The ability to produce successful results and successful rhetoric are two
very sought after and useful skills, but despite their stark differences the
two are often confused. In this article we outline what we believe are the
differences between the two and what you should do to ensure that you never
confuse rhetoric for results, a skill that we believe is paramount to success
in the financial markets.
Consider a modern financial institution where there will be employees
hired for their skills in rhetoric and those employed to produce results.
Those specialising in rhetoric have been chosen for their abilities in smooth
talking clients into deals, sounding well informed and educated in financial
markets but with no real focus on the results their well crafted speeches or
reports would have produced if followed. Those specialising in results have
been selected for their ability to make money and produce results with all
their focus on their bottom line rather than how eloquently they explain
their trades.
There is a huge difference in these two sets of people, and confusing them
can be very costly. Consider reading a report by Person A, someone who is
well educated in finance and puts forward a well formatted and detailed
argument for their point of view on the market. They make many good points
for their view, complete with in depth research, dazzling charts and pages of
expert analysis. Another report by Person B is simply a one pager listing
their open positions and some brief notes regarding any associated stops,
limit orders and what they are trying to achieve with their trading. Sadly
many investors will make the mistake of judging that Person A will be more
successful in predicting which way the market will go, and therefore they
position their portfolio in line with the view presented in the report from
Person A. That investor has just confused rhetoric and results. They have
followed the better sounding advice in pursuit of profitable trades; they
have chosen the report with the better rhetoric mistakenly thinking that this
will produce better results.
Instead of choosing the suggestions of the better sounding report, the
investor should be looking at how the picks of these people have performance
in the past. Whilst not perfect, a complete track record is a much better
tool for judging the abilities of Person A and Person B rather than how
elegantly they have structured their reasoning for their opinions of the
market.
This problem is particularly prevalent in the financial newsletter
industry, where subscribers pay a fee in return for receiving the market
commentary and trading/investment recommendations of the writer. In order to
avoid falling simply for a good sales pitch regardless of performance, to
ensure that you do not confuse rhetoric with results, here are some questions
we think all investors and traders should ask the newsletter provider before
handing over your hard earned dollars. Since we run a service which falls
into this industry, our premium options trading service SK OptionTrader, we
have provided our answers to these questions below too.
Please could you provide your full trading record?
This should be a complete and detailed record of every recommendation the
service has ever provided for its subscribers, winners and losers, with buy
and sell dates and prices. Do not settle for a list of “Our Recent Trades”,
“Top Ten Trades of 2010” or “Some Examples of Trades we have recommended”.
You want the full record of every trade. The full trading
record of SK OptionTrader can be found on our website, and it is
updated whenever we close another trade.
What is your annualised return on investment?
This is the most fundamental statistic a service can provide. You are
signing up as you are hoping the service will help you make money, so if you
had invested in accordance with their recommendations what return would you
have got on each $1 per year. The annualised return on investment of SK
OptionTrader is published on the front page of our website and
is currently 86.98% without reinvestment of profits.
Do you run a model portfolio? If so how does it work?
Any service that simply offers “picks” is not worth a lot of money in our
opinion. What to buy or sell is only part of the equation, you need to know
roughly how much should be placed into each trade. If the service does not
run a model portfolio with suggested weightings to each trade, then they
cannot produce a figure for their annualised return on investment and you
cannot make a decision on the quality of their investing or trading skills.
SK OptionTrader runs a model portfolio with clear weightings for each trade
and the remainder in cash.
Do you give clear and specific buy and sell signals? If a
newsletter wishes to claim the credit for making a good recommendation then
they should have stated clearly when to buy and at what price, then when to
sell and at what price. Only then can they be congratulated for any profit
subscribers could have made on the recommendation. A casual mentioning of a
stock and noting that it may have good fundamentals is not a buy signal and
the author should not be overly congratulated if it rises. A comment
regarding how a certain commodity looks overbought is not a sell signal and
the author cannot claim to have called a top if it falls. At SK OptionTrader
we give clear and detailed buy and sell signals on specific options, having
briefly outlined out reasoning for such a trade in an emailed update prior to
the signal.
If a service you are thinking of subscribing to cannot provide answers to
these questions, then we would suggest you save your hard earned money for
another opportunity.
Of course this all presumes that you are looking for a service to assist
you in making a profit in your investment and trading. If you are simply
looking for something to inform you about what’s going on in the markets, and
give you some good points to make during a conversation at the next dinner
party, then by all means pay for the newsletter which offers the best
rhetoric, regardless of how poor their actual performance may be.
However if you are looking for a service that focuses on results, banking
profitable trades and providing clear and detailed trading recommendations
then you may wish to take a look at our premium options trading service SK
OptionTrader. We focus on results, not rhetoric, and as
our track record shows our results are there for all to see and
compare with others.
Our annualised return on investment is 86.98% and we are averaging
a profit of 43.78% per trade, which includes the two losing trades on our
record along with 59 winners, or a 96.72% success rate.
We are open with everything we do, so if you have any questions on our
services then please contact us by clicking
here.
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