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Some Keys to Trading Success

2010-03-19T21:40:00.000-06:00

Before reading any further, would you be willing to ask yourself what you could consider doing that might improve your trading? What elements would you imagine are most likely to lead to success or greater success? Certainly there are a variety of answers to the question and if you have the time and the inclination, you might want to jot down a list for yourself and, I might suggest, that you then prioritize that list. Several years ago, when I first prioritized that list for myself after some careful consideration I was somewhat surprised by my own answers and when I began to use my priorities my trading became much better than ever before. Of course, I can't speak for you, I can only suggest you try it for yourself. The answers might be surprising.

As anyone who has attended any of my seminars or undergone personal coaching with me can attest, I am a great believer in simplicity in trading. It is important to recognize, however, that simple doesn't necessarily mean easy. It means creating a personal approach that fits within one's unique and individual trading personality, testing it and if the tests are successful, putting it into practice. Of course, that means gaining knowledge first and then utilizing that knowledge to create a general trading plan and a specific plan for each trade.

Well, I've already given away one of what I believe are the important keys to trading success. That is to have a plan. However, rather than just listing my own keys in my own order of priority this week, I am going to leave it to you to set out your own keys this week and in the article next weekend, I'll set out mine. For those who are interested and willing, please feel free to share your own list on the blog (no more than 10 items, please).

Where do you place finding candidates, for example, on that list or is it there at all. How about use of technical and/or fundamental analysis? Do either or both have a place on your list? What does it come down to, really? In my own list there are four general requirements and three necessities for each trade. How about you?

I'm not trying to be cute here by holding back information. Instead, I believe making and prioritizing your list may very well lead you to greater successes in trading and it surely can't hurt. In any event, I'll share my own list with you in the article next weekend and we can see how close we are to one another.

by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved

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Stop Loss and Stop Limit Orders

2010-03-13T04:25:00.001-07:00

In recent weeks, I have written about risk and included concepts like protective puts and stop loss orders as ways a trader might endeavor to cut losses in the event a position moves against her. The articles sparked a question from a subscriber who wanted to know about the difference between stop loss and stop limit orders and how the two might be used by a trader.

The stop loss order is an order to a broker that says if a stock hits a specific price the position is to be closed at the market. Suppose, for example, that we own shares of XYZ trading at $25 a share and we see a support around $24.25. If the stock goes below $24.25, it has broken support and is no longer showing the bullishness for which we initially bought the stock. In such a circumstance we might place a stop loss order at $24.20 thereby instructing our broker to sell our shares in the event XYZ hits $24.20 OR BELOW. Once the stock price hits $24.20 or below, our order goes to the market as a market order. I emphasize the "or below" part because there are times when a stock may gap down and never touch our stop. In the XYZ example, suppose, for example, that the stock closes at $25 a share today and that this evening it announces unexpectedly poor earnings. Tomorrow, the stock opens at $23 a share. Well, it didn't hit our stop price at $24.20, but passed right over it. In that event, our stop is activated, the sell at the market order goes to the floor, and we are sold out of the position at the market which is now around $23. While we did not get the $24.20 we might have expected, but, quite importantly, we are out of the position and that might not be a bad thing since the stock is falling sharply and we want to cut losses.

Instead of utilizing a stop loss order, we might have chosen a stop limit order. Actually a stop limit order is two separate orders combined into one. The first part, the stop is the same as I described in the preceding paragraph. The second part is the limit which places a limit on what we are willing to take. Using the XYZ example, above, we might place a stop limit with a stop at $24.20, limit, $24. Now, we have instructed our broker to sell our shares if the price hits $24.20 or below, but only if we can get $24 or better. In the situation where the stock gaps down the following morning, our stop would be hit because the price is now at $23, well below our stop, but we would not be sold out of the position because our order was to sell at a limit of $24.20 and since the stock is selling well below our limit, we would not be filled and would still own the falling stock. In general, then, if we are placing a stop so we can get out of a position that is moving adversely, we would probably want to use a stop loss rather than a stop limit order.

When might we want to use a stop limit order? Perhaps, if we saw a stock that was dealing with a resistance and we wanted to buy shares, but only if it broke above that resistance. Let's say ABC has been trading in a range between $14 and $16 a share and we saw a triple top resistance at $16. If the stock breaks through that resistance, we might want to own shares, but we would like to get in fast on that break above $16. In such circumstances, we might choose to place a buy stop limit order. The order might be buy stop at $16.10, limit $16.50. By that order, we have instructed the broker to place a limit order to buy the stock at $16.75 or better, but only if the stock hit $16.10 or higher. In that event, if the stock broke resistance and hit our stop number, our limit order would go to the floor, and we would buy the stock provided it was at or below our limit of $16.75. Such an order would prevent the situation where the stock broke above resistance, but rocketed past a price at which we were willing to buy.

As you can see, these orders, used properly, can be very valuable additions to a trader's arsenal. In "Trade Your Way to Wealth," I discuss in detail a number of important orders available to the trader that can be used to help control losses and to protect gains. Knowledge of available orders can be extremely helpful to the trader and I often use them in my own trading.

by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved

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Deciding Upon Protection

2010-03-05T17:45:00.000-07:00

In the last couple of articles, I wrote a little about issues of risk. Risk seems to be one of those things that too many traders consider only after they find themselves facing already existing losses. Too often, that seems to be the same time that greed may dissipate and fear increases, sometimes to the point of near paralysis. As I have written many times and as I emphasize with my individual coaching students, the time to assess risk is before entering the trade, not as losses mount or after substantial losses have already been achieved.

One question that has arisen on the blog relating to the articles on risk is what is the "best" protection. Some believe a stop loss order does the job well enough and others contend that the way to go when owning stock is to buy protective puts. Each of those routes has advantages and disadvantages (as is true with so many things we do in the markets) and whatever the choice, there must necessarily be some compromise.

One may first consider that a given trader might chose to have no protection and simply buy a stock and take the whole risk that the position could go to zero. Though I don't know it is the case, I suspect that most individuals who buy stock take precisely that approach; they buy the stock and have no protection in place and, in fact, frequently have no exit strategy whatsoever. Clearly, that is one approach. Is it the best approach? Who can say. That is an individual decision and I have little qualms with it so long as the trader has an understanding that the whole investment is then always completely at risk. If that trader makes such a choice, he need only be prepared to live with it. Living with it is that persons decision and one only hopes that he is not kidding himself into believing that the stock can't take a precipitous drop, perhaps even to zero. We can all name instances of that exact occurrence.

More conservative traders might choose other alternatives to attempt to protect their investment. One such choice for the stock buyer would be to buy protective puts. In those situations, the trader pays a premium and buys a put which enables him to assign his stock to someone else at a specific price anytime before the put contract expires. In that sense, it is akin to an insurance policy. For example, I might buy shares of XYZ at $20.50 a share and also buy the $20 puts. In that case, let's suppose the puts I buy expire in 6 months and they cost me $1 a share. Now, until expiration, I can force someone to buy the shares at $20 so even if the stock dropped to $5 a share before expiration, I could still get $20 a share and therefore lose only 50 cents a share on the stock, but, of course, the premium for the put cost $1 so I would actually be down $1.50 plus commissions. Still way better than losing $15.50 a share on the stock, but in order to achieve a profit in that 6 months, the stock would have to be above $21.50 a share at option expiration.

Another alternative discussed in the blog is the stop loss order. If we take the same example of XYZ above, we might place a stop loss at $19.95. That means if the stock falls to $19.95 or below our position is automatically sold at the then market price. Suppose it dropped to $19.90 and our stop was hit and the position sold at $19.90. There we would have limited our loss to 60 cents total. The problem, of course, is that stocks can gap down and in those situations the stop loss only offers a partial protection. Suppose we had the same scenario with a stop loss at $19.95 and on Thursday the stock closed at $21 a share, but that evening after the market closed XYZ released some bad news. What happens on Friday? Presumably, the stock is down significantly at the open. For our example, let's say the stock opened at $17.50 on Friday. Well, our $19.95 stop has been hit, but there is no one there to buy at $19.95 or even close so our stock is sold at $17.50 and we suffer a $3 a share loss. The really good news is we are out of the position and will not suffer additional losses from a continuing drop. We have cut our loss (and could get back in if it turned back up). The bad news is we didn't get out near the $19.95 we expected.

These examples are meant to be just that -- examples showing a couple of ways a trader may attempt to protect a position and cut losses. Is one better than the other? For each of us, the answer is probably "yes," but for subjective reasons which we choose will differ. Stops may be preferable to buying puts because it costs nothing to place a stop loss order but one does have to pay a premium to buy a put and the put will expire. On the other hand, buying puts may be preferable because I don't run the risk of a gap down with the attendant larger than expected loss that could occur with the use of a stop loss.

Truth is, we can argue until the cows come home which is better, but the bottom line is that what is better for me might not be better for you and your goals, your time limitations, your risk tolerance, your position size, your trading knowledge and other assorted variables.

I can only suggest that it might be wise to figure out ahead of time whether you want any protection and, if so, what protection best serves the furtherance of your own personal trading plan. In fact, the first step is to create that plan that is specific to you, your goals, your needs, and your abilities. Plan creation and the elements I suggest be included as a minimum are set out in detail in my book, "Trade Your Way to Wealth".

