Your Questions About Successful Trading

Thomas asks…

what is the most successful trading strategy that you’ve used?

Hi, I’m interested in hearing how successful people have been using the various trading strategies available to buy and sell shares on the market today.

John answers:

I study a stock, and find it is a good value, and a sound company that I feel I can hold for at least 1 year.

I buy 100 shares or more, always in lots of 100.

I wait until the stock goes up at least 20%.

I sell a covered call on the stock with a strike price of at least 20% higher than the current price, for at least 20% higher than the current price, with an expiration date of at least 1 year from the date the stock was purchased.

If the stock fails to go up 20% by the strike date, the call expires worthless, I still have the money from selling the covered call, and can sell another covered call. I am ahead 40%.

If the stock drops 20%, I still have the money from selling the covered call, so have made 20%, and can sell another covered call, as I still own the stock.

If the stock sells on the expiration date, I will have made at least 40% on the sale of the stock, plus 20% on selling the covered call, or 60%.

If the stock pays a dividend, I get the dividend.

If the stock drops 40% from the time I sell the covered call, I break even. The stock would have to drop at least 40% for me to lose money. Even then, I only lose if I sell the stock when it is down. I can always wait until the covered call expires and sell another covered call on it, or buy back he covered call very cheap as it drops in price according to the stock price and time remaining until expiration, then sell another covered call when the stock goes back up.

If the stock goes way up, I have not made as much as I could have.

This also prevents me from selling the stock in less than a year, so the gain tax will be the lower long term capital gain tax.

This works really well, but it is a lot of work. I find investing in mutual funds a lot easier. UMREX and UMESX have made me well over 20% per year.

BTW: The long term capital gains tax advantage is a USA thing and may not apply in other countries.

James asks…

I want to start successful FX trading. How can I start? any free book for Technical Analysis?

I want to start successful FX trading. How can I start? any free book for Technical Analysis? any web site for trading? any tips that helping in good technical analysis. which pairs are prefered for trading.

John answers:

Stockcharts.com has a “chart school” where you can learn about various indicators: http://stockcharts.com/school/doku.php?id=chart_school
There are other websites that provide good information on technical analysis.

Having said that, technical analysis takes practice and experience to use it successfully and in my opinion, Forex is not the place to learn – it can be a very expensive lesson, but it’s your money.

I follow 3 pairs and I suggest you limit yourself to 2 or 3 pairs and learn how they act both on quiet days and when economic reports are released. Trying to follow 6 or 7 pairs will spread your knowledge too thin.

A caution – based on your questions, it’s seems that you are a novice and may not understand the risks or difficulty of trading Forex. I would suggest you really educate yourself on the Forex market because you can lose a lot of money very quickly. About 90% of first timers lose their entire stake.

As for another answer concerning Freedom Rocks — stay away. It’s a multi-level marketing scheme and I have seen a lot of people lose everything. Here’s a message from someone on the Investor Village message board that tried it:

“Freedom ‘Rocked’
Both FR trading accounts have been liquidated by the broker due to insuffucient equity.
So much for the “set-it and forget-it” theory of currency trading.”

John asks…

Has anyone here truly been successful trading foreign currencies. If so, how are you doing it?

With the stock markets in the dumps it seems there are several opportunities to get into trading foreign currencies. Has anyone on here truly had success trading these and where did you learn how to do it. It seems quite risky and since it is leveraged the downside is high. Thanks.

John answers:

Yes. Find a place that charges the lowest commissions because the commissions eat up the tiny profit. You are always making small amounts of profit. Do not leverage..

William asks…

What are the books on successful options trading?

I’ve read many websites on Stock Options trading and I haven’t got a clue what should I do to get consistent high profits from trading. I want to know what the books that teach this?

John answers:

Trading carries substantial risk of either success or loss. And it’s one of those types of business ventures that is taken extremely seriously and, even in some instances, personally. Individuals who engage in trading must be cautious about information they give out, whom they work with and what they learn or discover in an ever-changing economic climate. Not to mention serious financial, legal and logistical consequences that all too often accompany any unscrupulous business practice in trading.

