3/31/2007
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Weekend Newsletter for March 31, 2007 Please forward to a friend! (Subscribe)
The Week At A Glance According To The Charts
Realistic Expectancies
Realistic Expectancies -- by Bill Kraft
Copyright 2007, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor
Every once in a while, I receive a communication that reveals what I consider to be an unrealistic expectancy and I know that many novice and retail traders do not have realistic expectancies. The other day, I received an email asking why I didn't find more higher returns in the $10 Trader. The writer was inquiring whether I couldn't find trades that made more than 30 or 40 cents. He is not alone. I would love to find more trades with better and higher returns on cheap stocks, but the reality is that a 40 cent gain on a $5 stock is 8%. Most of the trades I make fall into the category of swing trades and are closed within a few days to a few weeks of entry. 5% or 8% in a week or two really isn't too bad in my world. Compare that kind of return to a savings account or a CD and you quickly realize that such a trade makes more in a short time than the CD or savings account makes in a year.
I believe it is critically important to successful trading to have realistic expectations. The following list sets out some expectations that are part of the realism of trading:
It takes work to make money trading
It takes knowledge to make money trading
No matter who you are, you will have losing trades
No single trade is likely to make you rich
Only expect to make money if you understand and apply money management principles
Expect to take risk in order to trade
Make your profit expectations reasonable - 100% a month probably isn't a reasonable expectation
Don't expect that anyone is going to have 100% winning trades
Expect to study markets, strategies, and psychology if you want to be a successful trader
Don't expect to get rich quick
Expect to pay for your education (college wasn't free was it?)
Expect to keep careful records so you can see what you are doing right and what you are doing wrong
Expect to be responsible for your own trades, and recognize that no one else is
Expect to go through a learning curve before you are a good trader
Obviously, this is only a partial list, but I want to emphasize the importance of realism over fantasy. Believe me, if I could predict which trades on cheap stocks would make more than 5% or 10% in a short time, I would be placing them. Trading is not an easy business. In the heyday of day trading in a super bull market only about 16% of the day traders were making money. If it were easy, everyone would do it. It takes work, persistence, regular study and good money management to be an overall winner. Luck may be with you on some trades, but reliance on luck will ultimately lead you to the poor house. Make the effort and the expectancy of making money is more likely to be fulfilled. If you won't make the effort, then don't expect success. It is really that simple.
Good Trading!
Bill Kraft
Mr. Kraft's past articles are posted on our website for your review.
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SUCCESS TRADING GROUP -- by the Success Trading Group Team
Our Success Trading service delivers quality trading ideas for the elite investor that has the financial wherewithal and market nimbleness to profit on small moves in a stock's price. Become a member and you will be provided with email and/or pager alerts intended to provide you with the opportunity to make many, many profitable trades.
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OPTION TRADER -- by Bill Kraft
Our Option Trading Service is for conservative traders that understand leverage principles. We focus on powerful option trading strategies that place volatility and momentum in your favor. And we pride ourselves on minimizing our losses. We always know our downside potential in a trade.
Chart by StockCharts.com
ACL (Alcon Inc.)
Company Profile
ACL is a fairly expensive stock in an uptrend. I am considering a bullish put spread selling the Apr 130s and buying the Apr 125 puts for a credit around 80 or 85 cents which could yield a 19% return on risk before commissions in about 3 weeks if the stock stays above 130 until expiration and no adjustments are made.
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TREND TRADER -- by Bill Kraft
Trend trading as we try to practice it is a form of momentum trading. We prefer to try to capture profit out of the middle of the trend rather than try to catch reversal at bottoms and tops.
Chart by StockCharts.com
KNSY (Kensey Nash Corp.)
Company Profile
KNSY has continued its upward trend and had a strong day Friday when it was up almost 3% on strong volume. It is on my bullish candidate list.
Try our Trend Trader Real-Time Alert Service!
Details Here.
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$10 TRADER -- by Bill Kraft
We really enjoy trading stocks that are $10 and under. Often they provide the chance to enjoy high percentage gains and, of course, at worst, the risk is limited to what we paid for the stock.
Chart by StockCharts.com
RFMI (RF Monolithics Inc.)
Company Profile
This stock has been able to break out above a resistance at $5 and has formed a somewhat imaginative cup and handle.
Try our $10 Trader Real-Time Alert Service!
Details Here.
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DIVIDEND INVESTOR -- by the Dividend Investor Team
Perfect for your IRA! Our Dividend Investor service focuses solely on the "best of the best" dividend paying stocks. Many of the stocks that we will be buying in our Dividend Investor service raise their dividends almost every year. Year after year! This is powerful. We buy these stocks for their powerful dividend producing income; and we will also buy these with a purpose to make capital gains as the stock increases in value.
Feel free to sign-up for a free 30-day trial. During such time you can review our Trade Table and see the type of stocks we are buying. You will also receive all the new investing alerts we send during your trial period. Again, many of the stocks that we will be buying in our Dividend Investor service raise their dividends almost every year. Year after year! This is powerful. Don't miss out on this service!
While we titled this service an "investor" service, we also believe these stocks are solid for the "trader" in you. With these stocks, we believe an exit point of 3% above the buy price is generally appropriate for traders. And, in fact, our first 17 positions have hit our 3% target subsequent to the buy alert!
Details Here.
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COVERED CALL SERVICE -- by the Covered Call Team
Chart by StockCharts.com
SUN - Sunoco, Inc. is currently trading at $70.44. The May $70 Calls (SUNEN) are trading at $3.50. That provides a return of about 5% if SUN is above $70 on expiration Friday in May.
Company Profile
Learn more about our
8 Covered Call Tables!
Updated after every close.
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Trend Trader "The Trend Is Your Friend". Utilize trends and momentum in your stock trading!
Option Trader Use the power and leverage inherent in option trading to your advantage!
$10 Trader Focusing on stocks under $10 per share!
Dividend Investor Perfect for your IRA! Quality dividend paying stocks!
Covered Calls Conservative option writing -- Allowed in your IRA!
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The foregoing is commentary for informational purposes only. All statements and expressions are the opinions of Online Investment Services, LP. or the associated editor. This information is not meant to be a solicitation or recommendation to buy, sell, or hold securities. Past results do not guarantee future performance. Stock investing is risky. Option trading is risky. Futures trading entails great risk where one can lose more than his account balance. We are not licensed or registered in the securities or futures industries. The information presented herein and on the related web sites is presented "as is" without warranty of any kind either express or implied. Although the information has been obtained or derived from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolios of writers for this issue may, in some instances, include securities mentioned herein and on the related web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors. No one associated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites. By accepting emails, including various paid subscriptions and free email reports and newsletters, you agree to the terms of the MarketFN.com's website Disclaimer, Privacy Policy and Terms of Use provisions as such may be amended from time to time.
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