Give Your Trading “Edge” for Fun and Profit

How can you trade with the so-called winning “edge”? In this final installment of this 3-part series, we answer this question. In just six minutes, this step-by-simple-step procedure will give your trades the coveted trading edge.

Using the “RadioActive Profit Machine” technique, any trader can positively change the expectancy of their trades… putting the odds on their side… because of how the RadioActive Method works to skew every starting position in your favor.

You’ve already invested one of your six minutes. Here’s what to expect in the next five:

  • The PROBLEM– why do most traders end up losing, even the smart ones?
  • Why the PROBLEM persists– most people are looking for solutions in the wrong place
  • What’s POSSIBLE– how to skew your trading odds using an unexpected technique
  • What’s DIFFERENT NOW– how repeated iterations of the skewed trading structure performs
  • What YOU SHOULD DO NOW–  get more information on what savvy traders in 38 countries are doing

Read on, Trader. You’re the hero of this story:

What Gets in the Way of Trading Edge?

Trading Expectancy and the Martingale

The “Martingale”. The villain in too many traders’ nightmares.

 

Every trader struggles with the “Martingale” effect which dooms most trading systems before they launch.

Kind of an “ANTI-edge”.

I’ve personified (mm, maybe monster-ified) the Martingale before in other posts in these series.

The Martingale’s sinister mission is to destroy your nest egg, dealing death by a thousand cuts.

Let’s look a stock whose signature implies that it could gain OR lose 10%  in the next month.

Furthermore, let’s assume that it’s even chances: 50/50 either way.

Even though it seems that over a long enough time horizon everything will even out… it won’t.

This is because of our friend the Martingale.

Assume a $10,000 stake.

You lose… -10%.

Now what you have is $9,000.

But then you make +10%!

Ohhh… the +10% gain on the $9,000 is $900,

Meaning that you have just $9,900.

When you had started with $10,000.

Nuts.

The ANTI- Trading Edge: the Martingale

The ANTI- Trading Edge: You’d think you would be in the same place winning half the time and losing half the time. (click to embiggen)

The same thing happens if you win first:

$10,000 grows +10% to $11,000,

…but if the $11,000 takes a -10% hit, it’s back to $9,900 again.

Now, take that principle and repeat the process 100 times.

Hear the sickening sound of crunching bones? That’s your savings, dude.

We see the $10,000 balance dwindle to just $6,050 because fearsome power of the Martingale…

 

 

Why Can’t YOU  the Get “Edge” Trading?

Many investors mistakenly thing that higher payouts will result in a better payday.

Shooting for higher returns means shooting your self in the foot

Shooting for higher returns means shooting yerself in the foot; 68% loss instead of 40%! (click to embiggen)

But think about it: higher returns ALWAYS come with higher risks.

What and if we choose stocks that could win or lose  by 15% instead of 10%?

The Martingale strikes again.

Even probability, 50/50… coupled with even odds (1:1 risk/reward) will eventually bleed you dry.

Making the percent higher will only speed the process.

What MOST Traders Try to Get themselves Edge

We all like to be right.

In the last scenario we’ll get the EDGE all right; all we have to do is be right more often!

Say you learn a better way to read charts, or determine a company’s worth… and it makes you win 55% of the time instead of 50%:

Trading Edge obtained by being right more often: return goes from LOSING 68% to winning over 45%

Trading Edge obtained by being right more often:  from LOSING 68%, to winning over 45%

At first blush, it seems that all you need to do is be right more often.

And it might seem to make sense at first. Really.

But let’s consider TWO big “IF’s”.

Number One: IF your bright new analysis just turns out to be luck, that 55% winning record might be pie in the sky.

Number Two: IF you are indeed right more often than you are wrong, you can still get caught by the Martingale!

trading edge is dissolved by betting too much

Awww DANG. 20% gains, 20% losses, winning most of the time… but the Martingale wins AGAIN!

 

Those slippery equations that we showed you in parts One and Two prove that being right more often won’t necessarily make you a winner.

Repeated iterations just make the problem worse while we’re trying to tweak our systems.

In fact, we like being right (or are afraid of being WRONG) so much that the Martingale sniffs out traders in denial… and ruins them by the bushelful.

So what’s the solution? If attempts to get a trading edge by better technical analysis, or fundamentals DON’T work, how can a trader win?

Hold on to your hat.

I’m going to make the unpopular assertion that you don’t need to be right more often to make it as a trader.

Trading “Edge”… without Being Right More Often?

Trading Edge NO Skew

No trading edge when there’s equal chances of her going up OR down…

Here’s the most common way that people try to skew their results in their favor:

They TRY to be RIGHT more often.

 

And it’s a lot harder to do than you might realize.

 

But I have news.

 

There’s a better way to skew your long-term results.

 

And it’s infinitely easier than burning the midnight oil looking for the best stock,

 

…or pulling your hair trying to make sense of trendlines  and indicators.

