With the RadioActive Trading techniques we focus on LIMITING RISK first so if we have a trade go against us, we are not giving too much back to the market. Then you worry about the returns…which of course will vary based on what stocks you pick, what the market does, what timing you use, what income methods you use (and when). But what’s important, is that if you limit your losses and let your winners run, then any stock selection, any timing, any adjustments CAN be successful over the long-term.
Many options educators will present methods (usually for the low price of $3,000+ for a weekend instruction) that they claim will earn 3% to 5% per month…yes, that’s 30% to 70% per year! Can that really be sustained over the long-term?? Sounds fishy. I wish they would publish their trades! Not just the CLOSED ones…but all of them…I’d love to see someone making that kind of return every year through a couple of market cycles. There’s too many damaged investment accounts out there because of this “monthly return” expectation that investors are bombarded with.
Can you find covered calls, credit spreads, diagonal spreads or other strategies that have a chance to make 3 to 6% per month? Yes, they are available. However, with most of these strategies you can be right 80% to 90% of the time and still LOSE money. In a leveraged credit spread portfolio, one loss can wipe out 10 previous gains, putting you right back where you started.
The better way to approach your investing, for the long-term, is to focus on limiting your losses, then focus on the gains.
I'm Kurt Frankenberg, and I have discovered how to truly put the odds on the side on the individual investor.
For myself, I will accept whatever rate of return that the market provides, with limited position risk.
I’m not an old trader, and I’m not a bold trader. I’m just one that tries to be humble, instead.
Hi Kurt,
What went wrong with this trade lifted from Fusions you were in for 311 days where the stock more than doubled. If you leave the upside open, how come you only made 2%?
General Elec (GE) 3/10/2009 1/15/2010 8 311 2.2% 138.1% 57.9%
Thanks,
John
Hi John, great question!
The RPM setup and IMs that Kurt teaches in the Blueprint BEGIN with limiting risk…then seek returns later. When we get into a new RPM the risk is limited…but there’s still risk there. So, we use the Income Methods (IMs) to attempt reducing that initial risk…FIRST and FOREMOST. Hindsight is 20/20…if you knew the stock was gonna skyrocket…then you wouldn’t do ANY IMs at all…you’d just let the RPM sit there and make money…but in the heat of battle…you don’t know if the stock is gonna rise.
So…once an RPM is in place…we look for IMs to reduce the risk to zilch…making the position BULLETPROOF…it cannot lose, even if the stock goes to zero. By doing the RPM in the first place, you won’t be able to participate in every cent of the stock rise…then sometimes when you trade IMs, you will hinder the potential return as well….BUT…you do the RPM and the IMs because you didn’t know the stock was gonna rise…you do them to control and limit RISK. First immutable law of trading…risk and reward are inextricably connected together…when you take steps to limit risk…you are most likely also limiting return/reward.
When the GE trade was opened, risk was limited to single digits…by closing some of the position after 3 months and then doing an IM 3 months later…plus dividends…the position was BULLETPROOF…it couldn’t lose….NO RISK…that’s the tradeoff Kurt decided to make…being bulletproof rather than gambling on more stock appreciation.
Of course, in YOUR trading, you may make different decisions about risk you’re willing to take, if/when to perform and Income Method…and even if your goal is to become bulletproof vs. gambling for more return. That’s the beauty of what the Blueprint teaches…it gives you the techniques and theory to be successful…it’s a GREAT money management strategy…but you can still pick the stocks you want and make your own risk/reward decisions.