Incidentally, for those who use TeleChart and/or StockFinder software, I've been invited to and will do a free webinar on March 16th for Worden Brothers, the publisher of those services.

by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved

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Thinking About Risk

2010-02-27T09:18:00.000-07:00

In the article last weekend, I wrote a little about understanding risk and that got me to thinking how important risk really is to the trader. I consider it to be so important that I devoted much of my first book, "Trade Your Way to Wealth," to understanding risk and showing various ways in which a trader might try to reduce and manage risk. Risk, of course, is everywhere and it is particularly significant in trading the markets.

While seeking profits appeals to our "greed" side, risk awakens our "fear" side in trading. My guess is that many a bad trade has resulted from an initial misunderstanding of or an initial failure to pay attention to risk. Once that risk becomes reality, however, it can go so far as to result in fear and panic. Risk in trading means we can lose something we have. Unfortunately, it seems that sometimes traders fail to realize just how much is really at risk until it is too late.

Suppose we buy 5000 shares of an inexpensive little stock trading at $5 a share. Do we look at it as the $25,000 risk it actually is when we buy it or do we just let that thought pass. Is $25,000 a significant amount to risk? For most it probably is but more often than not I have witnessed traders enter positions like this example with no plan of protection. What if the stock price drops $1? That is a $5,000 loss. So often I have heard traders and investors simply say: "I'm not worried, it'll come back." Maybe it will and maybe it won't, and if it does, when will it come back? We might also want to remember that IF it comes back, that just brings us to even. One of the facts I find most compelling regarding risk of loss is that if a position loses 50%, it must then double (move up 100%) just to get back to even.

As we consider risk it may be worth noting that in the market buying a stock is one of the riskiest things we can do. When we buy a stock our total investment is at risk. Recent history has shown us once again that even formerly great companies can fall to zero. Are there any ways we can reduce the risk of losing our whole investment when we buy a stock? Definitely there are. One way is with the use of orders as described in "Trade Your Way to Wealth." For example, we may have a stop loss order in place or a trailing stop loss. In most situations, such an order is likely to prevent losing everything. It seems unlikely that a stock will drop from $50 to $0 overnight and most stocks that fail seem to give some warnings and while they may descend quickly usually take at least some time to hit absolute bottom. In those circumstances, at least the stop loss may preserve capital.

Another way to attempt to protect an asset is to buy a protective put. A put option is a contract whereby the buyer of the put has the right, but not the obligation, to force someone to buy his stock at a pre-determined price (the strike price) any time before the option expires. To obtain that right the buyer of a put pays a premium. The situation is at least analogous to an insurance policy where the insured (stock owner) pays a premium in order to assure that a loss is limited to the premium plus any deductible. For example, suppose I bought 1000 shares of XYZ at $25 a share late February. I might also buy a protective put, perhaps the Jan 2011 25 put for $2. Now, anytime between now and the third Friday in January of 2011 I can assign my shares of stock (known as exercising my put) and force someone to buy my stock for $25 a share (or exactly what I paid for the stock). Since I bought the puts as well as the shares of stock, my total cost would have been $27 a share ($25 for stock and $2 for put) so I would lose $2 a share if I exercised my puts. Importantly, however, that is the most I could lose between now and next January no matter how low the share price actually went. Even if the stock fell to $1 a share, I could still get my $25. I have reduced my risk from $25 a share to $2 a share. Of course, to profit overall, the stock price would have to exceed $27 a share.

The preceding paragraph suggests a couple of ways a trader might consider in reducing risk of a stock purchase. Another thought that is often espoused is to diversify. There are differing schools of thought regarding diversification and there are many ways to diversify. In my second book, "Smart Investors Money Machine," I write about a number of ways in which traders and investors can create additional streams of income. Strategies like dividend investing and covered call writing are included among many as well as diversification into and investment in other vehicles like bonds, ETFs, annuities, and even reverse mortgages. When we look at diversification into various categories we are spreading risk though there is an argument that all diversification does is make sure you have some losers to set off against winners.

The concept of risk is very wide-ranging in trading. Compare, for example, buying a stock versus buying a call option. When you buy the stock, you own it, when you buy a call option you buy the right to own the stock, but the cost is much less. We may buy a stock at $25 a share, but we may also buy a $25 call (that gives us the right, but not the obligation to buy the stock at that same $25) for $1.50. In each case, our risk is what we paid for the stock or the call. In that setting obviously the risk is much less in terms of dollar outlay when buying the call than in buying the stock. However, a major risk in option buying is that options expire so our call can only have value until whatever we chose as expiration. Also, assuming no change in the price of the stock, the call becomes less and less valuable as time passes until there is no time left.

These thoughts are only intended to invite the reader to seek a greater understanding of risk. In this article I have used just a couple of examples to illustrate some areas in which it might be useful to be risk aware. For those who may want to gain some deeper insights into specific trading and investing risk management, you may want to check out "Smart Investors Money Machine" and "Trade Your Way to Wealth". In "Trade Your Way..." I included a Table showing relative risk among 15 different strategies that are explained in the book along with a number of other comparative elements including relative risk and reward, initial capital required, the time frame, level of monitoring required, and any built-in protection.

Life is risk and as far as I am concerned risks are to be taken. However, it seems only prudent to make ourselves risk aware as much as practical and to make informed personal decisions on whether or how we might go about managing or reducing our trading and investing risks.

by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved

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Importance of Risk

2010-02-19T19:01:00.000-07:00

Over the last couple of weekends, I wrote about prioritizing trading skills and a subscriber emailed to emphasize the issue of risk. Probably nothing is more important than the concept of and issues surrounding risk. In fact, I wrote "Trade Your Way to Wealth" with the specific purpose of addressing risk awareness and risk management. In the book, I discuss a number of ways to manage and reduce risk because I am convinced that all too many traders and investors either fail to understand or at least fail to pay attention to the risk attendant to their trading.

Trading is risky, and it is even riskier if the trader fails to appreciate just what risk he is taking. Buying a stock, quite simply, is a high risk proposition. The whole investment is at risk unless some hedge is also employed. Over the years I've heard investors say things like: "Yes, owning stock may be risky, but I have shares in a good company so I really don't have that much risk." Unfortunately, as so many have learned the hard way, that just isn't necessarily so.

As an example, a couple of years ago when Citigroup (C) was trading near $40 a subscriber took me to task when I reiterated that I believed buy and hold was a dangerous strategy (when there was no exit plan). He wrote telling me he should be writing these articles and I didn't know what I was talking about since he and his family held Citigroup (C) (which he referred to as "that old doggie") since it was trading around $14. Quite an accomplishment now that the stock has not traded above $5.50 since early 2009. All we need consider is the disappearance of once great companies like Lehman Bros. or Washington Mutual. The list of once good companies that have since disappeared is shockingly long.

Most, if not all, of the priorities I discussed in the last two articles are specifically related to management of risk. Consider, for example, entry decisions and strategies. I personally use an entry strategy that attempts to assure my initial exit is nearby in the event I am wrong on direction. In other words, part of my plan recognizes that I can be wrong and if I am I have an exit strategy that helps reduce risk by cutting losses quickly. So, too, do principles like money management, reward to risk ratios, pre-planning a trade, and knowledge of types and uses of orders help manage my risk. If I am not utilizing such skills I am opening myself to greater risk. While risk can rarely be removed completely, we can and should take sensible measures to manage and alleviate the risks of our trading.

Once again, it comes down to our trading education. Unless we know, for example, what a protective put is and how it works, we don't know how to use it to reduce our risk. As a parting word this weekend, consider, if you will, what is more dangerous in the stock market than simply buying a stock? Is selling a naked put more dangerous than buying a stock? How about buying a call on the stock? How does the risk of owning a stock change if you also sell a covered call or buy a protective put? All these strategies and many others can be used to manage risk as long as we know what they are and how to use them. I cover these concepts in "Trade Your Way to Wealth," but the information can be found many other places as well. It makes sense to know the answers ahead of time.

by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved

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Prioritizing Trading Skills

2010-02-13T05:08:00.000-07:00

Last weekend I wrote about taking an inventory of our trading skills and my belief that how we prioritize them can make a substantial difference in our trading results. The list I included was as follows:

a. knowledge of and ability to use various orders
b. technical knowledge and abilities
c. understanding and using fundamentals
d. utilizing reward to risk potential
e. finding candidates to trade
f. entry decisions and strategies
g. exit strategy
h. devotion to continuing education
i. ability to discipline one's trading
j. money management
k. having a plan in general and for each trade
l. knowledge of and ability to use various strategies

I suggested that you might want to see how you would prioritize the list ideally and how you have prioritized it in actuality in your trading. I'm guessing the exercise might have been at least somewhat useful in gaining some insight into your own trading personality.

It seems fairly clear to me that the trader whose first priorities are:

Understanding and using fundamentals
Finding candidates to trade
Entry decisions and strategies

might have vastly different results from a trader whose first priorities are:

Having a plan in general and for each trade
Ability to discipline one's trading
Exit strategy
Utilizing reward to risk potential

Doubtlessly, each of the skills in the overall list are important to at least some degree. As a trader, I am convinced that certain of those skills must be utilized and in terms of priority fall on the same critical level for me. They are as follows:

Highest Level of My Priorities
- Having a plan in general and for each trade
- The ability to discipline my trading
- Money management
- Exit strategy
- Using reward to risk potential
- Devotion to continuing education
Next Level
- Technical knowledge and ability to use as discipline
- Knowledge of and ability to use various strategies
- Knowledge of and ability to use various orders
Final Level
- Entry decisions and strategies
- Finding candidates to trade
- Understanding and using fundamentals

In my books and in my personal coaching, I discuss these skills and illustrate what I consider to be the relative importance of each. Why, for example, would I suggest it is more important to use a minimum reward to risk potential than it is to find a candidate? Why is exit strategy more important to me than my entry?

