonalized calendar spread or strangles or going naked) and I was a little amused by some of the cliches. . . . more . . .

Trading Is About You
What strategies you select when trading the markets is entirely up to you. In my view, you should choose strategies that fit your needs, your risk tolerance, and your personality. . . . more . . .

Thoughts About Seminars
In the article last weekend, I wrote about education with some emphasis on coaching. I promised to write a little about seminars this week, so here goes. First, let me say that I am a fan of seminars. . . . more . . .

Planning Your Trading Education
I am absolutely convinced that one of the most important factors in achieving success in trading is to have a trading business plan. I am so convinced that I devoted a complete chapter in my book, "Trade Your Way to Wealth," to the creation and content of a personalized trading plan for traders and investors. . . . more . . .

Finding a Stock
Perhaps the question I am asked most often is how do I find what stock to trade. Quite honestly, I don't think that is the most important question a successful trader can ask, but it is clearly one that is on the minds of many retail traders. . . . more . . .

Some Random Thoughts About Brokers and Trading Knowledge
Whenever I have written about brokers in the past, it seems to have stirred a storm of emails relating either horror stories or positive experiences with brokers. Like anything else, there are good and bad and the key for us, as traders, is to figure out which is which. . . . more . . .

Setting the Record Straight
There is no question in my mind that people who are serious about their trading need to have accurate information. Without it, it is even harder, if not impossible, to succeed in an already difficult business. . . . more . . .

Loss Aversion vs Risk Aversion
As almost every trader knows, cutting losses is a critically important component of successful trading. The key, of course, is to know how and when to cut those losses. Unfortunately, all too often, emotions play a significant role in when we cut our losses. . . . more . . .

Home Runs and Singles
Spring training has arrived for baseball players and that led me to consider some of the analogies of trading to baseball. Over the years, I have observed quite a number of traders who perceive themselves as sluggers who are always looking for the home run in their trading. . . . more . . .

Passion for Trading
I am convinced that one of the elements of successful trading is passion for the activity. I just got back from speaking at Traders Expo in New York and realize that whenever I attend an event like that I come back really pumped up about trading all over again. . . . more . . .

Things That Are Important to Traders - Part II - Picking a Stock
In the article last weekend, I talked about understanding how even a trade that loses can be a good trade. That was intended to reinforce the concept that cutting losses can be critically important to successful trading. This weekend, I want to discuss stock picking a little. . . . more . . .

Things That Are Important to Traders - Part I - Can a Good Trade Result in a Loss?
My guess is that most traders would say that making money is the most important thing to them in their trading. Naturally, that is the ultimate goal of all traders and investors, but there certainly are many other things that are extremely important yet may be overlooked in the quest for the ultimate goal. . . . more . . .

Targets and Exits
I sometimes get emails from subscribers who want to know whether I set targets on positions I enter and, if so, how I establish the target. If the question means do I set a target that once hit will result in my exiting the position, the answer is no. . . . more . . .

Profits with No Risk, Low Risk, and Measured Risk Strategies
So far, January has been devastating to a lot of investors. So many think that they can only make money when the market is going up. Unfortunately, a high percentage of retail traders have no exit strategy and are wed to the concept that the only way to successful investing is buy and hold.
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Dividend Capture
A subscriber recently wrote and suggested I include some additional information on dividends, particularly as they may affect stock price. Before reaching that point, a little review may be helpful. Generally, there are four relatively important dates that relate to dividends. . . . more . . .

Thoughts On Technical Trading
I consider myself to be primarily a technical trader. By that I mean I make my trading entry and exit decisions based on what I see on price and volume charts and with the use of some favorite indicators. I do not mean to suggest that I completely ignore fundamentals because I don't. . . . more . . .

2007 Review
First, thank you all for subscribing to the Newsletter. I hope each of you and your families have a wonderful 2008. Now that 2007 has passed into history, it is time for me to review my performance in my subscription service trades. . . . more . . .

Certainty
The trouble with certainty in trading is that there isn't any. An unanticipated piece of news can change the direction of a stock in a flash and what looked like a sure thing wasn't. Markets can turn on sudden political turmoil. The Fed Chairman can make a statement and stocks turn on a dime. That is why even the greatest traders suffer losses at times. There is no certainty in trading. . . . more . . .

Traders Run the Gamut
One fact has been brought home time and again from the readers' responses to Newsletter articles. There are lots of ways to achieve positive results in trading. . . . more . . .

