AVOID THESE 6

TRADING SNAFUS

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TABLE OF CONTENTS

i.  Snafu #1… Trading with out a plan ii.  Snafu #2… Fear of Losses iii.  Snafu #3… Trading As A Business iv.  Snafu #4… Market Timing v.  Snafu #5… Having Unrealistic Expectations vi.  Snafu #6… Bad  Money  Management/Poor  

Diversifica6on

CHAPTER

Snafu #1 No Trading Plan ???

Trading Plans 101  When  the  trading  bug  first  bites  you,  you’ll  learn  very  fast  that  even  the  smallest  misstep  can  be  costly.  The  highs  of  the  risk  along  with  the  chase  of   the   next   big   bubble   creates   desperado   style   traders.   Today  we  will  provide   you  with   the   6  most   common   trading   snuafus   to   avoid   while  treading  the  markets!

Snafu  #1…  Trading  Without  A  Plan  

• Any  successful  business  requires  a  thorough  business  plan  to  succeed  and  the  same  goes  with  trading.  Having  a  trading  plan  ensures  that  you  follow  guidelines  which  create  rules  in  order  to  avoid  disasters.  When  you  invest  in  an  instrument,  you  have  just  invested  in  your  business  so  you  must  treat  your  trading  as  a  business  and  I  can’t  stress  enough  the  importance  of  trea6ng  it  as  business.  Let  start  with  the  basics  of  a  trading  plan  and  what  it  consists  of:  

• Goals:  How  much  would  you  like  to  gain  per  week,  month,  and  year?  What  is  it  geared  toward?  Day  trading?  Re6rement?  

• Risk:  What  is  the  minimum  risk/reward  you  can  accept?  I  am  willing  to  risk  $2  for  a  poten6al  of  $5.  You  should  know  your  tolerance,  

•  which  goes  hand  in  hand  with  your  overall  trading  capital.  You  need  to  assess  your  capital  and  determine  how  much  risk  you  are  willing  to  put  into  any  given  trade.  

•  Fundamentals:  Don’t  get  into  any  trade  with  out  know  the  ins  and  outs  of  the  company.  Ask  yourself  when  is  earnings?  Along  with  using  technical  analysis  for  paTerns  on  different  6me  frames  on  charts.  

•  Trading  Logs:  Have  a  clear  form  of  record  keeping.  Always  create  your  logs  as  if  someone  else  was  going  to  review  them  so  that  they  are  organized  with  winners,  losers  and  the  when  and  whys.  This  will  in  the  long  term  increase  return  of  investment  and  that’s  the  boTom  line.  If  not  you  might  as  well  go  to  a  casino  and  gamble  your  money  away.  

“ ."Know  when  to  fold  'em!"    by Kenny Rogers ” Snafu  #2…  Le@ng  Fear  Reign  Supreme  (a.k.a.  Emo6onal  Trading)  

   Let’s  face  reality  right  now  if  you  are  trading  in  any  market  you  will  have   loses  and  anyone  who  tells  you  different   is   lying   to  you  and  insul6ng   your   intelligence.   You   shouldn’t   fear   a   lost,   managing  losers  is  key  to  bigger  profits.  You  ask  how?  Simple  as  cu^ng  your  losers  faster  and  less  o_en  increases  your  profit  poten6al.  As  long  as  you  have  a  good  management  on  losers  at  the  end  of  the  month  you  will  see  that  your  return  on  investment  is  greater  then  before.  Here  are  a  few  basic  rules  to  follow  and  pu^ng  your  fears  in  check:    Ø  Don’t  chase  the  holy  grail  of  strategies,  which  you  can  set  it  

and  forget  it  sorry  this  isn’t  a  microwave  you  have  to  be  involved  with  your  trading  to  minimize  lost.  