Obviously, minds may differ on the priorities given to these different skills and I can't say there is some "best" answer as to how to set these priorities. I can only say I think some line-ups are better than others. Throughout the year, I expect I'll return to at least some of the individual skills I've touched on here and attempt to develop a more detailed picture of the value and importance of various of these skills.

by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved

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What's Your Trading Focus?

2010-02-06T07:46:00.001-07:00

Every once in a while it's probably not a bad idea to take inventory of our trading related skills. As I began to do so for myself I also recalled inventories with which various coaching students came to me and inventories of students at seminars. I am convinced that what we choose as our focus or focuses in trading can make or break us. There are many ways to succeed in trading and certainly many more ways to fail. I suspect that the way we prioritize the skills in our own inventory ultimately is what makes the difference.

When I write about a trading skills inventory, I mean those skills that we possess that might be included in the "how" of our trading. Last week, for example, I wrote about a specific type of order, the limit order, as an illustration of one part of the trader's inventory. Though not necessarily a complete list and definitely in no particular order, the following might be included in a trader's personal skills inventory:

a. knowledge of and ability to use various orders
b. technical knowledge and abilities
c. understanding and using fundamentals
d. utilizing reward to risk potential
e. finding candidates to trade
f. entry decisions and strategies
g. exit strategy
h. devotion to continuing education
i. ability to discipline one's trading
j. money management
k. having a plan in general and for each trade
l. knowledge of and ability to use various strategies

You may add other skills in your own trading inventory. Whatever the case, may I suggest you take a few moments and look over the list above. Perhaps it might be beneficial to see which of those skills you possess and how you utilize them in your trading. Once you have considered that, it might be helpful for you to prioritize them in the order you perceive their importance to successful trading. Once that list is completed, compare it to a list arranged in the order you have prioritized these skills in your own actual trading.

Often, the two lists, the one as you see the best prioritization for success and the other the prioritization you actually have been using may differ significantly. A change in those priorities could well make a difference in your trading.

Though subscribers who have read either of my books, "Smart Investors Money Machine" or "Trade Your Way to Wealth," may already have an inkling of the order of my list of priorities, I'll discuss them a bit in next weekend's article.

by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
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Why a Limit Order?

2010-01-30T07:48:00.001-07:00

Whether knowingly or not, many retail traders enter market orders to buy stock and that can sometimes be quite dangerous. A market order to buy simply instructs the broker to buy shares at whatever the market price may be at the time the order is filled. Ordinarily, there may be no problem, but every once in a while, there could be. Witness the following scenario.

Once upon a time a small pharmaceutical company issued a new release dealing with the effectiveness and use of its new drug to treat a specific form of cancer. The news media interpreted the release as indicating that the drug was a cure for the cancer and used that as the headline for their stories. A woman who occasionally bought stock for investment decided that shares of the pharmaceutical stock would be a good addition to her portfolio and saw that the stock had been trading around $20 a share and placed an order with her broker to buy 1000 shares "at the market." Of course, on the news of a cure for cancer, the stock price rocketed. By the time her order reached the market and took its place in line of buy orders the stock price was rising. When her order was filled, the price had increased four-fold to $80 a share where her order was filled.

The woman had expected to pay around $20 a share, but because the stock ran so quickly and there were so many orders, it had moved $60 a share before her market order was filled. That, however, is not the end of the story. The news media has misinterpreted the company's press release. In fact, the press release was basically a rehash of some old news about their confidence of success an early phase review by the FDA and a belief that the drug could be helpful in the treatment of (not cure) the specific cancer. The news story was corrected promptly and the stock fell to $18 a share. All this happened within a single day. The investor thought she was going to buy 1000 shares at $20 for an investment of $20,000. Her market order resulted in her buying those 1000 shares at $80,000 for a total investment of $80,000. The stock then dropped to $18 and she was upside down to the tune of $62,000.

I have no idea whether that story is true or not but is the concept that has convinced me to always use limit orders when buying. Of course the dramatic price moves in the story are highly unlikely though certainly not impossible. Nevertheless it would not be so unusual to see sharp price moves before getting filled, particularly if the investor phones his order to a broker and the broker delays even a little in forwarding the order. In any case I opt for better safe than sorry.

In my own trading, I always buy on a limit order. The limit order instructs the broker to buy, but at no more than a specified price per share. So in our example above, had the lady placed a buy limit order to buy 1000 shares at a limit of $21, she simply would not have been filled on the run-up since the price was already higher than her limit of $21.

There are many orders available to traders and knowledge of their purpose and use can be extremely advantageous to traders. In my book, "Trade Your Way to Wealth," for example, I discuss seven different orders and explain their use in detail. Using orders to your advantage can definitely improve one's trading and make it easier as well.

by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved

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Trading as Life

2010-01-22T16:10:00.001-07:00

Recently, I received what I considered to be a very insightful email. I found it so interesting for reasons I'll discuss at the end of the article that I asked the author's permission to share it with you. In the interests of space, I have editorially deleted some small surplusage. Here is what she wrote:

"Since I have been trading, I have come to see the stock market more and more as a parallel to life. Especially in the last year, I've had almost a reflex reaction to interpreting events in my life as similes and metaphors to my trading... and I can't seem to get it to stop. ;)
Take this weekend for example, I was fortunate enough to be invited to the Green Bay/Cardinals playoffs. [editor's note: the Cardinals won in overtime 51-45] In the first 10 minutes of the quarter, the Cards scored 2 touchdowns. I immediately thought of the linear regression line that I use to track and monitor my equity curve on my trading system. and I said to myself..."this wont last" .. I envisioned this quick "get ahead" as a parabolic move up from the mean, and knew that there had to be a retracement, or at least a consolidation of some sort. I turned to my friend, and while his eyes glazed over, I explained to him that this couldn't last because it was beyond the mean, and not only that , but this would cause an overconfident shift in sentiment from being the losers to being the winners, and that was a setup for the next event to be a loss.
I then went on to predict, in that same first quarter, that I expected that the Packers would catch up , and tie the score, and that we would go into overtime. Seriously I said this, and I have witnesses.! Needless to say, the game unfolded as expected. The Packers scored (the retracement) the mean between these two competing forces was restored to equilibrium.. I hadn't predicted or really thought about what would happen next, after the score was tied, but I should have known that something unexpected, would be the final denouement to this story.. But of course, that crazy Cards defensive recovery of the Packers ball in the final minutes was exactly as it should have been. An unpredictable event, an outlier if you will, and one that the Packers didn't see coming... Are you hearing stock market again..? Does this sound familiar? It sure did to me. Think news, think 9-11, think computer breakdown. The Packers stops were just not in place for that final play
These parallels just seem to keep popping up wherever I go. I have noticed that my relationships in life seem to follow the same sequences and can be couched in the same terms as market behavior.. Sometimes there are big moves in relationships that are positive, and in my life , that are happy and joyous,( trending up) only to be followed by periods of calm ( sideways) or total reversals of experience..bad moments, days weeks or even years, in the opposite direction ( trending down) . The rhythm still applies....
Life, unlike the market however, is short, and finite. I have learned that if you can learn to follow the same concepts as in your trading , trying to maximize your life as I try maximize my equity curves, it might just be the path to make your life happier, and more rewarding. Whenever possible, find the happiest, stimulating and most fulfilling part of your experiences and go there.. Ride that trend as long as you can and keep the people around you who help make that happen. Know that this will, eventually, give way to a quieter period and accept that too. Assess the risk for each situation going in and act accordingly. Have a plan.
And if you ever find yourself in a downtrend, don't resist,.go short.. ride that one out too. You may not have a choice. If you resist, it will only cause you pain, and at least in my life, it seems to be a given, that, like the market, somewhere down below, there will be support, a place of rest, a place for a reversal of fortune. Cover your short there, and go long again..If you are very lucky, like me, you will find yourself a V- bottom which could bring you back up to where you started or even beyond.
Right now , I'm in a big bull uptrend and loving every minute."

I don't know whether or not you would agree with me, but the writer's message seems quite insightful and covers some very important ground. I would disagree only with the beginning statement that the market is a parallel to life. Rather, I would suggest it is a part of rather than a parallel to life. Trading and negotiating is something all of us do every day whether it be in the market or otherwise and is heavily influenced if not controlled at times by our emotions.

As an example, the email notes how relationships progress with ups, downs, and sideways periods. The ups, both in markets and in relationships can produce euphoria and a feeling that the good times will go on forever. Of course, that is rarely the case. Both in the markets and in relationships, there are downturns and even occasional catastrophes. I have had traders come to me for coaching after suffering large losses because they were afraid to trade again. I have seen formerly active traders quit trading completely following a series of losses and I have seen traders with big gains "bet it all on black" and lose everything. The question becomes how will we handle the reversals and how will we handle the positives. Certainly there is nothing wrong with enjoying things when they go our way, but in the markets, at least, we need be ready to exit before we are hurt too badly. The same may be true of a relationship. On the other hand, when things are going great, we may have too high an expectancy that they will remain that way forever. We can't help having emotions, but in the market setting, it is important that we do not permit them to rule us.