Understanding Risk Can Improve Your Trading
After last weekend's article about day trading and the perils about which the NASD warns prospective day traders, I received some contributions to the blog from a couple of apparently successful day traders. Their contributions demonstrate that some traders can and do make money day trading. Does that mean we should ignore the NASD's warnings? . . . more . . .

Some Day Trading Issues
Last week a subscriber wrote and mentioned that he was getting in and out of trades more quickly than he had in the past and had even entered and exited the same position in the same day. That action resulted in a warning from his broker about day trading. . . . more . . .

Thinking About Taxes
Last weekend, a subscriber wrote and suggested I address record keeping for tax preparation purposes. Clearly, taxes are an important part of any trader's life so I'll offer some comments concerning approaches to record keeping and tax preparation. . . . more . . .

What About Paper Trading
I frequently do get very helpful suggestions in emails and one I received was from a subscriber in the stock brokerage industry who, among his many insightful comments, suggested that he never understood why paper trading was so frequently recommended because it is definitely different when real money is traded. . . . more . . .

Lots of Ways to Skin a Cat
Almost every week I receive emails about the content of the Newsletter article and most of the time they are pretty friendly even when they don't agree with everything I have to say. Every once in a while, I receive a "Nastygram" as I did last week following the article about options. Here is what the dear fellow (whose name I have withheld) had to say . . . more . . .

Think About Options
I have to say I sometimes get tired of hearing people say how dangerous option trading is. Of course trading options can be risky, but what about buying a stock? If you pay $50 a share for a stock, what is the risk?
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Trading Education
Last weekend I attended two days of trading seminars at the OptionsXpress EXPO in Chicago. The event was simply excellent. Seminars were offered for all levels of traders from the pure neophyte to the seasoned futures trader. It caused me to pause and reflect how important basic education and continuing education are to the successful trader. . . . more . . .

Where to Place Stops
Last weekend I suggested that it was probably better to use stops than not for most retail traders. While these orders may yield imperfect results at times, I remain convinced that their use is generally much preferred to the alternative of exits by emotion. That does not mean, however, that I believe that setting stops is easy. It isn't. . . . more . . .

Stop Loss Orders or Not
A little over a year ago, I wrote an article entitled "Stop Loss and Stop Limit Orders." In that piece, I defined the orders and explained a little about how they each work. As a review, a stop loss order (to sell) is an order to the broker to sell a specified position in the event a stock price (or even an option price) hits a certain level. . . . more . . .

Keeping It Simple
Last weekend, I wrote about elements I believe help lead to effective successful trading. Shortly after the article had been sent out, I received an extremely interesting email from a subscriber. . . . more . . .

Trading Necessities
This week I was interviewed by TraderInterviews.com concerning some of my thoughts and approaches to trading. If you are interested, you can hear the whole interview . . . more . . .

Technical Trading
Technical trading, generally speaking, means trading where entries and exits are based on charts or graphs of price movement over time. The principles can be applied to many areas such as stocks, futures, indices, foreign exchange or whatever has a price that fluctuates over time. . . . more . . .

Diversification and Money Management
How many times have we heard the advice that we need to diversify our investments? What does that really mean? . . . more . . .

Know the Subject
In the Article last weekend, I wrote a little about "knowing thyself" in the trading arena. In my estimation, it is critically important to know what you really want and expect from your trading. The answer is much more complex than simply making money. . . . more . . .

Preparing Your Plan
I recently had the opportunity to sit down with a friend and go over his investment plan. He had just taken a bath on some spreads during the whipsawing market conditions and was a little gunshy. . . . more . . .

Fundamentally Speaking
I often get queries about my approach to fundamentals in choosing a stock. First, let me say that if there is one fundamental that is head and shoulders above the others, I believe it to be earnings. . . . more . . .

Who Is Making Your Decisions?
I need to preface the next few remarks by saying that I really do like kids. What I have noticed, however, is that in recent years there seems to be a movement to defer to the judgment of children. . . . more . . .

How Much Should I Be Making?
In my conversations with retail traders, I find that they have very high expectations for their returns. I suspect that the expectations are often unrealistic and can lead to some poor decision making. . . . more . . .

Buy and Hold
It is a simple truth that we never know what the markets are going to do on any given day or for that matter over any given week. About the time we think we know, some event occurs that results in a change of direction.
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A Word About Losses
Last weekend, I wrote about the importance of having a plan and in the article, emphasized the importance of money management and exit strategy. I just can't say it strongly enough -- money management is absolutely critical to successful trading. No matter what anyone may say, some losses are inevitable. . . . more . . .