Introducing the REDLine, one of three key principles of RadioActive Trading:

The "RadioActive Profit Machine" is assembled with 100 shares of stock to 1 In-the-Money, far away put option. The REDLine skews the trading expectancy

The “RadioActive Profit Machine” is assembled with 100 shares of stock to 1 In-the-Money, far away put option. The REDLine skews the trading expectancy so that losses stay low, but the upside is open

skew expectancy trading edge

Same stock, different expectancy. The unique “RadioActive Profit Machine” structure SKEWS odds in your favor…

The question has been, “1. How can I be right more often?”

This question reflects the state of mind of probably 95% of the investing public.

The logical follow-on questions have been,
“2. How would my account be affected if I was right more often?”, and
“3. How difficult would it be to make that happen?”

But as we’ve seen already, your account doesn’t always do better just because you pick more winners.

And it isn’t easy to pick winners more often in the first place.

Here’s a switch for your paradigm…

We’ve been asking the wrong questions. Let’s try different ones:

“1. Is it necessary for me to be right more often to make more money?”
“2. How would my account be affected if I could skew my risk/reward so I don’t have to be right more often?”
“3. And perhaps most important… how easy would THAT be to make happen?”

Better questions get better answers.

married put supplies a trading edge

Same 50/50 trading record as before, but look at the performance!

How  “Skew” Gives You the Trading Edge

Do you see how much easier it is to skew your results by losing less,

…instead of breaking your back trying to be right all the time?

It’s time to start

Trading Edge even with probability against

Trading Edge probability against. 15% +/- converts to 6.5% vs. 2.2%. Even if you were losing most of the time,  you’d still do well!

looking at your trading a new way.

Rather than trying to be a control freak, trying to BE right… instead, let’s TRADE right.

By using a structure that keeps possible losses to single digits, we change the odds.

Before, trading a stock that could go 10% up and 10% down, and trying to be right more often didn’t perform great, even if you could guarantee that you’d be right more often.

NOW, even if you LOSE more often than win, trading “edge” covers you.

But that’s not all.

The unique structure of the RadioActive Profit Machine… a “married put” trade that breaks all the traditional rules around how a married put trade is supposed to be assembled… can make it possible for you to hit some serious home runs.

Kicking Trade BUTT With Your Trading Edge

Now today’s examples were more or less easy to follow. A stock goes up ten, fifteen… a stock goes down ten, fifteen.

But every once in a while the market takes a total DUMP…

…and also, sometimes the trading muse smiles on you.

😎

Here’s the point of structuring your trades with the REDLine principle and the RadioActive Profit Machine:

RadioActive Trader Mike Chupka had one stock, Silver-Wheaton (SLW) totally blow its doors. Nice job picking SLW Mike.

BUT… in the same twelve month period another of Mike’s picks, Talisman Energy (TLM) absolutely went in the toilet. The stock went down by more than 50%. Yikes.

So Mike’s 65%+ WIN would normally be eclipsed by his loss.

Think about it: a 50% loss takes a 100% win to recover… double your money after losing half of it, and you’re right where you started.

So Mike… though he picked a 65%+ winner… would have been KILLED by the 50% loser!

Trading Edge Mike Chupka 58.9

The POWER of Skew (not to scale). No matter how low his stock goes, Mike is protected to single digit percents. 4.5% is this most he lost. But the sky’s the limit when he catches a winner!

But not so fast: Mike was using the RadioActive Profit Machine setup.

So no matter what what happened, he wouldn’t risk more than single digit percents.

His 50%+ loser only *actually* lost him 4.5%.

(4.5%… the most he ever lost in that 12 month period… boo-hoo Mike)

And his 65%+ winner didn’t win 65%… the expense of the put took away from that a little teeny bit…

…so he “only” made 58.9%.

That’s on 300 shares of stock and 3 put options, a capital investment of $6,450.

There’s no theoretical limit on how much a stock that’s protected this way might gain.

But there is a tight, single-digit limit on how much you can possibly lose.

SO, skewed expectancy… how do ya like me now?

I WANT the “Edge”… So What Should I do NOW?

So, dear Reader! Let me challenge you to think about what “skew” means to you and your account… now that you know the one factor that’s more important than any other: controlling losses.

Think about YOUR trading record in the last twelve months.

If you had tightly controlled your losses to be only 2-5% all year… but allowed your winning stocks the ability to ride higher,

…would you be in a better position today than you are now?

😉

If you’re even considering how much better your total account might do, if you never lost more than single digit percents,

…you NEED to get this full report.

Here’s what we’re offering for a limited time, as well as what it’ll take for you to get it:

  • A premium PDF with all three posts, plus exclusive content
  • An invitation to a free webinar, only for select Readers of this blog this week
  • All your questions answered about how to get the trading EDGE using the RPM setup

To get your premium PDF with Expectancy, Position Sizing, and How to Skew Expectancy, plus a webinar and exclusive content, just do this:

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Okay Traders! Looking forward to sending you some valuable stuff.

 

About Kurt Frankenberg

Kurt Frankenberg is an author and speaker about entrepreneurship, martial arts, and trading the stock and options markets. One of several “Biznesses” he founded as a teen, The Freedom School of Martial Arts, has been in continuous operation since 1986. Kurt lives in Colorado Springs with his wife Sabrina, German Shepherd Jovi, and his ninja cat Tabi.