One of the ugly truths about the stock market is this — not everyone makes money.
There’s a buyer and seller in each exchange. When someone wins, another person loses either money or an opportunity.
Investing is not for the faint of heart. It’s a cutthroat business.
Getting an edge is the hard part. Each person has their own distinct style, often discovered over years of intense experience (and surviving painful losses).
But there are a few key principles you can commit to memory today that will give you a leg up on 90% of the competition.
Key Principle #1: Fire Every Shot!
Here’s why this is on my mind…
I was reading some emails from our subscribers a couple weeks ago. I saw a few that really bummed me out.
Someone had lost a lot of money trading one of our strategies. This came as a surprise to me, because the strategy in question was outperforming.
The average trade was a double-digit gain. So how was this person losing money?
Simple. They were picking and choosing the trades… and ended up picking wrong.
Some options strategies work really well even when you only win on half of the trades. That’s because while some options trades can go to zero, often the winners can go up 100%, 200%, even 300% or more.
Those trades will raise the overall average… but only if you bought them. And if you’re not taking every trade recommendation, your odds of meeting the overall average plunge.
Other strategies, like Pure Income, work because the trades are so consistent (with a 92% rate of success). With consistency like that, there’s no harm in missing a trade or two.
But if you’re trading a speculative strategy that might lose every other trade, you have to do something that’s not easy…
You have to hang on and keep trading.
Very often people will trade through their losses, give up and miss out on the winners. Then after seeing the winners, they’ll jump back in… only to catch the next batch of losers.
This is why it’s important to place every trade a system gives you. This is the stock market. There will be periods of outperformance and underperformance every year and often each quarter. So if you have found a strategy, system, or approach you believe in, the only way it will work is if you to stick to it.
Key Principle #2: Throw Each Punch With Equal Force
But it’s not enough to just put money into every trade.
You also have to put the same amount of money into every trade.
This is called “equal weighting.” And it’s something every investor must do if they want to remove the emotion from their trading.
If you equal weight every trade, you let the math do its job. Investing is a numbers game. If one big winner gets you out of the gutter… great. The system did its job.
But if you were putting $500 in here and $5,000 in there based on how you “felt” about each trade, you’re still picking and choosing your trades. And you’re inevitably going to over-position in a losing trade and wipe yourself out.
The point is keeping your variables to a minimum so the strategy or system you’re using can do its job.
Key Principle #3: Never Go All In
The final lesson is the most important: Never invest more than you can afford to lose.
Our job is to tell you the best areas we see to make money. But at the end of the day, you’re the only one who can decide your risk tolerance.
When I look at Chad’s premium services, he has three different levels of risk.
On one, he aims to win on more than half the trades, but the gain potential is high. This one is Fast Lane Profits and we’re officially opening the doors to it next month.
On another, Quick Hit Profits, he wins on two-thirds. It’s still speculative, but over the last five years it’s won on about two-thirds of its trades. For an options strategy, that’s killer.
And the next wins on 9 out of 10. This is Pure Income — Chad’s most unique strategy, but not just because of the win rate.
I mentioned every trade has a buyer and seller. In Pure Income, you play the role of the house rather than the gambler. Instead of buying, you sell options to other traders.
High-frequency trading firms have enabled enough liquidity that pretty much anyone can do this in a brokerage account that’s been approved for options trading. You can use a cash account or upgrade to a higher level of approval where you can trade on margin.
Chad’s actually walking our members through one of these trades in a couple hours. This live training will be held on Facebook at 1 p.m. ET today, tomorrow, and Friday.
We’re big believers in this strategy, and we want you to know more about it. So we figured, the best way to help you decide if it’s right for you? Just give you a free trade.
Here’s a link to the Facebook page where the live training will commence. Technically the sign-up for this event ended last night, but I don’t want to lock you out from learning this strategy. It’s that important.
I know this is a bit short notice, but if you hit the “join group” button I’ll be sure to give you a last-minute approval. It’s no sweat.
Chief Editor, True Options Masters
Chart of the Day:
Am I Really Bullish on
This Right Now?
(Click here to view larger image.)
Today I’m looking at a weekly chart of Denny’s (Nasdaq: DENN).
Yes, the restaurant chain where you can get a stack of flapjacks at 2 a.m. Hear me out…
DENN is another one of those stocks I’ve been obsessed with charting lately. The ones that haven’t yet recovered their pre-pandemic highs.
Sticking to the broad market’s performance lets us forget that there are stocks still reeling from the pandemic. But these stocks interest me for their potential. With so much liquidity hitting the broad market, the effects will eventually be felt in the laggards.
That doesn’t mean you should have a firm bullish bias on these stocks. Some stocks will struggle to come back, if they ever do.
But I’m bullish on DENN today. Here’s why…
After rallying from November to March, DENN has been in a downtrend channel for about as long as its rally. It recently broke out of that downtrend channel, then retested and bounced off the falling pink support line.
That has me looking at this chart as a potential bull flag. With a bull flag, you want to measure the flagpole (the November rally) as the potential rise after the pattern completes.
If this pattern plays out, that would mean DENN trading at about $26… just above its pre-pandemic high.
Managing Editor, True Options Masters