There is no question in my mind that people who are serious about their trading need to have accurate information. Without it, it is even harder, if not impossible, to succeed in an already difficult business. I wrote "Trade Your Way to Wealth" to try to help disseminate what I believe to be important considerations every potential trader and investor should take into account in their efforts to become successful or more successful. In the book, I included methodology and strategies that I have learned and used successfully over the years to try to help others avoid re-inventing the wheel.
Last week, for the first time, an unfavorable review of my book, "Trade Your Way to Wealth," appeared on Amazon.com. It was written, I suppose not surprisingly, by someone who wrote anonymously, unwilling to reveal their own identity. The critic claimed to have been trading for 10 years, but failed to reveal whether successfully or not. I can guess. In any event, under a heading, "The Bad," Sir Anonymous wrote: "The book shows a few options trading strategies such as collar (as risk free to low risk free), iron condor, spreads, etc." Sir Anonymous found those strategies to be "very basic or introduced for novice traders." In fact, the book, along with setting out how to create a business plan and manage money specifically discusses 15 separate stock and options strategies in depth and identifies the risk, capital requirements, relative lengths of time each generally requires, the level of monitoring required by the trader/investor and the market direction to which each applies. The strategies set out are: buying stock, writing covered calls, selling stock short, protective puts on long stock, selling naked puts, protective calls on short stock, buying calls, buying puts, bullish call spreads, bearish call spreads, bullish put spreads, bearish put spreads, iron condors, collars, straddles and strangles. In addition, there are discussions about trading REITS and generating regular tax free monthly income on vehicles like closed end funds.
Sir Anonymous says that one may not be able to make millions using collars. Of course that is true. Whether a trader makes millions or not depends on many factors including knowledge, risk awareness, capital devoted to trading, ability to cut losses and so on and so on. I should note that reportedly, the very wealthy use collars as a device to significantly reduce and even eliminate risk in trades while still leaving quite an attractive upside in many situations. I certainly use them myself. Our critic also says it is difficult to find a collar where you can get a credit on the option legs at entry. I didn't say it was easy. Successful trading does require work. I find many such collars during the course of a year. When I was asked to speak at Traders Expo in New York last month, for example, I wanted to illustrate a trade with an assured profit (and no risk). The day before my talk, I did a little searching and found a good one within 10 minutes.
I'll conclude my harangue by noting my belief in the critical importance of formulating a business plan for yourself. Sir Anonymous criticizes "Trade Your Way to Wealth" for failing to set out my own personal business plan. In fact, I did not set out my personal plan for a couple of reasons. First, a good business plan must be constructed for the individual as I describe in the book. My goals, capital, risk tolerance, choice of strategy, time spent studying and trading, knowledge level, and experience are unique and undoubtedly different from that of each reader. What I have done in "Trade Your Way to Wealth" is to set out a road map for you to create the plan that fits you, not me. Second, as I note in the book, the trader's business plan is a living document, a work in progress. It can and should change as you gain more knowledge, accumulate more capital or suffer losses in your trading. You may practice new strategies and add them to your trading arsenal. Copying someone else's plan when it does not fit your knowledge, experience, goals, risk tolerance, etc. would be absolutely foolhardy.
I have been fortunate and successful in my own trading. I sincerely believe in making things as simple as possible and I believe we all are better off if we study and completely understand the critical basics of trading. Some of those basics, in my opinion, are the understanding that successful trading isn't easy and we tend to make it even harder than necessary, it does take work, it will not be handed to us on a silver platter and there is no holy grail of trading. In my teaching and coaching, I have found that two of the most common faults of unsuccessful traders are a failure to understand the real risk in the trade and a propensity to try to add complexity to their trading. In "Trade Your Way to Wealth," I have tried to address those failings in an effort to help readers become better traders and investors within the framework of their own lives and personalities.
by Bill Kraft, Editor
Copyright 2008, Makin' Hay, Inc.
All Rights Reserved
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