Have a Plan
I recently received an e-mail from a subscriber who set out his plan for money management. In general, he made each trade 10% of his capital and found that about 60% of his capital was in trades at any given time. I applaud the subscriber. Not particularly because of the brilliance of his plan, but because he took the time, made the effort, and understood the need to have a money management plan. Could he have chosen a different money management plan? . . . more . . .

Control
It probably won't come as any astounding revelation, but it can be important to recognize that we have no control over the market or any particular stock. . . . more . . .

Some Advanced Orders
Over the last couple of weeks, I have discussed vacations and some orders that a trader might consider placing when he is not going to be looking at the markets. Not all brokers will offer some of the orders I discuss in these articles, but most of the better internet brokers do permit their use.
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Auto-pilot Trading with Protective Puts or Trailing Stops
Last weekend, I wrote a little about what I consider to be the importance of vacations. In this article, I'll look at some things we can do about our trading when we do take a vacation. There are a few choices. . . . more . . .

Vacations in Trading
As we approach the 4th of July weekend, the subject of vacations comes to mind. The period from the 4th of July to Labor Day is often very interesting in the markets. Many of the big players are enjoying life in the Hamptons or, perhaps, the south of France during that time. Often the third quarter shows weakness and may see increasing volatilities as well. . . . more . . .

I Wish I Could
On Monday, June 11th, I bought stock in Aluminum Corp China (ACH) at $34.23 a share and by around noon on Friday that week, it had jumped $7.88 a share. That move represented a 23% increase in just four days. Of course, I was moving my stop up behind the move in an effort to protect profit yet stay in the play as long as the stock was climbing. Obviously, this trade made me very happy and it reminded me of an email I had received from a subscriber several months ago. . . . more . . .

What Strategies to Use
As anyone who has been following my articles for some time knows, I am an advocate of trading education. We work hard to earn our money and we also need to work hard to learn how to make our money work for us. If we spend the time it takes to learn how to have our money make money for us, we may create a much better quality of life for ourselves and our families. Few are willing to take the time, but for those who do, the rewards can be fantastic.
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What I Think Doesn't Matter
When it comes to the market or to a specific trade, what I think does not matter. It probably doesn't matter what you think either. Just because you or I or an analyst or a network broadcaster thinks the market or a stock is going to go up doesn't make it so. . . . more . . .

Whether to Trade Options
A couple of weeks ago, I suggested some questions to ask yourself to get a better feel for your own trading strengths and weaknesses. Among the questions were whether you traded options and, if so, why and if not, why not. Relatively few investors trade options. If you are among that majority, why don't you trade options? . . . more . . .

A Hot Tip
While on a commercial flight a week or so ago, I met a man who told an incredible story. He had asked me about myself and I told him I was a trader and that my book on stock and options trading was going to be in the stores in December or January. He replied that he was quite fortunate and had made a lot of money in real estate and penny stocks. . . . more . . .

Deciding to Buy a Stock
Last weekend I took a look at some relative risks between a few simple strategies. The most common strategy for the retail trader simply is a stock purchase with the belief that it will go up in price. . . . more . . .

Evaluating Risk
Last weekend, I posed a number of questions for your review. The first question asked that you rate a number of strategies from least risky to riskiest and the second asked whether there is any zero risk trade. These questions were designed so that you could perform your own test of risk awareness. . . . more . . .

Your Trading Knowledge
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. . . . more . . .

Love of Money, the Next Chapter
The last two weeks I wrote articles on money and it has amazed me the nerves they touched. In response to last weekend's article, I received the following email. . . . more . . .

Love of Money
In the opening paragraph of last weekend's Newsletter, I wrote: "This article looks at the specific subject of money which may be the root of all evil, but..." I received a miniature firestorm of emails that corrected my statement to say it isn't money that is the root of all evil, rather it is the love of money that is the root of all evil. . . . more . . .

Controlling Your Money
Last weekend I wrote about some of the difficulties encountered when a trader begins the transition from paper trading to trading with real money. This article looks at the specific subject of money which may be the root of all evil, but is certainly the element that introduces the dangers of emotion when we leave the relative safety of paper trading and put our cash at risk.
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Transition from Paper to Real Money Trading
I received a letter to the editor this week that highlights one of the paramount hurdles a trader must cross before becoming successful. Here is the letter.
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Realistic Expectancies
Every once in a while, I receive a communication that reveals what I consider to be an unrealistic expectancy and I know that many novice and retail traders do not have realistic expectancies. . . . more . . .