Ø  Don’t  double  up  on  trades  to  recoup  a  recent  lost  Ø  Don’t  believe  in  a  magical  indicator  for  all  the  analysis  you  

need  to  enter  a  trade.  Ø  Learn  from  your  mistakes  Ø  Leave  emoMons  at  the  door  

Snafu  #3…  Not  Trading  as  a  Business  (TAB)      

Many   investors  don't   recognize  the  write-­‐offs  they  can  use  when  inves6ng.    Did  you  take  a  trading  educa6on  class?    Are  you  paying  a  monthly  subscrip6on  for  a  char6ng  program?    These  all  can  be  properly  handled  on  your  taxes.    

 

Also,  your  IRA  contribu6on  needs  to  be  taken  advantage  of  EVERY  year.    The  tax  benefits  of  this  are  amazing,  and  most  IRAs  can  be  traded  out  of  just  like  a  cash  account.    If  you  start  thinking  of  your  trading   as   a   business,   you   will   stop   trea6ng   your   trading   as   a  gamble.  

Don’t  Fall  VicMm  To  Snafu  #3    Trading  Is  A  Business  and  Should  Be  Treated  As  So  

Epic

Market Timing So   many   people   have   issues   with   this   one;  market  6ming  is  one  of  those  things  you  pick  up  with   experience   and   correc6ng   all   of   the   items  we  discussed  before.

A Publication of

TBL

Is Now A Good Time

trends  or    even  worst  you  follow  a  so  called  “Guru”  who  is  beTer  at  marke6ng  than  with  trading.  The  boTom  line  is  if  you  cant  read  a   chart   and   understand   it   to   the   point   where   you   can   teach  someone  it  you  will  not  be  taking  full  advantage  of  trading.  

 Snafu  #5…  Having  UnrealisMc  ExpectaMons    

Inves6ng  is  about  as  complicated  a  subject  as  there  is.    That  is  partly  why  every  investor  has  completely  different  expecta6ons.    If  you  are  involved  in  low-­‐risk  funds  and  slow  moving  stocks,  you  should  have  expecta6ons  in  line  with  what  that  can  provide.    That  is  why  diversifica6on  is  so  important.    This  topic  6es  most  of  the  other  5  Snafus  together  in  that  you  can  only  move  forward  with  your  porgolio  if  you  first  honestly  ask  yourself,  "How  much  do  I  want  to  make,  and  how  much  risk  am  I  willing  to  take?"    Your  expecta6ons  then  must  be  constantly  assessed,  and  re-­‐assessed  in  line  with  the  performance  of  your  porgolio.    If  you  start  losing  money,  you  shouldn't  stay  in  the  same  investment  and  expect  the  same  return  over  the  long  haul  without  making  any  changes.    Don't  fall  in  love  with  every  decision,  keep  your  porgolio  fluid  and  look  at  it  objec6vely.    Only  you  have  the  power  to  make  changes..  

 

Snafu  #4…  Poor  Market  Timing  You   would   be   shocked   how   much  money   you   are   leaving   on   the   table  with   poor   market   6ming.   Poor  market  6ming   is  due  to  not  having  a  watch   list   or   just   inexperience   and  not   focusing   on  what   you   should   be  looking  for  so  you  solely  trade  on  

This  is  two-­‐fold,  we  are  talking  about  overall  diversifica6on  as  well  as   on   a   trade   by   trade   basis.     Proper   diversifica6on   in   your  porgolio   as   a  whole   is   of   paramount   importance.     The   fact   that  you  drink  Starbucks  every  day  is  not  enough  reason  for  you  to  buy  the  stock!  Get  familiar  with  all  markets,  sectors,  commodi6es,  and  indexes....not  just  what  you  see  commercials  for.      Ask  yourself  if  your   are   honestly   prepared   for   when   the   market   has   a   40-­‐50%  retracement   again.     A   large   percentage   of   investors   have   yet   to  recover   from   the   2008   disaster,   and   it   is   only   a   maTer   of   6me  before  the  market  goes  back  down.    Make  sure  you  have  enough  non-­‐correlated  assets   in   your  porgolio,   as  well   as   alterna6ves   to  long-­‐only  investments.  You  should  keep  money  in  various  different  areas,   and   mul6ple   different   direc6onal   strategies.     That   is   the  only  way   to  not  be  handcuffed  to   the  market  having   to  go  up  as  the   only  way   you   can   profit.     Don't   "double   down"   on   the   next  trade   a_er   a   loser   either,   that   is   a   sure   fire  way   to   have   a   huge  drawdown.     In   this   day   and   age,   there   are   more   than   enough  op6on   strategies,   short   funds,   and   other   choices   to   diversify  properly.    Cash   is  never  a  bad  place   to  be  either.     Everyone  can  make  money  when  the  market  goes  up,  but  that   isn't  always  the  case.    Have  a  disaster  plan!  

