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. This fall, for example, there is going to be a reality TV series where a bunch of kids set up their own society with no adult influence. I bet that first appendectomy will be something to behold. TV ads show kids lecturing to their parents about investment concerns. In some quarters discipline is abandoned and scores are not kept in athletic contests because it may harm a kid's self-esteem. It's only my personal opinion, but I think this approach is absolute unadulterated nonsense. The question becomes who is running the show? The kids or the adults? Personally I vote for the ones with the most life experience, education, and knowledge. Rarely is that the kid.

The foregoing little tirade was designed to lead into the question of who is running the show in your own trading? I adhere to the principle that no one cares as much about my money as I do. No one. Since that is the case, I also believe that I should run the show in my own trading. In order to run his own show successfully, a trader must first educate himself to gain the necessary knowledge and then practice that knowledge by paper trading. When both the knowledge and skill are in place, then, I believe, the trader should be in charge of his own trades.

What is a new trader to do while gaining the knowledge and experience? Though it is more expensive than using an internet broker, I suggest finding a good broker who is (1) knowledgeable and (2) willing to work with you. Finding that person may not be too easy. Interview several and find out who knows and actually trades the strategy or strategies that interest you. If you just want to first buy and later sell stock, find out what specific exit strategy the broker advocates. If you ask the question about exit strategy and the answer is buy and hold, ask how that worked out buying QQQQ at the top in 2000 (you still wouldn't be back to even) or if they had any clients in Enron. Once you establish that the prospective broker is, indeed, knowledgeable, find out if they will be available throughout the trading day and, if not, who covers for them. Finally, make sure it is someone with whom you feel comfortable and with whom you are at ease communicating.

Only when you have become competent on your own should you open an internet discount brokerage account. When you open that account, you will pay lower commissions, but you will be on your own in the decision making department. While that can be a good thing, it is important that your decisions have a foundation in knowledge and experience.

I believe it is better to avoid complete reliance on any single broker, financial planner, adviser, or whoever. As I mentioned at the beginning, no one cares as much about your money as you do. It is important to you and since your money can make money for you, it seems like trading or investing is something that is worth the effort. While professional advice can be extremely valuable, it is you who should make the final decision. In order to make the final decisions effectively, I urge you to take the time and make the effort to educate yourself about trading. Read trading books, attend seminars, avail yourself of education your brokerage firm offers. On the other hand, you could turn to your kids or grandkids for trading guidance.

Good Trading!
Bill Kraft

August 25, 2007

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