Reasons to Trade
I have been re-reading Dr. Alexander Elder's "Come Into My Trading Room" (New York: John Wiley & Sons, Inc., 2002). It, like his other books, is excellent and informative and is written from the perspective of a psychiatrist/trader who has been successful in the markets. I have mentioned Dr. Elder and his books before because they give a different slant from many of the trading works on the market. . . . more . . .

More on Brokers
I received more emails after last weekend's article on brokers than in response to any other article I have written in the last couple of years. Most of the emails related true horror stories. One reader wrote: "Bling monkies do better jobs than any broker I know." Generally, the emails related specific problems, and some offered suggestions. . . . more . . .

Broker Problems and Solutions
I received an interesting email from a subscriber in response to last week's article in which I outlined a mistake one of my brokers had made and how they immediately fixed the problem. The subscriber (I'll call him Fred) did not have such a satisfying result. . . . more . . .

Everyone Makes Mistakes
Everyone makes mistakes, but I certainly hate it when I am the object of the mistake. This past week, I had placed a stop on my expensive shares of Google (GOOG) with a one triggers other (OTO) order to buy to close my covered calls on the stock in the event the stop was hit and the shares of GOOG sold. . . . more . . .

Cutting Losses
Following my article on "Stops and Whipsaws" last weekend, I received an interesting email from a subscriber. The reader outlined a situation where 100 shares of a stock are purchased at $10 a share and a $10 commission paid. . . . more . . .

Stops and Whipsaws
During the last week, I received an email from a long time subscriber asking whether I could write about stop loss orders and whipsaws. Evidently, he was placing stops regularly and getting stopped out only to see the position reverse position after he was out and take off. . . . more . . .

Records and Notes
While keeping records and making notes of your trades can be a real pain, it is both necessary in many cases and helpful in almost every situation. When we file our tax returns, for example, trades must be listed on a D-1 schedule. . . . more . . .

Exiting Too Late
After many years of trading for my living, and even though I know better, and even though it bugs me, I sometimes still exit positions too late. It is really hard to be a successful trader without cutting losses. The old adage states: "the first loss is the best loss." . . . more . . .

Commissions Do Play a Role
I am old enough to remember a time when the commission on a hundred shares of stock could be $150 or $200. In fact, only a couple of years ago, when teaching a seminar class, an older student in the front row was livid and essentially accused me of lying when I casually mentioned that my commission for a thousand share trade was $9.95. . . . more . . .

Patience
When I was a kid, my mother used to tease me saying: "Patience is a virtue possess it if you can; often found in women, but never found in men." Perhaps that is the reason why women often make better traders than men. Impatience can definitely be the enemy when trading the market.
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Some Thoughts on Stops
Since we never know the ultimate results of the trade until it is closed and since we want to cut losses rationally, it is important to have an exit in place. One way to attempt to remove the emotion from trading and establish an exit in the event a play goes against us is to place a stop loss order. . . . more . . .

Trading Isn't Playing Football
When I think of my youth and the many pieces of advice I heard related to playing different sports, I often think how inappropriate they are to trading. "It ain't over until the fat lady sings." First of all, the fat lady usually sings at the beginning of the game and almost never at the end. . . . more . . .

My Trading Year in Review
As I end my trading for 2006 and look forward to 2007, I thought it might be appropriate to review how I did in each of the subscription services I edit.
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Increasing Option Knowledge
I have written several articles about option trading in the past. In June, for example, I wrote an article about trading call options. Recently, I have had inquiries about some option positions so I would like to elaborate a bit in order to help subscribers better understand the consequences of being in certain option positions. . . . more . . .

Holy Grail
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.
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Learning To Make Money
One of the serious ironies I find is that we live in a society where there is an emphasis on making money yet our public school system does little to teach us anything other than how to be employees. I don't mean to suggest that there is anything wrong with being employed, but I do believe that having a job, alone, is not a particularly good way to achieve wealth. . . . more . . .

It's OK to Pay Taxes
We are now entering what is traditionally a time to sell to take tax losses. I make no pretense of being a tax adviser and urge anyone who has done a lot of trading to contact their personal tax advisor before year end to get the best advice possible. . . . more . . .

Santa Claus Rally?
I hope that everyone had a pleasant Thanksgiving holiday. Now we look forward to the time of the 'Santa Claus rally'. One has to wonder whether there will be such a rally this year since the markets have been in pretty high gear since July for the S&P 500 and the Dow and since August for the NASDAQ. . . . more . . .