Snafu #6  

Snafu  #6…  Bad  Money  Management/Poor  DiversificaMon  

A)   Emo6onal   trading:   everyone   has   a   different   value   of   a   dollar,  but  nobody   likes   to   lose  one.  Be  self  aware  enough  to  know  and  admit   to   yourself   if   it   is  6me   to   just  walk  away   from   the   trading  plagorm  for  the  day,  week,  or  even  month!    A  couple  of  losers  in  a  row  can  have  dire  psychological  effects  on  a  person,  and  create  a  snowball   effect   of   reckless   trading   decisions...there   will   ALWAYS  be  another  trade...don't  force  the  situa6on!  B)  Don’t  Trade  instruments  you  like,  or  are  familiar  with,  instead  of  others   you   will   make   money   with.   Just   because   you   drink  Starbucks  every  day  does  not  mean  you  should  have  200  shares!    Get   familiar   with   all   markets,   sectors,   commodi6es,   and  indexes...not  just  what  you  see  commercials  for!  C)  Proper  diversifica6on.    It  is  almost  criminal  to  have  a  porgolio  of  long-­‐only   stocks.     You   should   keep   money   in   various   different  areas,   and   mul6ple   different   direc6onal   strategies.     That   is   the  only  way   to  not  be  handcuffed  to   the  market  having   to  go  up  as  the  only  way  you  can  profit.    Think  about  your  porgolio  right  now  as   you   read   this.......and   ask   yourself   this   ques6on,   and   be  honest....."Am  I  prepared  for  a  massive  downturn   in   the  market?  Or  have  I  been  blinded  and  goTen  a  false  sense  of  comfort  by  how  much  it  has  gone  up  in  recent  years?"    A  lot  of  people  s6ll  haven't  recovered   fully   from   2008...don't   be   that   investor   this   6me  around...be  vigilant!    Have  a  disaster  plan!  D)   Investors   think   it   smart   to  hang  on   to   losers   longer   than   they  should  when   that  money   could   beTer   serve   them   elsewhere.     I  love   when   investors   say,   "It's   a   paper   loss!”   Oh   yeah?   And   that  makes  it  beTer  why  again?    Don't  ever  be  scared  to  take  a  loss  and  move  on!  

E – Book Overview  

The Bottom Line

Analysis

1)  Your  alloca6on......how  much  is  in  what  asset  classes,  and  where  you  can  move  money  to  minimize  drawdown  and  maximize  return.  2)  Introduce  asset  classes  you  may  not  be  familiar  with,  but  belong  in  your  porgolio  3)Lets  go  over  your  fees,  are  you  paying  too  much  to  your  broker?  4)  assess  risk  levels  of  your  investments.....is  your  risk  vs.  reward  plan  working?  5)  Assess  how  correlated  you  are  to  the  market,  for  example,  are  you  "handcuffed"  into  only  making  money  when  the  market  goes  up?  6)  Are  you  protected  for  when  this  market  crumbles?    will  you  make  money  when  it  goes  down?    nobody  has  a  crystal  ball  and  knows  when  this  will  happen.......it  is  beTer  to  be  prepared!  7)  Are  you  maximizing  investments,  costs,  and  market  losses  on  your  taxes?  8)  What  can  you  do  right  now.....today.....to  take  the  first  step  towards  maximizing  your  porgolio  and  protec6ng  what  you  have?

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