Mark asks…

What is the secret to successful forex trading?

A complete newbie to forex trading, I am having difficulties figuring out where to look for information, but also what exactly to look for. Commodities? Bank quarterly results?

John answers:

Well you could take courses on US and World economics, read some financial economies books and/or know when and the fundamental news that affects price swings are reported. Stay clear during these volatile times because they can take out your stop in a heartbeat and a few beats later go back the other way. And remember that the news could already be mostly priced into the current price.

Http://www.forex.com/learn.html
Link will answer many questions and answers you should know. I have 3 accounts (never put all your money/eggs in one account/basket). You can start with $500 when you can afford to open account. Since you are just starting you will lose money if you don’t learn the basics, first. #1 best tip, don’t trade your real money until you try trading demo account. When you can trade a demo for about 2-3months daily and make money then if you feel ready slowly start trading real money. So making and/or losing money depends on how well you can trade. For some it very profitable, for many it is not. So trading with the right tools and knowledge can become a very good income(s) for short and long term goals. And trade with the current trend.

I use Lightning Strikes Trading System for trading in any time frame and it works on forex, stocks, bonds, etf’s, mutual funds, etc… They have 3 free training sessions a week and you don’t have to buy the software to join in the live chat and text. They focus their training/trading on the Forex markets major currencies. You can even watch some recorded past live sessions. Here are some past charts that I used.
Http://f1.grp.yahoofs.com/v1/MB16R0zjjaZ…
Http://f1.grp.yahoofs.com/v1/MB16RxjOUQt…
There are 7 indicators (2 short, 2 medium, and 3 long term) and if volume is reported another one is added (on balance volume). Plus whatever time-frame is used the 2 green horizontal lines are the support and resistance for that time frame. So when indicators are all touching the bottom price is at or very, very near support. At top is at or very, very near resistance. Which helps my entry/exits and risk/reward ratio.
Http://f1.grp.yahoofs.com/v1/MB16R9Wv-wt…
Http://f1.grp.yahoofs.com/v1/MB16R9wSKdV…
Http://f1.grp.yahoofs.com/v1/QCt6R2fYIj6…
Http://f1.grp.yahoofs.com/v1/QCt6R3R0VQe…
If you can not view charts above or want to see other charts, I can email them. Or you can view more charts in this yahoo group. Http://finance.groups.yahoo.com/group/lightninglive/

Start learning the basics of fundamentals and technical analysis so you will be more informed in your investments. You can find all the basic info you need to learn on websites for free.
This site should give you a good start.
Http://finance.yahoo.com/education

Try what you learn on demo sites. They can be a very fun but educational way to learn from mistakes. If you pick 75% right with play money then you might be ready to start slowly investing.
Http://simulator.investopedia.com/
http://simulator.zacks.com/
http://www.fxcm.com/open-free-100k.jsp
http://www.alpari-idc.com/en/metatrader4…
Or just google for more.

Here are my favorite sites.

Http://finance.groups.yahoo.com/group/lightninglive/
Join group to see and discuss LS charts.

Http://stockcharts.com/
Has basically all you need from fundamental to technical terms. Plus stock screens, charts, public chart lists, and much more useful info.

Https://www.fidelity.com/
Has good learning resources.

Http://moneycentral.msn.com/home.asp
In addition to yahoo finance.

Http://www.reuters.com/
For news and more.

Http://www.marketwatch.com/default.aspx
For news and more.

Http://www.valueprime.com/index.php
For rating stock risk/reward ratio and reports.

Http://www.barchart.com/
For investing in more than stocks.

Http://www.investopedia.com/
For more great learning tools.

Http://www.lightninglive.com/
For best software timing your entry/exits any time frame for day traders and long term investors.

Others worth exploring.
Http://www.equis.com/
http://www.stockta.com/
http://www.secform4.com/

Best Wishes,
Burt Whitley

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