As the author of the email noted, we can do better with a plan. By that, I don't mean that we can expect every plan to work every time. I only mean that if we have a plan of action then when things go against us we may be able to cut losses more effectively when a position turns against us than we might if we just followed the impetuous action of an inner emotional dialogue. So, too, with a plan we might do better letting profits run than if we permit ourselves to take profits emotionally.

Bottom line, trading is life. It takes work to be successful. It requires an understanding that we do have emotions that can affect our behavior and, in trading, it can be quite important to discipline out as much of the emotion as possible.

Thanks to the author of the email I quoted for allowing me to bring her insights to you.

by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved

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A Secret about Successful Trading

2010-01-15T15:31:00.000-07:00

Over the years, I have observed a whole lot of traders looking for the secret that, once revealed, will lead to riches. The search often seems to be directed to a way to find the perfect candidate or a "can't miss" strategy known only to some chosen few. I remember a husband and wife who studied with me back in my seminar days who I believed were convinced that I was holding some secret back from them. In fact, one day, the husband got me in private and asked what the secret really was. I laughed, thinking there was no secret, but now I know there definitely is a secret that can really help.

As I mentioned in the article last week, I'll be speaking at the Scottsdale/Trading Group next Wednesday, January 20th at 7:00 P.M. In thinking about my upcoming presentation, I decided I'd talk about the elements of what I believe is the secret to successful trading. If you live in the Scottsdale/Phoenix area, I hope you get a chance to attend.

However, even if you aren't coming to that presentation, there is no reason why I shouldn't reveal the secret as I perceive it to you as well. I must caution, however, that there is no guarantee that the secret will work, but I believe that use of the secret be a piece of very valuable information. Nevertheless I am sure that many will be disappointed as I disclose this secret because, like many secrets, once known it looks obvious and easy.

Secrets often are simply a revelation of something that may be quite apparent with a little thought anyway. Consider, for example, the illusions of a magician. Seeing the lady sawed in half may be astonishing until we are shown how it is done and then it is obvious and easy though maybe a bit clever in concept.

I know, I know -- enough! What is the secret. For me, the secret is that the successful trader always returns to basics. She has a plan for money management, a minimum requirement for potential reward to risk, an exit strategy, discipline, and study. That's the secret. In my estimation, those things are critically important to sustained good trading and are often overlooked, by-passed, or forgotten in the quest for some non-existent secret holy grail. That's it. That's my secret. Basics in trading are absolutely invaluable and are far more important than specific strategies or algorithmic systems.

I hope you forgive me for the tease about revealing some hidden secret. I do believe this is an important secret but wonder how many readers were hoping or anticipating I was going to write something much different when I wrote that I was going to reveal a secret of trading.

Incidentally, the Scottsdale/Phoenix Trading Group to whom I'll be speaking on Wednesday the 20th will meet at The Inn at Pima, 7330 N. Pima Rd., Scottsdale. It would be a good idea to let them know you are coming and please introduce yourself.

by Bill Kraft, Editor
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Past and Future

2010-01-08T18:49:00.000-07:00

Happy New Year!

Every once in a while, I wonder who is included in the "they" of the "they say" school of reinforcing a statement. You know, "they say" the market has been due for a retracement. Or "they say" that 2010 is going to be a good year for the market. In fact, they say the past is destined to repeat itself. That is why we may rely on certain chart formations like a head and shoulders or a double bottom to signal an entry (bearish with a head and shoulders, bullish off a double bottom). However, we need to remember that the formula is fallible. Not every double bottom is followed by a move up or every head and shoulders where the neckline is broken will be followed by a further decline.

While what they say about the past repeating itself may be true, we can never tell when the repeat may occur. That is one of the reasons I always try to approach statements about good results in the past with caution. I make that preface before I set out the results of my paid subscription services for the percentage of closed trades that were winners in 2009. It was a good year for me. In terms of percentage of winners of closed trades in 2009, the following were my results:

Trend Trader 92%
$10 Trader 80%
Option Trader 77%

The specific trades appear on the Trade Tables for each of the services. Does that mean that I will do as well in 2010? Of course not. Well, the past several years have also been pretty decent in terms of percentage of closed trades that were winners, so does that mean I'll do as well in 2010? Of course not. I could do better, or not as well. Past performance, as they say, does not guarantee future results.

What works in the markets, I am convinced, are those things I write about and speak about regularly. They are the basic foundation upon which we try to build good trading plans and good trades. Things like cutting losses, letting profits run, managing money, having an exit strategy and actually following it, etc. Most of us have heard or read about these fundamentals, but as I have seen with seminar attendees and sometimes with personal mentoring students it is a failure to understand and adhere to the basics that results in disappointing trading.

Incidentally, for those of you who may be local to the Scottsdale/Phoenix area, I will be speaking to the Scottsdale/Phoenix Trading Group on the evening of Wednesday, January 20, 2010. Please say "hi" if you're there. Also, I will do some additional private coaching again in 2010. I try to limit that to one student a month so if you ever have an interest, please let me know as early as possible.

by Bill Kraft, Editor
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Food for Thought from the Sports World

2009-12-19T08:07:00.000-07:00

Those of us who have grown up and lived in America have been exposed to many wonderful things. Among them, in my opinion, has been the opportunity to participate in and watch sports. Many valuable lessons have been learned and taught on baseball diamonds, football fields, basketball courts, and boxing rings. Though much of what we have learned may be transferable to our trading, perhaps, unfortunately, some of those lessons as embodied in various cliches are counter-productive.

I believe it was Yogi Berra, the Hall of Fame New York Yankees catcher who once inspiringly said: "It ain't over until it's over." Similar sayings like: "It's not over until the fat lady sings" or "never give up" abound. Parenthetically I should note that the fat lady usually sings before the game, but that's beside my point. We have been trained from early childhood to strive to win and to understand that losing is not a good thing. Leo Deroucher, another baseball giant, once said: "Show me a good loser and I'll show you an idiot." Please don't get me wrong, I make no argument that anyone should strive to lose. I only mean to suggest that some losses in trading are absolutely inevitable.

If we followed the "it ain't over until it's over" philosophy in trading, we might just find ourselves committing a cardinal sin of letting losses run. My point is that we get to decide when it is over in our trades and sometimes making it be over before losses mount is, by far, the best approach. All we need to be successful is to trade in a manner that our winners total more than our losers. We can achieve that through practice, through attention to smart exits, through money management, and through entry only when the reward to risk ratio appears to justify the trade.

"Never give up hope" is another cliche to which we have all been exposed. In the trading world, it is sometimes callously said that "hope" rhymes with "dope" and the winner is the one who takes the early loss rather than hanging on to a losing position with the hope that it will come back.

Michael Jordan the supreme basketball player said: "I've missed more than 9000 shots in my career. I've lost almost 300 games. Twenty-six times I've been trusted to take the game winning shot and missed. I've fouled over and over and over again in my life. And that is why I succeed." It is much the same with the successful trader. She knows there will be losses, but she also knows that patience, practice, and keeping herself in the game (not necessarily in a single trade) can yield fabulous rewards over time.

Maybe Vince Lombardi, famed coach of the Green Bay Packers said it best when he said: "It's not whether you get knocked down, it's whether you get up."

To those of you who have made such kind comments about my books, "Smart Investors Money Machine" and "Trade Your Way to Wealth," my most sincere thanks and the hope that you have found something valuable to help you on your financial way.

by Bill Kraft, Editor
Copyright 2009, Makin' Hay, Inc.
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A Few Random Thoughts About Trading

2009-12-12T08:46:00.001-07:00

At times, it is a struggle to come up with a new and specific subject for an article every week. As I was thinking about what I should write this weekend, it occurred to me that trading is a part of life and in life we see ourselves do many things without a conscious intention.

Supermarkets are great examples that use our natural tendencies to add to their sales. As we go to a check-out, look around at all the last minute things we can buy just by reaching out a hand. Tabloids with enticing headlines abound. Have you ever been tempted to read that article about the boy who was abducted by aliens only to return with an astonishingly high IQ or the article about the celebrity who is having affairs around the world. Even if that doesn't get us to buy, there are many who pick up the paper just to glance at the tantalizing article. So, too, are there tempting bars of candy and the all so necessary breath mint.

As we know, these displays set us up for the "impulse" buy. We may not need it, but the suggestion may lead us to buy it. Have you ever noticed that in your trading or investing? A friend or a broker might suggest a stock, for example, and we just buy it. We do no fundamental analysis and certainly may fail to look at a chart to see whether there is an opportune entry or, probably even more importantly, whether there is a handy exit. While an impulse buy of a candy bar may not be terribly devastating, an impulse buy of stock might be.

Just like at the supermarket, if we think about things and do even a little analysis, we may pass on the stock as we would on the tabloid. We might see that the stock price is pretty far from a logical exit or that the reward to risk potential may not be what we ordinarily plan.

Generally, the wiser supermarket shopper makes a list and doesn't go shopping on an empty stomach. They have a plan and the plan has eliminated much of the impulse buying since a growling stomach isn't suggesting additions to the cart and the list has set pre-determined choices based upon the shoppers needs.

Perhaps the trader would be wise to follow some of those cues. Having a plan in the first place would help eliminate candidates that fail to meet the trader's requirements. As an example, a trader who is interested in entering a bullish trade might demand that any potential entry be above the 50 day moving average and he might discipline himself to understand that he need not be invested in bullish positions when a market is decidedly bearish. I've found that most of my selection process with stock and options is one of elimination rather than selection and only when I no longer find a reason to eliminate am I ready to add to the portfolio.