Learn Before You Trade Real Money
When I first prepared to give seminars, one of the things I learned about adult education was that we adults think we know more than we do. I believe that phenomenon carries over to our trading. I have been a full time trader for many years now and have devoted a great deal of time to my own trading education. . . . more . . .

Elections
This article will be a bit of a departure from the usual, but ignoring the election results this past week would be like ignoring a six hundred pound gorilla. The real question is what will happen down the road. . . . more . . .

Buying Long Term Options
Recently in the Option Trader I bought some Jan ’09 LEAPS calls and received a number of questions from subscribers about why I purchased calls with an expiration so far out. . . . more . . .

Knowing Your Broker
Many times, traders choose brokerages based solely on the commissions offered by the firm. They spend little time understanding requirements of the brokerages before signing on. I thought it might be helpful to review some of the brokerage requirements so that traders considering changing brokerages or opening new accounts may know some of the questions that are valuable to ask. . . . more . . .

Investment Clubs and Trading Groups
I must confess that I am not a huge fan of investment clubs and trading groups. I don’t mean to say that these organizations are without value, I only mean to say that in my experience they are not particularly successful.
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Take Care Around Earnings Time
We have again entered the season when earnings are announced. Traditionally the season begins when Alcoa (AA) announces its earnings. This time, Alcoa announced that its earnings were up approximately 86% for the same quarter a year ago. In spite of this apparently favorable information, Alcoa dropped like a stone. . . . more . . .

Strategies
Choosing a strategy is one of the most important things you will do as part of your business plan. There are, of course, many strategies and they include buying a stock, selling a stock short, buying options, selling options, writing covered calls, creating various spreads, and numerous other strategies.
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Mistakes I've Seen
I've been amazed by what I've seen and heard since I began trading and giving trading seminars. Many students and other traders have been quite insightful and have made good, intelligent suggestions and have demonstrated great acumen in their trading. I want to talk about some of the others today. . . . more . . .

What Should I Study?
Last weekend I wrote about the importance, indeed, the necessity of education if one is going to be a successful trader. Now I'd like to touch upon some of the resources available to the person new to trading. . . . more . . .

How To Improve Your Trading
I gave a two-day basic seminar the last weekend in August and it was so well received that I thought it might be worth re-emphasizing the need for traders to expand their knowledge and pursue their trading education. Don't worry, this isn't a commercial for my seminars. . . . more . . .

A Use of the Call Option to Reduce Risk
On August 26, I wrote a little about stop loss orders and their use and shortcomings. This weekend, I want to discuss some uses of options to try to reduce risk. Brokers will tell you and the literature is full of statements that *options are risky*. Indeed, they can be. How about buying a stock -- is that risky? . . . more . . .

Stop Loss and Stop Limit Orders
In this article, I'll discuss the stop loss and stop limit orders as ways to attempt to limit losses. The "stop loss" or "sell stop" order is an instruction to the broker to sell the stock if it hits a certain price. . . . more . . .

I Think I Whined Too Much
Last week, I devoted a lot of space to a loss I incurred in a position that gapped down. No loss makes me happy, but that one was particularly annoying. Many of you wrote sympathetically and more than a couple offered trading suggestions. Thank you for the support. . . . more . . .

Lessons From A Loss
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.
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Entries Are Important, Exits Are Critical
I'm definitely old enough to remember when broker calls (cold or otherwise) touting a stock were a pretty frequent occurrence. The stock always would come with a story. It could go something like this: DEF Corporation has discovered a way to extract gold from gold tailings outside of old mines.
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Trading Strategies Review
I have written an Article for this Newsletter each weekend over the past many months. Now, I'd like to indulge in a little review. I wonder how many of my readers agree that trading is a business and that most successful businesses have a business plan. . . . more . . .

What's A Put and How Can It Help?
In recent weeks, I've devoted some space to basic information about calls. I've written a little about buying calls when a trader thinks a stock is going up and I've written about selling calls against stock the trader already owns (writing covered calls) and I've discussed risks of entering those types of trades. This week, I'm going to turn my attention to the definition of put contracts and one important use that can be made of puts from the put buyers' perspective. . . . more . . .

Risk Awareness
Following publication of my Article on calls and writing covered calls, I received a thoughtful and helpful letter from a subscriber. After thanking me for the article, the subscriber suggested that I may not have emphasized the risks associated with the covered call strategy strongly enough. He suggested that the inexperienced trader could "put the cart before the horse" and just look for calls with high premiums so he could then buy the stock and write the high priced calls. . . . more . . .

