Masters Series: Three Simple Trading Rules Every Retiree Needs to Learn
Editor's note: The key to success in the options market is thinking like a long-term investor.
Using this simple discipline, Dr. David Eifrig has racked up one of the most successful options-trading track records in the industry.
"Doc" wrote today's edition of our weekend Masters Series – originally published in the July 29, 2011 issue of our free e-letter DailyWealth – early on in his winning streak. His numbers only got better from there. Since launching Retirement Trader in 2010, he has closed 176 out of 178 positions for a gain for his subscribers.
If you're ready to start safely doubling or tripling the trading gains you normally make in your retirement account – with much less risk – think like a long-term investor… and stick with the three simple rules Doc details below.
Follow those rules, you'll have an advantage over most traders... and options-trading can be one of the safest and most effective ways to make money in the markets…
Three Simple Trading Rules Every Retiree Needs to Learn
By Dr. David Eifrig, editor, Retirement Trader
At first glance, it sounds ridiculous… 28 for 28… a 100% win rate.
I never thought I'd be "that 100% guy."
I've been investing and trading for more than 30 years. I've read investment advisories for nearly that long. I've worked at several of Wall Street's most prestigious firms. And I can tell you from experience that when someone claims to win 100% – or even 90% – of the time, you should brush them off as delusional, using "massaged" numbers, or a criminal who trades on illegal insider information.
The stock, commodity, and futures markets are simply too big and complex for someone to win all the time. Even for great traders, a 60% win rate is more realistic. Heck, traders who make sure their wins are huge and their losses are small can make millions by being right just 30% of the time.
With this warning in mind, I do think it's worth pointing out a secret we've used in my Retirement Trader service to generate a perfect trading record (28 out of 28 so far):
We think like long-term investors.
There's a lot that goes into that – more than I can discuss today. But I can explain the most important pieces and show you an opportunity that fits perfectly into our strategy…
First, we take fundamentals into account. Often, when folks look to make short-term profits in the stock market, they focus exclusively on chart patterns and complicated computer programs. While several successful traders I know rely on this kind of "technical analysis," most folks will start seeing patterns that don't really exist. And a "can't lose" system can turn into a "can't win" system overnight.
Instead, I look at how "healthy" a company is. I check cash flow, profit margins, debt, and so on. I look to place leveraged trades (using options) in great companies like Coca-Cola and Intel.
The second advantage we have over most traders is we only bet on companies that treat their shareholders right. Most traders get excited about the latest IPO, the hottest penny stocks, and riskiest resource investments. Sometimes, these can be high-reward trades. But they're incredibly risky. The IPO can flop, the penny stock can collapse, and the next big gold mine can turn out to be just another empty hole.
I'd rather have the deck stacked in my favor… So what I do is look for companies that buy back shares, have a history of increasing dividends, and bring in enough cash to keep doing both. These are the marks of a solid, conservatively run company.
After all, you can massage a financial report a hundred different ways to fake a profit. But you can't fake a cash dividend. When you're buying a company that has a long-term-focused corporate attitude, the chances of a catastrophic loss are much smaller.
Finally, when we don't see the right setup, we WAIT. In short, a lot of amateur traders hop in and out of positions, incurring fees and sweating to catch the next big win.
But I don't take a trade unless the "stars are aligned." In fact, I made it a condition of my contract before I signed up to write Retirement Trader. I refused to agree to publish a "hot trading tip" every week.
Safe investment and trading opportunities don't pop up just like that… The markets don't adhere to anyone's schedule. And success only comes from waiting patiently for what billionaire investor Warren Buffett calls the "fat pitch."
If you're ready to start safely doubling or tripling the trading gains you normally make in your retirement account – with much less risk – these are the kinds of trades you need to make. You need to think like a long-term investor… and stick with these three simple rules.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig Jr., MD, MBA
Editor's note: Trading options is inherently risky. But Doc says the strategy he uses is actually safer than owning stocks outright. And his success rate speaks for itself. He has closed 98% of his recommended trades in Retirement Trader for a win.
Doc says the secret to success is spotting the investors who make the worst decisions… and collecting the money they lose. And it's a lot simpler than it sounds. Placing one of these trades can take less than five minutes… Then you just sit back and watch the money roll in. Get the details here.