I hope you have a wonderful weekend.

by Bill Kraft, Editor
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Basics

2009-12-05T09:05:00.000-07:00

As far as I am concerned, successful trading can be very simple, but, by that, I don't mean to suggest that it is easy. I am constantly amazed by the trading talks I've heard and the concepts avowed that involve endless complexities.

It is my opinion that far too many traders fail or at least fail to succeed because they try to make their trading too complex. I agree that it is important to have rules by which to trade because that introduces discipline to the trading, but I don't believe those rules need to be particularly complex. In fact, with the prior history of coaching students who later come to me I have frequently seen their previous trading go from pretty good to not so hot as they began to add layer upon layer of complexity. My advice in those situations often is to keep your trading simple but if you want more complexity go study nuclear physics.

Unfortunately keeping it simple can be very hard to do. I know of traders, for example, who have developed a very successful trading methodology, but they persist in day trading different strategies that break even or lose money because they feel they need to be doing something else. Someone once suggested that they followed that pattern because it seemed so easy just to make money with a simple strategy that worked and they felt some element of guilt so they expended more effort even though it was not financially productive. Logically, of course, that makes little sense, but psychologically there is probably something to it. When we step back and think about it, after all, the markets well may be more about the psychological than the logical.

I guess it would only be fair to ask me what I mean by making trading simple. In "Trade Your Way to Wealth" I've discussed in depth the creation of an individual's personal trading plan. It includes money management. One thing that each trader should do in my view is have some specific plan of how much to assign to each trade. There are several ways to do that as discussed in "Trade Your Way to Wealth" and the works of other authors. None is terribly complex, but it is important to pick one. After the method of money management is decided a trader might establish a minimum reward to risk that must appear before any trade will be entered. Finally, an exit and entry strategy should be chosen and, in my estimation, in that order. For example, a trader with a longer time horizon might decide that he will use a 50 day moving average as both initial entry and initial exit. If the share price crosses above the 50 day MA he might decide to buy the stock and will use a cross below the same 50 day as the exit. He might continue the trade for a short or very long time, but the method of exit is in place; a cross below the moving average.

Is such a strategy the best? No one can ever tell until a trade is finished, but it is simple and it can be effective. One problem with moving average entries and exits is that one can get whipsawed when a stock is trading in a relatively tight range. Another is that the exit becomes pretty far away if using a fairly long term moving average like the 50, but once there has been a move in the right direction the trader can then use Part B of his plan and move stops up to attempt to protect additional profit.

Anyway, there is an example of simplicity. 1. Money management plan 2. Reward to risk requirement 3. Initial exit/entry strategy 4. Method to move exit strategy in direction of move. Now, off to nuclear physics class.

by Bill Kraft, Editor
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What You Want from Your Trading

2009-11-28T08:05:00.001-07:00

Before I launch into the subject of this weekend's article, I hope all of you had a fantastic Thanksgiving. Traditionally, the holiday is a time to give thanks for what we have and to reflect about our lives. In that spirit of reflection, I thought it might be a good idea to reflect on what we want from our trading.

Obviously, on the most basic level, we want to make money from trading. I suggest, however, that there are considerations well beyond the basic. Dr. Ari Kiev, a psychiatrist, an advisor to traders and a prolific author of trading books suggests that more self-examination is something that would benefit us ("Trading to Win," Wiley, 1998, p.7). I couldn't agree more. Few traders seem to take the time to determine what they really want and how they might go about it.

It seems to me that one thing almost everyone would like is more regular income. Before we can amass great fortunes, we need to pay the bills each month so it makes sense to me to consider utilizing trading strategies that provide regular streams of income. I devoted a whole book, my recently released "Smart Investors Money Machine," (Wiley, 2009) to precisely that concept. The book sets out at least 16 different strategies through which a trader or investor can create income flow beyond what he or she may earn through their employment.

I haven't been employed for years yet I am fortunate to live a comfortable life and am able to enjoy many of the things life has to offer with relatively little stress. One of the major reasons is that I have developed a number of streams of income and while no single one may be considered particularly large, together they provide more than enough to cover my costs of living. It is only after those costs are covered that we can look to increasing our net worth.

In my own case, I assign a portion of my assets to income production and the remainder to efforts to appreciate capital. Once I know expenses will be covered, I can be relatively relaxed and patient in my efforts to accumulate more capital. I would suggest that may be an important approach for many traders. As I have written before, patience is a critically important factor in successful trading. One of the impediments to trading I often have seen is the rush to make money. Recently I heard a speaker discuss a strategy he was using and as part of that strategy, he was taking profits at a specific target even if the move was continuing in a favorable direction. I call that cutting profits. The speaker admitted it was part of his personality in that he did not want to stay too long in any position. I look at things a little differently and would prefer not to stay too little time in any position that is continuing to add money to my account as time goes by.

The speaker to whom I refer may be an example of the trader who hasn't conducted a self-examination at least to the level where he recognizes that he is violating a cardinal rule of successful trading. He is not letting profits run. The idea of exiting a trade quickly just to be finished with it quickly does not appeal to me. It is hard enough to find really good trades, and makes little sense to get out of one that is still producing just because I want a trade to finish quickly. It's like capping an oil well that is still a strong producer in favor of drilling a new well in the hope that it will be productive.

Self-examination might lead such traders to a conclusion that they might improve the bottom line simply by staying with a trade until it is no longer productive. All of that is to say that if one knows precisely, not just generally what one wants, the results may improve. As Dr. Kiev suggests, setting a goal (and then putting it in the background) is often very helpful in getting where we want to be. My own suggestion is that we first consider how we intend to get to the goal once set. For many, I suspect that is the production of regular income.

In "Smart Investors Money Machine" I include many ways to add streams of income from simple concepts like investing for dividends to writing covered calls to selling naked puts or creating iron condors or investing in MLPs or bonds, annuities or even reverse mortgages for those older than 62. Each of these strategies is explained in detail and the reader is shown how each might be employed depending upon the trader or investor's age, station in life, and resources. These strategies can really help. I know; they've definitely helped me. In addition to helping me pay the bills they have provided income that permits me the luxury to be patient in my own trading.

by Bill Kraft, Editor
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Changes Over the Last Several Years

2009-11-21T08:20:00.001-07:00

Option traders are about to see an important and long overdue change. Option symbols are finally changing so that it will be easier for traders to identify the option they are seeking or trading. At the initiative of the Options Clearing Corporation option symbols will become much more straightforward and easy to understand. The old symbols have been used for the past 25 years and gradually will be replaced by the new symbols that are more intuitive and more easily deciphered. For example, the April 2010 $35 calls on XYZ may formerly have been XYZDG but now will be XYZAPR1035Call showing the stock symbol, expiration date, strike and option type. Though longer, these new symbols seem much more self explanatory.

Knowing these changes in option symbols were about to be implemented got me to thinking about other changes in trading over my lifetime and particularly in just over the decade in which I have been trading for a living. One very dramatic change has been in commission structures. I remember paying a couple hundred dollars in commissions when I made my first trade almost too long ago to recall. Once, in a seminar in the early 2000's I mentioned a stock trade I had made where I paid a $12.50 commission to buy 1000 shares of stock. An older man in the front row was completely disbelieving, blurting: "You did not. No way you only paid a $12.50 commission." He had been trading for years and was accustomed to the high commissions charged by the full service brokers. I had to show him my confirmation before he would believe me and he was irate with his own broker because he had made the same trade and paid more than $150.

Option trading for retail traders was quite rare before the '90s. Commissions and illiquidity made options difficult to trade for the littler guy and quotes were both untimely and hard to find. I recall when I began trading for my living I was still using newspaper option quotes as my starting point.

As with so much of our lives, home computers have made a huge difference in our trading. I recall beginning to make online trades enjoying very reduced commissions and utilizing quotes that were only 15 minutes delayed. Real time quotes were still expensive to obtain and the 15 minute delay was remarkable. Now, of course, many online brokers provide real time quotes free of charge and charting services have real time charts for very little cost.

Charting, too, has been revolutionized. Though I never did my charts by hand, I did use what would now be considered some pretty primitive charts. Today charting has become so sophisticated that almost any indicator can be attached to and used in conjunction with the charts.

Clearly, technology has made much more available and in many instances at a very reduced cost. I'm sure the readers could add many innovations to the few mentioned here.

The problem continues, however, that so many traders continue to be overall losers. Technology and the other changes have not changed that problem except, perhaps, to add more traders. What I believe we all must keep in mind is that it is we, not the technology, who trade. We must deal with our own psychology when money is at risk. We must understand how to discipline our trades, when to cut losses and how to let profits run. These are issues about which I have regularly written and about which I regularly teach in my coaching sessions.

Enjoy the advancements. Understand, though, that people made money in the markets long before the advancements and people still lose money in spite of them. That might teach us that there is more to learn and that learning through reading, through seminars and DVDs, and through a coach or mentor may well exceed the technological advancements in importance.

by Bill Kraft, Editor
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What's Your Trading Personality?

2009-11-14T09:17:00.000-07:00

In my most recent book, "Smart Investors Money Machine," I discuss a variety of ways people can add streams of income to their lives. I use examples of a single unattached male, a family with children, and a couple at retirement to show how various strategies might be employed by them at differing life stages with differing needs and varying time constraints to add what can be important streams of income in each situation.

