Trade Like a Pro E-Book

Noble DraKoln

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Trading Series
• Sprache: Englisch

Seitenzahl: 444

Veröffentlichungsjahr: 2009

Beschreibung

Praise for Trade Like a Pro "Noble's commitment to the individual trader is exactly what traders need during these volatile times. He has knowledge that spans across markets and is worldwide. He is a valued contributor to the TraderPlanet.com community, and this book further demonstrates his dedication to educating traders and helping them become more successful." --Lane J. Mendelsohn, Publisher, TraderPlanet.com "In a time when, on a global level, important things are happening to the financial industry, when new profit opportunities as well as risks are revealed, the book Trade Like a Pro offers a complete picture concerning the risk administration techniques." --Teodor Ancuta, President and General Manager, Sibiu Stock Exchange "Trade Like a Pro is a comprehensive presentation of all the basic trading strategies that belongs in every investor's library. Whether your specialty is futures, options, or stocks--or, for that matter, a combination of all three--you will find yourself going back to this valuable reference guide again and again. Everything rings true. Moreover, the author gives you the pros and cons of each respective strategy without imposing his own point of view. Well researched and presented." --George Angell, author of Small Stocks for Big Profits and Winning in the Futures Market "Armed with good intentions, most new traders are unaware of the realities involved. Although there is often the belief among novice traders that profitability will be easy, the evidence strongly suggests otherwise. In his new book, Trade Like a Pro: 15 High-Profit Trading Strategies, Noble DraKoln offers a thoughtful approach to making the transition from unsuccessful retail trader to the arena of the professional, which is imperative for lasting success as a trader." --Ron Rossway, President, Denver Trading Group

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Preface

Acknowledgements

PART I - Designing the Trade

CHAPTER 1 - From Retail Trader to Professional Trader

TRANSITIONING FROM RETAIL TRADER TO PROFESSIONAL TRADER

SUCCESSFUL PROFESSIONAL TRADERS

TIGHTENING UP YOUR APPROACH TO THE MARKETS

CHAPTER 2 - Markets and Margin

EXCHANGES

WHAT DOES THIS MEAN FOR THE MARKET?

DAISY CHAIN EFFECT

GLOBAL MARKETS

BECOMING A SOPHISTICATED TRADER

WHAT DO THESE CHANGES MEAN FOR YOUR TRADING?

CHAPTER 3 - Some Essentials of Trading

THREE DIFFERENT TYPES OF TRADERS

A TRADER’S FOCUS

ESSENTIAL TRADING CONCEPTS

USING THIS BOOK TO ITS FULLEST POTENTIAL

PART II - Basic Strategies

CHAPTER 4 - Holding the Bull and the Bear by the Tails

STRADDLE, STRANGLE, AND EXECUTION

GETTING THE RIGHT OPTIONS FOR THE JOB

OPTION TUTORIAL

SAMPLE STRADDLE AND STRANGLE WRITE-UP SHEETS

CONCLUSION

CHAPTER 5 - Precision Trading at Its Finest

WHAT IS HEDGE TRADING?

PRECISION TRADING GROUND RULES

IDENTIFYING MARKET TRENDS

CONCLUSION

CHAPTER 6 - Trading with Hard Stops

STOP LOSS ORDER

OPTIONS AS AN ALTERNATIVE TO THE STOP

CONCLUSION

CHAPTER 7 - The Markets on a Leash

COLLAR

GENERAL COLLAR PITFALLS

DAY TRADERS

CONCLUSION

CHAPTER 8 - Replacing Traditional Options with Synthetic Options

SYNTHETIC OPTION VERSUS STANDARD OPTION

WHEN TO USE A SYNTHETIC OPTION

CONCLUSION

CHAPTER 9 - Everything in Its Season

SPREAD OPPORTUNITIES

CONCLUSION

CHAPTER 10 - Gunning for Premiums with Covered Options

PROBLEMS WITH SELLING OPTIONS

COVERED OPTION TRADING

CONCLUSION

CHAPTER 11 - Outflanking the Market

FRONTSPREADS AND BACKSPREADS

TRADING BACKSPREADS

CONCLUSION

PART III - Advanced Strategies

CHAPTER 12 - Exposing Yourself to Loss

SYNTHETIC FUTURES, LONG-SHORT

PRIMARY DRAWBACKS

INTERCOMMODITY SPREAD

PRIMARY DRAWBACKS

THE BULL CALL SPREAD AND BEAR PUT SPREAD

PRIMARY DRAWBACKS

CONCLUSION

CHAPTER 13 - Advanced Option Selling Strategies

DO 90 PERCENT OF OPTIONS EXPIRE WORTHLESS?

