Frequently Asked Questions

Q: What is your track record?
A: I’m proud of my trading history and used to publish it, but over time I found it created unrealistic expectations and attracted the wrong type of subscribers. When I promoted an XX% return, not only did people assumed that is what they would get every year, they also expected a smooth ride getting there. Unfortunately the market doesn’t work that way. I grew tired of managing a revolving door of performance chasing subscribers that would cancel after one or two losing trades. Attracting subscribers with unrealistic expectations is not worth my time and is why I stopped publishing my track record.

While you cannot judge this service based on its historical performance, I invite you to try the Free Two-Week Trial so you can experience the service for yourself. In addition to the free trial, I also offer a low-risk monthly plan that allows people to subscribe with minimal commitment. But if you are like most of my subscribers, it won’t take long before you appreciate the value and upgrade to an annual subscription.

Q: How come you are not a professional money manager?
A: I enjoy working from home and spending extra time with my family. Being a professional money manager is far more than just trading. It means having a staff, processing mountains of paperwork, subjecting myself to SEC audits, and spending the bulk of my time and energy recruiting new investors.  I love trading and keeping this an educational service allows me to focus on the markets, not running a business.

Q: What do you trade and how many positions do you hold at a time?
A: I primarily swing trade the S&P500 using UPRO and SPXU. As a result, most of the time I only hold one position at a time.

Q: How often do you trade?
A: Obviously it varies based on market conditions, but one or two trades a month is typical.

Q: Do you use stop-loss orders?
A: Stop-loss orders are a must for new traders or those with busy lives, but I follow the market every day and don’t rely on automated stops to close my positions. For my style of trading, the why matters as much as the what, meaning I evaluate the sources of the weakness before I sell. Occasionally that means I get out later than if I had an automated stop, but more often than not I sell poor price-action long before a traditional stop-loss level is reached, or I confidently hold through a routine dip. But this is how I manage my risk. Everyone needs to develop a personalized plan designed around their risk tolerance, schedule, and willingness to admit defeat.

Q: Why don’t you use options?
A: Getting the direction right is challenging enough. To successfully trade options you also need to know:

  1. Strike to buy (in-the-money, at-the-money, or out-of-the-money)
  2. Duration to give yourself enough time to be right, but no so much that excessive time-premium dilutes your results (weekly, monthly, or LEAPS)
  3. How big the move will be so you can spread the trade (always a good idea to lower costs by selling premium)
  4. The change in volatility during the holding period
  5. The cost of time decay
  6. The cost of slippage

Miscalculate one of these factors and a great trading idea produces disappointing results. There are other ways to profit from options, but for swing-traders it is best to stick with the underlying so you only have to decide up or down.

Q: How long have you been doing this?
A: I’ve been trading for two-decades and doing it full-time since 2008. I started the Cracked.Market blog in 2012 and have been offering a premium subscription since 2013.

Q: Why do you blog?
A: It all started on an investing forum. I found engaging other users helped me be more thoughtful, rational, and deliberate with my analysis and trading decisions. Putting my best ideas out there for all to see (and criticize) held me accountable and helped mitigate the emotion that always tries to sneak into our trading. The blog grew from wanting to share these thoughts and ideas with a larger audience. And it really is true, the best way to learn something is to teach it. I get as much out of this experience as my loyal readers, and for that I thank everyone.

Q: If you are a successful investor, why do you charge a subscription fee?
A: I enjoy supporting the trading community that has already given me so much. That is why much of my content is available for free. But for traders that want more actionable content, it is reasonable to charge a fee to those profiting off my ideas. I use the subscription revenue to cover the blog’s overhead and related expenses, making it possible to continue doing this for both free users and premium subscribers.

Q: Why shouldn’t I simply follow the guy with the best performance last year?
A: Many retail investors underperform the market because they chase what was hot last year. If there is one guarantee in the market, it is that a trader’s performance will be different next year. Some will do better. Some will do worse. But outside of a statistical fluke, no one will do exactly the same.

If a person believes in reversion to the mean, then a hot investor will invariably cool down and a cool investor will eventually warm up. Unfortunately most retail customers bailout on the cool guy who is about to warm up and give all their money to the hot guy who is about to cool down. It doesn’t take a math degree to figure out selling low and buying high rarely works out.

From the St. Louis Fed’s website:
“…return-chasing behavior had a significant impact on the performance of return. The buy-and-hold strategy earned an average annual return of 5.6 percent in the sample period, while return-chasing behavior only realized 3.6 percent. In other words, chasing returns caused the average U.S. mutual fund investor to miss around 2 percent return per year, which is very significant.”

Q: If chasing performance doesn’t work, what is the best way to pick a mentor?
A: Find a mentor who has a similar view on the market. No matter how impressive the person’s track record, if you are a square peg (value), don’t try to fit in a round hole (momentum). Compatibility and consistency are key for long-term success. Some years the performance will be great. Other years it won’t. But it averages out over the long-term if you stay true to your strategy.

 

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