One of the important considerations for any of us is to arrive at an understanding of our own trading personality. As I have emphasized so many times both in these articles and in "Trade Your Way to Wealth," a critical need is a trading business plan and as or even before such a plan is developed, the trader would be well advised to do a little self-analysis to determine his or her trading personality characteristics. Obvious factors such as how much time one is willing and able to make available for study and trading are critical, but, in my view, one needs to take a deeper look in order to increase the favorable odds or gain an edge.

Since this subject can be both broad and deep, I'll just try to give a few examples of trading personalities I have seen along with some suggestions as to how the trader with such traits may help himself improve in the trading arena. One of the more common traits seems to be an effort at achieving trading perfection. Classically, people who have been trained as engineers tend toward this approach. Through training and experience they seem to tend to seek every last piece of information before entering a trade. Obviously, if one could actually gather and process all information relative to a trade before making an entry, an edge would likely exist. Clearly if one were designing a bridge or the structure of a building he would need and want every available piece of knowledge and information in order to insure the integrity of the structure. However, in trading, it is rarely, if ever, possible to know all relevant facts.

Suppose one were to undertake a relatively complete fundamental analysis of a company in order to decide upon a trade. Even if literally every available fact were gathered and incorporated into the decision, that would not preclude a new fact from changing the whole picture just as the buy order were placed. The CEO, for example, could be indicted or new onerous law passed, or a competitor could announce a fantastic new product that would be an overwhelming advancement (remember what the auto did to the horse and buggy or vacuum cleaners to rug beaters or computers to typewriters?). A new news item can literally wipe away attempts at perfectionism in investment analysis.

In addition, those whose trading personalities tend toward perfectionism are frequently plagued by paralysis of analysis. There are just so many pieces of information to try to gather and analyze, one may never get to a level of comfort that permits entry into a trade.

For folks with this element of perfectionism in their trading personality, I would suggest a bit of change in focus. Instead of looking for the perfect trade, look instead to trades that offer a strong reward to risk potential, perhaps on the order of 2.5 to 1 or better. Look for trades that offer a close and convenient exit just in case you are wrong on direction (as you inevitably will be on occasion). Understand that there really is not perfection in trading and that it is a different animal than designing a bridge. Trading involves infinite variables.

Not far from the perfectionist is the trader who seeks ever greater confirmation before entering a trade. He may see an entry, but then awaits confirmation of the entry and then looks for confirmation of the confirmation. Believe me, I am not against confirmation, but, like anything, if taken to extremes it can be harmful. The problem with confirmation is that the longer one waits, the farther the trade has moved and the more of the trade the trader often misses. In addition, the exit in the event the trade goes the wrong way gets farther and farther away before entry is made thus increasing losses in losing trades and reducing gains in winning trades. My suggestion for these folks is to concentrate on having a disciplined close exit at the time of entry. If that method is employed and the trade goes south, the loss will be small and contained and the trader can move to the next trade. Again, reward to risk potential should be a major consideration in my view.

Lastly, for this week, at least, is the ready, fire, aim trader. This personality is almost diametrically opposed to the perfectionist trader and jumps on a trade with little basis, technical or fundamental, and no plan other than some unsubstantiated hope he will make money. Often this person buys because a friend owns a stock that has done well or because it has been touted by a broker. The trader has neither an entry nor an exit strategy and just jumps on board, all too often as the stock is about to turn the other way. Here, I believe the trader needs to learn and exercise discipline. He needs to have an exit plan in place before entry and he needs an overall plan for his trading. Without those in place, he is quite likely to wind up without trading money quite quickly.

Obviously, these examples are relatively extreme, but they are also relatively prevalent to one degree or another. The key is to understand yourself and your own foibles. We all have them and they can definitely impede good trading. I think it was Pogo who said something like: "We have met the enemy and they are us." It is so true that we are most often our own worst enemy in trading and the first step is to discover what we are doing to undermine our own success. Once found, we can take steps to improve.

by Bill Kraft, Editor
Copyright 2009, Makin' Hay, Inc.
All Rights Reserved

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Costs of Trading

2009-11-07T04:22:00.001-07:00

Last weekend I wrote an article about trader education and how important I considered it to be. Obviously, as with any education, there are costs to be incurred. As I noted in "Smart Investors Money Machine" education is becoming increasingly expensive. One kindergarten I checked out, for example, charges $3,500 a semester. Coaching and trading seminars can certainly rival the cost of kindergarten, but rather than playing with paste and crayons, the would-be trader may be readying herself to risk tens to hundreds of thousands, or even millions. Any education has a cost whether it be in books, DVDs, instructors time and facility costs, or whether it be through self-learning by putting money at risk without really knowing what one is doing in the markets. As I often tell students, trading can be simple, but it definitely isn't easy.

In response to the article last week, I received a request from a reader to discuss other costs of trading beyond those directly resulting from paying for education. One of the first and most obvious costs are commissions. If one is an active trader or a trader who is trading a relatively small account, commissions can become a very important consideration. Suppose a trader is paying $10 in commissions to enter a 100 share stock position when the shares of stock are trading at $5 a share and that he sells those shares after the stock has a $1 a share profit. He now pays another $10 commission to exit the trade. Before commission, he has a $100 profit, but that profit is reduced to $80 by commissions. He has lost 20% of his potential profit just through commissions. To view it another way, the same $5 stock must move up 4% just to break even in this small trade example. While a $10 commission sounds small (and it is compared to what commissions used to be) they can be a very important factor to someone who is making fairly small trades.

Very active traders like me may make literally hundreds of trades in a year. Suppose I make 500 (250 entries and 250 exits) option trades in a year and pay a commission of $12.50 to enter a 10 contract position and another $12.50 to exit the position. Over the course of the year, I would have $6,250 in commissions. On a $100,000 account, I would need to make at least 6.25% profit just to break even. When we think what CDs are paying, we can see that commissions can be an important consideration in our trades.

Many investors buy open end mutual funds and may face large charges from the fund company. For example, when researching for my book, "Trade Your Way to Wealth," I found one mutual bond fund that charged 13.5% as an "investment advisor fee" on income and added another 1% as a "custodian fee." Unless an investor reads the Prospectus and understands what he is reading, he may have no idea of the exorbitant costs of investing in some mutual funds.

Yet another cost often found in trading is the spread. Option traders are familiar with this cost. Any option is quoted with a "bid" price and an "ask" price. The "ask" is the price at which someone (usually the market maker) is willing to sell and the "bid" is what someone (usually the same market maker) is willing to pay. If we saw an option quoted at $1.00 x $1.25, it would tell us we could buy the option at $1.25 a share (option contracts usually are for 100 shares per contract) and that we could sell the option for $1. Suppose we bought 10 contracts at $1.25 (that's 100 shares x 10 contracts = 1,000 shares x $1.25 per share) for a total of $1,250 and for some reason, we had to sell immediately. We would sell at the $1.00 bid and get $1,000 and would have lost the spread or, in our example, lost $250 just as a result of the spread. Wise option traders will know that they might be able to get "in between" that spread so the loss from the spread might not be quite so dramatic, but there would be some loss even then because getting "in between" the spread only means some savings, not that there is no spread.

Yet another similar issue is known as slippage. Slippage often occurs when the investor or trader places market orders. Suppose we see that a stock is trading at $25 a share and we place a market order to buy 200 shares at the market. By the time our order gets executed, the price might be $25.30. That is the price we wind up paying so instead of making a $5,000 plus commission investment as we thought we might, we have paid $5,060 plus commission. One way to avoid the slippage on entry is to place a limit order. If we placed a buy limit order of $25 a share, we know we would not pay more than $25 a share plus commission, but we might not get the stock; the price might have gone up and we missed the trade. The market order to buy would have assured us that we would buy the shares, but we really don't know at what price. Suppose the stock was trading at $25 as we placed the order, but before our order got to the floor trading was halted for some news announcement and the announcement turned out to be very positive sounding and the stock then re-opened at $50 a share. Now our market order would be filled at $50 instead of where we were thinking. Then suppose there was a subsequent announcement that clarified the earlier announcement and made it clear that it was not as positive as earlier presumed. Then the stock fell back to $25. Now, because of our market order, we bought at $50 and shortly thereafter owned that same stock trading back down at $25. While that may be an extreme example of slippage, things like that have happened and do happen.

Hopefully, readers will recognize that there are many potential costs attendant to trading and one of the best ways to ultimately reduce them is to be aware and pay for the education necessary to learn how to control them.

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Education

2009-10-31T07:20:00.000-06:00

I was talking with an investor the other day and he mentioned how odd it is that so many people come to trading with no education or training and without knowledge specific to trading yet expect to do well. There are few endeavors in which we can expect success without knowing what we are doing, but, oddly enough, it seems that many evidently believe that trading is something they can do without gaining the knowledge first. Sadly, I have been contacted by quite a few folks in that category. They have called or sought help or coaching, but only after losses had mounted to high levels.

A few weeks ago, I wrote about my coaching sessions and mentioned the cost. One reader thought my price was way out of line. Certainly, he is entitled to his opinion. The fact is, almost all traders wind up paying for their trading education one way or the other. Many prospective students have called only after having lost literally hundreds of thousands of dollars. They call to try to find ways to stop the bleeding. Compared to such losses, the cost of a day or two of coaching is minuscule. The cost of a day's coaching can be equated to the size of a relatively modest trade. Nevertheless, it seems like many new and inexperienced traders choose to pay for their trading education through the school of hard knocks, and the losses are regularly greater than the cost of getting an education up front.