WHAT TO EXPECT WHEN SELLING OPTIONS

STRANGLES, STRADDLES, OR NAKED OPTIONS

SELL STRADDLE

SELL STRANGLE

NAKED OPTION SELLING

CONCLUSION

CHAPTER 14 - Retreat, Recovery, Opportunity

MANIPULATING THE STRATEGIES

CONCLUSION

CHAPTER 15 - Analyzing Charts and Strategies

S&P 500

EURO

GOLD

CORN

OIL

CONCLUSION

CHAPTER 16 - Applying These Strategies with Stocks

STOCKS

STRATEGIES

CONCLUSION

About the Author

Index

Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding.

The Wiley Trading series features books by traders who have survived the market’s ever changing temperament and have prospered—some by reinventing systems, others by getting back to basics. Whether a novice trader, professional or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future.

For a list of available titles, please visit our Web site at www.WileyFinance.com.

Copyright © 2009 by Noble DraKoln. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data

DraKoln, Noble.

Trade like a pro : 15 high-profit trading strategies / Noble DraKoln. p. cm. - (Wiley trading series)

Includes index.

eISBN : 978-0-470-44912-7

1. Investments. 2. Investment analysis. 3. Financial risk management.

4. Stockbrokers. I. Title.

HG4521.D698 2009

332.6-dc22

2008036346

.

To my friend, Mike Moone

Although you’re gone, your wisdom and presence are still felt. Thanks for all your support when you were here and the good word you have been putting in for me in the hereafter.

Preface

In 2000, approximately nine years ago, I released my first book, Futures for Small Speculators. This book was meant to be a repudiation of all of the misinformation that investors were receiving from brokers and the industry. I was angry at how many and how often investors were losing their money trading. I realized that losing was the norm for them and when they did make money, they had a difficult time replicating their success. Since then I have put out six publications—this being the sixth—and while my anger has subsided, my hope is still to see investors readily able to trade successfully.

This book is a logical extension of the book, Winning the Trading Game. That book broke down the three components of successful trading: money management, technical analysis, and risk management. After it was completed, I realized that to clarify the distinction between risk management and money management, I would have to write another book. I knew this book would have to break down as many risk management techniques as possible—in clear concise terms—with as many chart examples as I could muster. I also needed to point out to stock investors, forex investors, and futures investors that risk management transcends trading genres, and in order to trade like professionals, they need to cross those barriers without hesitation.

Things have changed so much in the industry in the last decade, with new exchanges, the weakening dollar, the growth of China and India, and the creation of new tradable instruments like contracts for difference (CFD). All of this change means more opportunities to profit. The old way of looking at futures as too risky or of trading stocks with 100 percent cash has become more fluid. This book is designed to help you make that adjustment.

This book has 15 risk management strategies in two parts. There are nine basic strategies, originally discussed in Winning the Trading Game, and now, in Trade like a Pro, analyzed more in depth. In addition, there are six advanced risk management strategies, that build on that knowledge. Finally, this book shows you how to put the two sets of strategies to use to improve your odds of success.

While this book can teach you techniques on how to manage risk, it really cannot make you money, nor can it lose you money. Only your intelligent reaction to the markets can do that and these tools are designed to help you make those intelligent decisions. You still need to have a trading plan, trading goals, a well-kept trading journal, and a sound money management plan, win or lose.

Your dedication to the craft of trading is constantly tested by the demons of fear and greed. It is always tempting to go for a magic bullet, but if it exists—I have yet to find it. Trading is difficult and requires a set plan, built around discipline and perseverance. My book helps you erect and maintain that plan and face the losses that occur with confidence.

Good fortune and good luck in all of your trading endeavors.

Acknowledgments

This book was very difficult to complete in the face of my personal adversity. Like so many other people I was affected by the economic downturns in the real estate market as well. Couple that with the responsibilities that come with being a single father and I could have been overwhelmed at any time. My faith in God not only sustained me, but helped me thrive. I definitely want to acknowledge and thank God for his presence in my life and the constant blessings I have received, which includes all of the wonderful people that have strived to help me both professionally and personally.