Learning To Trade
I've never met anyone who has read "Rich Dad, Poor Dad" by Robert Kiyosaki who didn't agree with the premise that in order to become rich it is necessary to have your assets working for them (unless they inherited wealth or won the lottery, etc.). Most of us work for a living and we, ourselves, are the only money producing asset. That is a very rare way to wealth yet it is what we are taught to do. I recommend Mr. Kiyosaki's "Rich Dad, Poor Dad" to you. Hopefully it will inspire you to learn to utilize assets in addition to your own time to produce wealth for you. . . . more . . .

A Bullish Strategy and a Bearish Strategy Using Calls
This strategy is bullish and is one of the more common uses of call options. It is known as writing covered calls. In stock lingo writing means selling. Covered means you own the underlying stock, and you already know what a call is from last weekend's article. . . . more . . .

A Little About Call Options
While many of our readers only trade stocks, I thought it might be helpful to write a bit about options, specifically call options. I often use call options in my Option Trader trades and my own portfolios, so I thought it might add some clarity if I provide some explanations of certain basic options strategies. . . . more . . .

What To Do When The Markets Are Falling
The Dow Industrials fell more than 877 points between May 10th and the close on June 12th; the Nasdaq dropped 279.61 from April 19th to the June 12th close; the SP-500 fell 90.13 from the high on May 5th to the June 12th close. As I write this piece on June 13, 2006, the markets are still in bear mode. What is a trader or investor to do? . . . more . . .

Price and Volume - Bullish or Bearish?
What I'd like to explore here is the value of price and volume (in chart form) in determining continuation of a trend and potential reversals. . . . more . . .

Trends and Reversals
Obviously, many factors enter into successful trading. Among those factors that lead to success are things like having and following a plan, good money management, learning to cut losses and let profits run, knowledge of strategies, and patience. . . . more . . .

More About Disciplined Trading
We often hear that the markets trade on fear and greed and that is doubtlessly true. Rumor has it that amateurs often buy near the top and sell near the bottom. Why would that be? . . . more . . .

What To Do When The Market Goes Down
Dive! Dive! Dive! As I write this on Friday morning, the markets have been falling through the week. The Dow industrials, Nasdaq and SP-500 have each fallen down through the uptrend and the 50 day moving average.
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Trading the News
This week, the Fed, again, raised interest rates and, of course, that was big news for the markets. As I write this, the markets are trying to decide what to do with that news. . . . more . . .

What Kind of Investor Are You?
Were you taught to be a "buy and hold" trader? Exactly what does that mean? In the classes I give, I always ask: "Buy and hold until when? Death?" That can work very well for your heirs, but how about for you? . . . more . . .

Business Plans for Traders and Investors
I teach seminars on stock and option trading and in the basic class, I always begin with the necessity of having a business plan. Trading and investing are businesses. We need to treat them that way. . . . more . . .

Trading Do's and Don'ts
Anyone could become a better trader just by becoming or remaining aware of some simple but important "do's" and "don'ts." Markets trade on emotion so if we can learn how to play emotion or group psychology without being ruled by our own emotions, we increase our chances to become better traders. . . . more . . .

A Focus on Earnings
I 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 I paid for the stock. . . . more . . .

Trading $10 and Under Stocks
I 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 I paid for the stock. . . . more . . .

Using Subscription Trading Services
In my experiences trading for a living, as editor of stock and option subscription services, and in classes where I teach budding traders, I have seen many approaches to trading and to the uses of subscription services.
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Money Management and Reward to Risk
Unless you're a pure gambler, "betting it all on black" or putting all your trading money into one position definitely isn't the way to go. Money management can be critical to long term success in stock and option trading and investing. "Diversify." "Don't put all your eggs in one basket."
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Trend Trading
"The trend is your friend." Certainly that is one of the many stock market adages. Generally, I think a saying becomes an adage through repetition over time. Those sayings don't seem likely to be repeated unless there is some truth to them. Trend trading as we try to practice it is a form of momentum trading. . . . more . . .

Option Buying Principles
In my last article, I spoke about the limited risk (limited to the initial investment) and high leverage attained when buying options. Those can be fantastic plusses for the option trader. Astounding returns sometimes can be achieved but that possibility also can lead to some serious trading mistakes. . . . more . . .

Option Trading
Option trading is often considered to be very risky and it certainly can be. However, one of the nice things about many option trades is that the risk is limited and is often much less than the risk of stock ownership. . . . more . . .