I am a believer in preparation first and action thereafter. Ready, fire, aim is definitely the wrong way to go when entering the trading arena. I don't mean to suggest that everyone should hire a coach before trading. There are a wide variety of ways in which to get a trading education other than by losing money and learning the really hard way. Many books are available to guide the trader. Among them, my own "Trade Your Way to Wealth" and Dr. Alexander Elder's "Trading for a Living" can start a would-be trader on their way. DVDs and live seminars are available and many brokerages include excellent education on their websites. The Options Industry Council and the CBOE are among many of the organizations that offer wonderful educational opportunities. In my view, people should avail themselves of these resources first and only after gaining some education should they even think about beginning to trade.

As I have written before, after first gaining some education one can then gain some experience without putting real money at risk by paper trading. I know paper trading isn't the same as trading real money because the same emotions are not involved, but paper trading does permit the trader to learn a strategy before exposing his emotions to real money trading.

Trading is a very high risk endeavor. Good sense would seem to dictate that we learn to appreciate the risks specific to what we are doing before we actually undertake them. Few do, and those who don't can be expected to have an exceedingly short trading life expectancy.

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The Rewards of Patience

2009-10-24T07:55:00.000-06:00

One of the more common problems I see with traders at all levels is impatience. It can be an insidious problem and is fueled by both fear and greed. Traders are afraid that they will miss a good one if they don't have a position going at all times and that means that our greedy side may miss out on a good move.

Those emotions may lead to forcing a trade. In other words making an entry that is not ideal. The entry may be too far from an exit in the event the trader is mistaken on desired direction or it may fail to incorporate an adequate reward to risk ratio. Impatience can lead to jumping the gun as in the case of trying to catch a falling knife. That situation arises when a trader is trying to predict a bottom on a falling stock before the stock, itself, has signalled a turn. Sometimes a trader gets lucky and does catch a bottom, but more often, it seems, he catches the painful point of the knife as the trend continues down taking the newly acquired stock along with it.

The only way I know to avoid impatience is to set rules for ourselves. Unless the rules are followed and the specific criteria met, we don't enter a trade. That should be part of every trader's approach. In both "Smart Investors Money Machine" and "Trade Your Way to Wealth" I emphasize the importance of creating and following a plan that is unique to the individual trader. It is one significant way in which we can give ourselves an edge and without an edge we are not likely to do very well in the market.

As a child, I remember my mother teasing me with the old saying: "Patience is a virtue, possess it if you can. Sometimes found in women, but never found in men." Now please don't jump on me for being sexist, but I have to say there is at least a modicum of truth to that old saw. In seminars and coaching sessions, I have seen that women seem to be better at exercising patience and following rules of trading. Many (not all) men, on the other hand, seem to have more difficulty waiting for the really good entry. So, too, do they seem to have more trouble remaining in a position that is going in their direction and tend to pull the plug prematurely thereby failing to let profits run.

I think it is important for all of us to remember that we don't have to have a trade in place at all times and just because we turn on the computer does not mean that we have to make a trade. The point of trading is to try to make money, not to constantly play the game. There are many times when we may not find a great entry or a satisfactory reward to risk ratio. Those times require the exercise of patience if we are to do well in the long run. I want an edge, not constant action. If it is action we desire, there is plenty of that at the tables in Vegas, but there the edge is always with the house.

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What Stock to Buy?

2009-10-17T07:13:00.001-06:00

In the article last weekend, I discussed some considerations traders may want to ponder when deciding upon a vehicle to trade. We looked at the idea of using ETFs to trade whole markets or sectors as opposed to trading single stocks and noted the probable differences in relative volatilities among those choices as well as certain comparative risk issues. In this article, I am going to focus on some ideas related to choosing individual stocks to trade.

Undoubtedly there are a myriad of ways to select a stock to trade. We may have heard someone touting a particular stock at a cocktail party, or we may have received a cold call from a broker, or gotten a recommendation from our own broker. We may subscribe to a service or we might have some scan or scans of our own.

While we might establish some ranking of the various ways to select a stock, each has at least some merit. Although my general experience with cocktail party or barbershop tips is that they are rarely to be followed, there are times when they might put us onto something good. The problem with many of those is that it is already late in the move; perhaps too late to jump on board. One of the major problems I have with broker suggestions is that they are often completely unrelated to what I would consider to be a good entry, i.e. one that has a palatable reward to risk ratio. The other problem I have with many brokers and their advice is that they may call and say to buy, but it is a much rarer case when they call to suggest it is time to exit.

I edit three alert subscription services, Trend Trader, Option Trader, and $10 Trader. My publisher adds the Success Trading Group, a Covered Call service, and a Dividend Trader service. In the case of my own services, I am usually actually making the play I discuss in the alert shortly after I send the alert to subscribers and I send additional alerts when I place a stop loss order, exit the trade, or, in the case of Option Trader, when I adjust the trade. The idea with these services is definitely not to recommend a trade, but rather to draw the subscribers' attention to a particular vehicle and show how I may utilize specific strategies. The simple fact that I am making a specific trade, alone, is not a sufficient reason for someone else to make the same trade. Their goals, risk tolerance, available cash, etc. are likely to be different from my own situation so they need to make their own analysis in light of their own personal circumstances and plan.

The key for traders, in using any of these methods of selection, including their own scans, is to recognize that it is just a beginning. A trader must then make an analysis and decisions on his own about whether the candidate fits their plan. As I discuss in detail in "Trade Your Way to Wealth", once a candidate is identified the trader, among other things, must determine for himself or herself whether there is a sufficient reward to risk ratio, what their exit strategy will be if an entry is made, where a first target may lie, what capital to invest, how risk will be managed, and what strategy to employ. In "Smart Investors Money Machine", for example, I discuss a variety of strategies that might be considered, all of which are specifically designed to create a regular cash flow (sometimes weekly, sometimes monthly, or maybe quarterly). Other strategies discussed in "Trade Your Way to Wealth" may be used to attempt to capture gains in up, down, or sideways moves. The point is that merely selecting a candidate, whether through a tip, an advisory service, or one's own selection methodology is only a first step in identifying a trade. The successful trader makes several other very important decisions before ever pulling the trigger.

When I'm asked how I find a specific stock to trade I often reply that is one of the least of my worries. My first concern always is where will my initial exit be in the event I am mistaken on direction. Once the initial exit and exit strategy are determined, I want to see where the first level of potential reward appears to be. Those factors are more critical for me than what stock I use. I should hasten to add that though I am aware of fundamentals when trading, technicals form the discipline for my trades and I try to let them control my actions.

Of course, the trader can choose to trade individual stocks as many do. Movement in them may well be farther and faster than in whole market or sectors and that can be a good or a bad thing depending upon the position taken.

Issues of risk control and monitoring are critically important no matter what the investor chooses to trade. In a DVD entitled "Trading for Keeps" that I was invited to do in Chicago, I cover a number of issues related to those subjects including some important principles of disciplined trading, trend line and stop loss use, and protecting positions and portfolios. You can purchase a copy by following the link in this paragraph.

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What Should I Trade?

2009-10-10T08:17:00.000-06:00

The question I am most frequently asked is: how do I find candidates to trade? There are numerous considerations that can be taken into account, but as I am constantly writing and preaching, the first consideration is the trader's individual plan and trading personality. What might be a great candidate for me might be a terrible choice for you and vice versa. In this article, I'll try to offer some suggestions that could help a trader decide on what approach an individual trader might prefer in seeking candidates. In looking at some of the possibilities, I think it is important to understand that almost any choice involves a compromise of one sort or another.

Though not usually the first choice of many newer traders and investors, one of the first candidates to consider is to trade a whole market. ETFs (Exchange Traded Funds) are available that permit investments in whole markets like the Dow 30 (DIA) or the S&P 500 (SPY) or the Nasdaq 100 (QQQQ). In general it is somewhat easier to trade a whole market than it is to trade an individual stock because the whole market is not subject to quite the same risks as the individual stock. The price of a single stock, for example, could be dramatically influenced by news that a competitor is introducing a new product, or by news of an SEC investigation, or by postponement of an earnings announcement, or by the arrest of a corporate officer, or by the announcement of the acquisition of a big new customer, etc. While events like those may have a huge influence on the price of the individual stock, it likely would have a much lesser influence on the market as a whole. In essence what I am saying is that one could expect less volatility in a market than in an individual stock under many circumstances. As a corollary, under most conditions, it is probably somewhat easier (not necessarily easy) to follow market direction than individual stock direction for many of the same reasons. On the flip side, movement may not be as fast or far in whole market trades as in individual stocks and, of course, that can be good or bad depending upon one's position.

If the trader is seeking a little more movement, a little more volatility yet wants to avoid single stock risk, another alternative is to trade sectors. Again, sectors can be traded using ETFs that essentially are baskets of stocks. The investor can choose an ETF for any given sector and essentially own an interest in all or a chosen group of stocks in a given sector. Much has been written about a phenomenon known as sector rotation. Basically the theory suggests that money flows from sector to sector with some gaining favor while others may be losing support. As an example, as of the time I am writing this article, over the past month a couple of the hottest sectors have been Information Technology and Hotel/Motel REITS (real estate investment trusts) while some of the less favored were Residential Construction and Health Care Plans. Seeing that, a trader could choose to make a bearish play on the Residential Construction sector or a bullish play on Information Technology until he or she saw a change in momentum. Once again, at least some of the risk of individual stock ownership is removed though certainly less so than if the trader was in a "whole market" ETF. In many cases, volatility or price movement could be expected to be somewhere between that of individual issues and whole market ETFs.