As a single father, I really would like to thank my two sons, Alex and Zach. When I am writing, they may as well be writing too since they are directly affected by it. I appreciate their love and their patience in dealing with my odd writing hours and intense work schedule. I also want to thank Lori for being a part of this process, again. You are so loving, supportive, and encouraging. Just by having you around, you definitely made the writing process go easier. I also want to thank my mom, Celestine. You have made me smile and laugh throughout the process and your calls to check up on my writing helped get me to the finish line.

I also want to thank Meg Freeborn and Emilie Herman. Editors extraordinaire! You both have made my writing shine. Not being a writer by trade has meant a lot of reliance on your notes and recommendations on how to improve the manuscript, all of which have helped the quality of my writing.

Without question, I must also acknowledge one of my favorite places to write, Portfolio Coffeehouse. I have been writing there since 1994. Many of my articles, large sections of my books, and a significant amount of my ideas have come while sitting there sipping on a cup of black tea. Thanks.

Finally, I’d like to thank all of my colleagues, clients, customers, supporters, and friends for your constant prayers and well wishing. Your encouragement and positive energy is greatly valued.

PART I

Designing the Trade

The next few chapters lay out a set of ideas and concepts that help you make the transition from a retail trader to a professional one. Professional traders approach the market with three distinct differences that their retail counterparts don’t have to consider.

First, the majority of professional traders are working for someone else. This means that they have what is known as a fiduciary responsibility to their clients. They must, at all times, act in the best interest of their clients at all times. This means that when choosing between risk and rewards, managing risk takes precedence in order to preserve the client’s principal.

Second, professional traders don’t get paid unless their clients get paid. While this can be stressful, it is the only way to keep the professional traders focused on what’s important—making their clients money. This philosophy creates a spirit of cooperation in which everyone wins. If the client doesn’t make money, then the trader doesn’t make money. This is a simple philosophy that should be embodied in all forms of investing.

Finally, professional traders are looking for returns that are meant to beat stock and bond returns, not necessarily to break the bank. For anyone who has ever played baseball, you know that you don’t hit for the fences every time you are up at bat. In fact, you always take into consideration what has happened before and what will happen after your turn. That might require you to be conservative or loose with your playing, depending on the situation. Trading is no different. Historically stocks have returned 12 percent annually and bonds have returned 7 percent; any program that beats these returns is considered a success.

The ability to set aside greed is one of the professional trader’s biggest assets. If done correctly, setting realistic goals does not hinder opportunities; it simply diminishes the need to take unnecessary chances for unlikely rewards.

When a retail trader recognizes that he has a fiduciary responsibility to himself, pays himself from his profits, and makes greed take a backseat to the reality of the situation, he has taken some solid steps to trading like a professional.

CHAPTER 1

From Retail Trader to Professional Trader

October: This is one of the particularly dangerousmonths to invest in stocks. Other dangerous monthsare July, January, September, April, November,May, March, June, December, August, and February.

—Mark Twain

When it comes to the futures and forex markets, it is important to understand the difference between trading and investing. The fast-paced nature of these markets, the high degree of leverage, and the limited nature of the contracts (from a few days to a few months) make it difficult to invest in them for the long haul. It takes a significant amount of active involvement in these markets to have even a chance at being successful. This means that as an investor you have two mental transitions to make. The first transition is your ability to change a buy-and-hold mentality to a buy-and-hold-as-long-as-I-need-to mentality. The second transition is to make the leap from approaching the market like a retail trader to approaching the market like a professional trader. Let’s tackle the first transition.

Investopedia defines a trader as “an individual who engages in the transfer of financial assets in any financial market, either for themselves, or on behalf of someone else.” It further states that “the main difference between a trader and an investor is the duration for which the person holds the asset. Investors tend to have a longer term time horizon where as traders tend to hold assets for shorter periods of time in order to capitalize on short-term trends.”

While all investors who make the transition to futures and forex believe that they are traders who focus on profiting from short-term trends, it quickly comes to light that they really do not know how to do it properly. In my last book, Winning the Trading Game, chapter after chapter was devoted to dispelling classic stock market beliefs and busting various myths that can be fatal to would-be traders. While the transition from investor to trader is not easy, it can be accomplished through planning and a constant vigilance of your mental attitude.