A lot of people ask why I don't buy stocks or options. It's a good question and my explanation may make you question why you would as well.
For most retail traders and investors, the traditional way they try to make money from the markets or are advised to make money in the markets is by "buying low and selling high." On its face, this makes sense and works if executed. The problem is, as most traders find, it is not that simple. The overwhelming majority of people who attempt to trade for a living lose money. In fact, according to statistics, 80% of all day traders quit within 2 years. And only 1% of all day traders are consistently profitable. The reason being is that buying low and selling high is extremely difficult to do consistently.
Why? Because you have to be right. And being right consistently in the hardest game in the world, is very hard.
I was no different than anyone else when I first stated trading. I thought I could "time the market" and I found like most people do, that while once in a while, I would get a win - I would end up giving it back on subsequent trades and end up making no money or losing.
But, after a couple years of trying to figure it out. I started to ask some questions and they led me down the path to being a consistently profitable trader.
Here are some of those questions and answers:
Going down this path was a huge eye-opener for me. I was stacking the odds against me by buying anything in the markets. I was literally starting in a hole.
And the other big "aha" was sellers get paid. Think about it - when you buy a stock or option, you are taking on all the risk and forking over the money up front. A seller gets paid to take on risk. I really liked that.
I then asked, who are the sellers? Well, one way to be a seller is to take a company public on the exchanges and sell shares. That wasn't happening any time soon. Another way is to be an accredited investor and get in on an IPO. In my early 20's, I wasn't there yet.
So, I began to investigate how to be a seller and came across some specific types of trades that allowed me to be a seller in the markets. Specifically, naked puts, covered calls, and credit spreads. I started first with covered calls and naked puts and had some good success. I then graduated to selling spreads, condors, and other types of sell trades. And just buy choosing these types of trades, I put the odds in may favor giving me a 67% chance to win and make money from the start.
I didn't stop there because I had still had a 33% chance of losing money. So, over the years I created advantages such as my proprietary Fractal Energy Indicator which signals when the energy in a chart is going to trend. I came up with solid, tested rules for entry, exit, and profit taking. And in doing so, I boosted my odds of winning trades over 90% in many cases. But, even with that, I still had a chance of losing, so I created defensive systems and rules to protect me in case a trade goes wrong. Because of this, I have much more control over my success as a trader than a traditional investor. Is it perfect? No.
No system is, but it has served me and my students all over the world well for over 15 years.
Will selling options pay 1000% returns? No, selling options can pay great returns, but think of them more like consistent base hits that add up to more than the occasional home run. That is the key to a winning strategy, consistent, compounding profits with very few and minimal losses.
Learn to sell options, put the odds in your favor, and start compounding your profits!
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11/8/2022 06:03:27 am
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