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Quick Fixes

2009-10-03T07:31:00.000-06:00

Many traders lose. That is no secret. The important question is why so few actually succeed. I have had quite a bit of experience teaching trading classes and working with individual coaching students over the years and I thought it might be useful to discuss some of the observations I have made, particularly in the coaching arena.

In my experience it is unfortunate that most students do not seek help from a trading coach until losses have reached significant levels. It is not at all unusual for prospective students to call telling me that they have lost 30% or 50% or more of their portfolios. It seems sad that losses have to reach such depths before help is sought. Recently a student commented to me that it is so odd that in almost all other endeavors in life we get training and education first but in trading and investing the norm seems to be to wait until losses have piled up before looking for help.

Undoubtedly, one of the reasons a lot of losing traders wait so long to seek a coach is that they perceive the cost to be so high. In my own case, I charge $3,000 for a single 6 to 7 hour day and $5,000 for a two day session. At times, special discounts are applied that can reduce that cost. I am aware of some coaches who charge more than twice that amount. Yes, I can agree that $3,000 is a lot of money, but if we really look at it in comparison to trading, it is probably equivalent to one or two trades. When compared to someone who has lost half of a $250,000 or even a $1,000,000 portfolio it is minuscule. As has often been said, we pay for our trading education one way or the other.

In any event, what can coaching actually do for a trading student? In my own case, when a prospective student contacts me I usually start with a brief conversation on the phone so we can begin to get to know one another. I try to find out what they've been doing and what led them to contact me. I try to make a determination whether or not I think I might be able to help them and suggest what I might have to offer in their specific situation. I always suggest that they think about it after our conversation to make sure it is something they believe could be helpful to them. Assuming they follow up and decide to go forward, we schedule a date and place and I then send them something I title "New Student Information" along with a form of agreement that essentially says that I will not be responsible for their losses.

The answers to the few questions on the New Student Information form help me learn a little more about a student's background. I'm trying to begin to determine what the individual's biases might be so I can see what obstacles they might have to overcome. For example, it is almost a joke in the industry, that people who are trained as engineers often have a great deal of difficulty achieving success as traders. Engineers are trained to gather every fact possible before proceeding and then often seek perfection in the trade. This approach can be problematic in that (a) it is not possible to know every fact that is relevant to a trade, and (b) even if we did, the facts would quite likely change to some degree by the time we actually entered the trade or shortly thereafter. Please, understand that I am not trying to pick on engineers. I am only using this as an example and do not mean to suggest that no engineer could ever be a good trader. Just one anecdote: I once drew a rough sketch in a class to illustrate how the time value of an option diminishes ever more rapidly as the option nears expiration. It was a hand drawn rough sketch and meant as an illustration only. During the break when I came back into the room, an engineer had a protractor and was measuring the slope on my drawing. We made a big joke about it in the class, but had I not walked in on him, protractor in action, he may have tried to apply the specific math to later trades.

In any event, after asking background questions, the New Student Information form seeks things like what the student has studied with respect to his trading, whether he has a plan, and, if so, what it is. I ask what strategies the trader has been using and how they have worked out. Finally, I want to know what they expect from the session with me.

Inevitably, the answers provide us with definite direction and often pinpoint problems with the traders method. While many times the trader puts his finger precisely on the problem even before we have met, it is clear that he has been unable to provide the solution. Oftentimes it is as simple as the fact that the trader has a plan but he doesn't follow it or that he has an exit strategy but doesn't pay any attention to his own exit. Sometimes focus is misplaced and the trader may be fixated on creating watch lists while the whole idea is not to create a watchlist, but rather to find the entry in a trade. The point here is that there is rarely a quick fix. If there were, the trader would already have accomplished it for himself and would have no need for me. I always try to go back to basics and identify precisely how the unsuccessful trader is failing to cut losses and/or let profits run. From there we try to look at ways the trader can improve his abilities to follow his own plan once created and not let the emotions of the heat of trading overrule his pre-determined decisions. Recognizing the problem is only the first step and even though a problem may be apparent to me it often is not apparent to the student and even if it is, the solution may not be easy. The fixes are not necessarily quick, but once the problem is identified and potential solutions discussed, the student can go forward to work through their problems.

Good trading may be simple, but it definitely is not easy.

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What's Your Perspective?

2009-09-26T07:37:00.000-06:00

I've been writing these articles for quite a long time, now (maybe too long) and I have received many, many comments. Some have been very thoughtful, others very kind, and some just plain annoying, but, in retrospect, they have taught me a lot about the widely varied perspectives of the readers. I know, for example, that if I write anything with even the slightest political overtones I can expect high praise and ultimate damnation. I've seen that I can rile up the readership with any discussion of social security and I certainly am not going to discuss health care. I once entitled an article "More Than One Way to Skin a Cat" and got a couple of the nastiest comments I ever hope to receive. I guess those few readers took it a little too literally and thought I was going to write a set of instructions. Actually, using language from Mark Twain's A Connecticut Yankee in King Arthur's Court, I only meant there were many ways to accomplish a task.

Last weekend, there were a couple of apparently divergent comments on the blog that got me to thinking about the different perspectives readers have as they read these articles. The first comment suggested I publish all my trades and that they be audited. Better for business the writer believed. While I am sure it was very well meaning, it indicated to me that the commentator was probably both suspicious and unbelieving. He didn't just want to see everything I was doing, he wanted it audited. I'll return to that perspective shortly.

The other commentator (whom I do not know) reported that he has been in the trading business for 33 years and referred to my articles as "a breath of fresh air," and went on to elaborate how important the concept about which I had written was to successful trading.

So, as I see it, we had two very different perspectives. The old pro affirmed that I had at least attempted to write about an important and useful concept. The other writer, whose experience is unknown to me, was looking for some higher proof of credibility. I don't blame him for searching for the credible in a sea of information and misinformation. I guess what I want to say is that the suspicious fellow need only test the information for himself. That is something I have been advocating for years. Paper trade the strategy. See if it works; if it doesn't then you can be assured I am full of bean soup. If it does work, maybe you have been given some valuable information. If it is valuable, use it.

Motive, too, is important. I, quite frankly, have several motives in writing these articles. Though the disbelievers will automatically reject the first motive, it is that I really do want to help people succeed. Secondarily, I would like it if you bought my books or signed up for one of my paid subscription services, but I will tell you that whether or not you buy a book or sign up for a subscription service will have almost no effect on my life. Of course, I do receive some modest income from each of those endeavors, but if they were my livelihood I would probably starve to death. The same is true of income from the few coaching sessions I do each year. I do them because they are fun; they are challenging, and they help keep me sharp in my own trading. Whether I do them or not has no influence on my life or lifestyle other than to require me to devote 10 or 15 days a year to try to help someone else solve their own trading problems.

So, bottom line, whatever you do is up to you. You can choose to believe or disbelieve. It doesn't matter to me except when I am called dishonest. You can come from a trusting or distrusting perspective, but in the end, it is you who must determine, on your own and for yourself, what is or is not worthy. It seems, though, that if you are really serious about your own trading you should not reject things out of hand or make some demand that my life be audited for you. Instead, how about reading the concepts, see if they make common sense, apply them in situations where you are not putting money at risk (like paper trading), see whether or not they work, and if they do, use them; if they don't work, reject them. The responsibility can only lie with you.

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Sine Metu

2009-09-19T07:49:00.000-06:00

I hope the little series of articles over the last three weekends provided some ways in which traders can cut losses and let profits run. The fellow who initially suggested I provide some information on the subject suggested it would be a cop-out to say that there are probably as many ways to cut losses or let profits run as there are traders, but as you could probably see if you read the articles, there are a wide variety of ways in which a trader can accomplish the goals. Much is dependent upon the creation of a plan that is specific to your own needs. In both books, "Trade Your Way to Wealth" and "Smart Investors Money Machine" I talk about the need for such a plan and in different ways show how an individual can construct a plan specific to his or her needs, age, station in life, goals, family situation, and financial status.

Discipline is a first key. Most would-be traders, I find, are unwilling to even engage in the discipline of learning how to create a plan let alone working on its creation. It's my guess that their likelihood of sustained success falls somewhere between slim and none and leans to the "none" side. Creating the plan, however, is only the first needed act of discipline.

As many of you may know, I just had the privilege of traveling through Ireland, an absolutely beautiful country. During our stay, we took the opportunity to tour the Jameson Irish Whiskey Distillery. In addition to learning how Irish whiskey is distilled, we learned how Mr. Jameson went to riches, then to rags as a result of world events totally beyond his control, but recovered to regain his riches. As a result, he was awarded a crest and a motto. The motto is: sine metu. It means without fear. That is how Mr. Jameson managed his ultimate success and the ongoing success of this now internationally renowned company.

Sine metu is a motto that all traders should take into account in my book. If we trade through fear, undoubtedly we will make bad trades. We will cut profits because we may be afraid of a pull back instead of having an exit strategy such as those I discussed in the last article in the recent series or we will let losses run because we are afraid to take the loss and move ahead. With a disciplined approach and a pre-determined exit strategy in place we have the ability to increase our chances of success and proceed sine metu.

As an aside, for any who have shown interest in private coaching sessions, I am now booked through the rest of the year. I take no more than one student a month so if you are interested, you might want to contact me for bookings in early 2010. I am continuing the one day reduced price special in Arizona for January, February and March. It is 1/3 off the regular price for a one day session.

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