Frequently Asked Questions
What does SDS #2 or
SSO #2 mean?
The SP Slugger
system is basically two systems in one. The "#2" simply means the second
half of the position. You should read the
SP Slugger
description to learn more.
What does it mean
when I see a number next to the System Name?
If you see
something like "SP(65%)" in the system column, it simply means to trade 65%
of usual. This is necessary in volatile times. If you are not sizing your
positions correctly, you are not trading correctly. Money management is THE
most important aspect of trading.
Make sure to
log in and watch my Video Tutorial. Good stuff.
What are inverse
funds?
There are
several exchange traded finds that allow you to short the market by buying
certain tickers. We use SH (100% short the S&P 500), and SDS (200% short
the S&P 500). These ETFs can be traded in an IRA. Be aware these funds do
not exactly track the inverse of the S&P 500 over the long-term.
They're pretty
close over a few days, but there are problems with them over several weeks
and months.
How do you short the
market by buying?
See the above
definition of inverse funds.
How do I determine
the direction of your Smart Money Indicator?
Simply log in
and look under "open positions". You will find how the Smart Money is
positioned by looking at the "system" column (just look for SMI). If the SMI
ticker is "SH", the SMI is betting the market will head down. If the ticker
is "SPY", the SMI is looking for the market to rise.
Can I trade options on your signals?
I strongly urge
most people not to do this. There are many variables involved. There are
times where we can be in a position for a couple months even when our swing
trade methods. You had better be aware of option expiration. If you are
comfortable with option trading, then this might work for you.
Can I trade Futures
on your signals?
Yes. This is
what I do for the most part. Futures offer great liquidity and low
transaction costs. However, this is not for everybody. I wouldn't swing
trade futures with less than $50,000. If you are trading the SP
Slugger system, you can determine where the stop and target should be with
some simple math. The initial stop is based on the closing price. When I
update the stop and add a target the next day, they are both based on the
opening price.
For example, if
the initial stop on SSO is 20% from the closing price, the stop on the ES
futures contract would be 10% from its closing price. The stop and target %
would always be half that of the leveraged funds (since they're leveraged
2-1).
How do I start up a
brokerage account?
The best way we have found to
start up a brokerage account is to go with a deep discount broker. The reason
for this is simple: low commission costs and fast execution. Many deep discount brokers charge as little as
$0.005 per share, and as low as $1 minimums. All you need to do is apply
online.
The best brokers these days appears to be
Tradestation and interactivebrokers.com
The slickest
interface winner is Tradestation. They offer MANY, MANY
features.
What if I'm
not in the US?
Take a look at
interactivebrokers.com
What is Margin?
This is where
your broker gives you a loan based on the equity in your account. Margin basically doubles your
trading dollars with stocks and index funds. A 5% gain turns into a 10% gain if you use
some of that extra trading money. If you have a bad trading system, you will lose money
twice as fast. If you have a good system, you will make money twice as quick. Most
brokerages need $2000 to initially start up a margin account.
New margin rules: The SEC mandates that
if you are a "pattern daytrader", you must have $25,000 in your
account. The definition of a pattern daytrader is not very specific, so you
might want to talk to your broker about this.
Why Would You Sell Your System?
Great question.
Everyone knows that if someone had a system that beats the market, he would never sell it.
That's true. I won't sell my trading techniques at ANY price.
I also
know that if everyone follows our signals, they eventually will become useless.
Personally, I hate the fact that so many people trade incorrectly (buying at the top, and
selling at the bottom). However, we count on that...that's how we win so much.
At the same time, I
know there's room for a small percentage of investors to share the "pie" so to
speak. Plus, the additional compensation allows me to keep compounding my
portfolio without having to make many withdrawals.
Can you just trade for me through a broker?
No. Too
much crowding.
What
exchanges do you trade on?
We
trade US equities only, so we'll trade on NASDAQ, NYSE, and AMEX
for stocks. We trade index options occasionally. These are based
on options exchanges like CBOE. We don't trade exchanges in
Europe or Asia.
Can I trade if I
live in another country?
The
US has the most liquidity of all markets, which makes it easier
to get in and out of stocks. Many members trade our picks from
other countries. Brokers like interactivebrokers.com
are world wide, so most can trade US equities with them.
How am I notified
about what to buy and sell?
All the information
on what to buy and sell, changes to positions, and commentary is
accessed on the member page. An email
is sent to notify you of the update. Make sure you white list us
so your Spam filter doesn't filter out our emails.
How long are most of your
positions held?
The swing trades are
normally held a few days. Day trades are obviously held only to
the close.
How
much money should I start with?
The
minimum suggested is $10,000. A deep discount broker like
interactivebrokers.com makes it easier to trade with smaller amounts, but
$10K is the BARE minimum suggested to make it worth while. If you're day
trading, the minimum is $25,000 to avoid the pattern day trade rule.
How often are the
signals issued?
Signals are issued about 3
times a week.
Can
I receive a discount for prepaying 6 or 12 months?
Yes,
I offer discounts for 6 and 12 month
suvscriptions. Log in and click on Edit Billing for the price discount.
How
do I add additional email addresses?
Simply
log into the Member page, click on Edit Profile, and you will see that
there is space for up to three email addresses.
How
do I cancel service?
Our web
site is automated, so you can simply log into the Member page, click on
Edit Billing, then set the auto-renew feature to "no". You will
then be cancelled automatically at the end of your billing cycle, and you
will also receive a receipt of your cancellation via email.
I
want to recommend this service to people I know. Is there anything in it
for me?
Yes, we
have an affiliate program that pays 20% of each sale...for as long as that
member stays on (so you get residual income...month after month). More...
What if I
miss a signal...can I buy it now?
If you miss a trade signal for
buying a swing trade or day trade (obviously), it's best to skip the trade. Your reward/risk ratio is not
as good past day one.
If you miss the Smart Money
trade signal, you can buy the recommended fund within 1 week of the
signal, or you can wait for a repeat buy signal (which occurs every 1-2
months on average).
What
do all those terms like 'SHORT' mean?
We have compiled a list of
terms you should definitely know. Further down are some more factoids that should be known
if you trade options.
ASK: This term refers
to the price at which the everyday Joe must buy a stock or option. The ASK will often
times be higher than the last value a stock or option was traded for.
BID: This is the price
that you sell a stock or option at. It will usually be lower than the last traded price,
and lower than the ASK.
EPS: Earnings per
share. For example, if a company has a million shares and it makes five million, the
earnings per share will be $5.
LAST: The last price a
stock was traded at. Usually between the bid and ask.
LIMITS: A limit is used
to define at what price a stock or option should be bought or sold. For example, A buy
limit set at $20 on a stock would wait until the stock drops down to $20 to buy in. A sell
limit can be used to trigger a sell at a price higher than what it is now. A sell limit
could be used to trigger a sell at a higher price while you were even on vacation!
MARKET ORDER: Whenever
you buy or sell a stock or option at market, you are putting your order out to the general
trading market. This means that your order will be filled for whatever the market is
currently at. The good thing out market orders is that they are generally filled very
quickly. The bad thing is that you might get the stock or option for a price you did not
want.
PE Ratio: The price to
earnings ratio. If the earnings per share is $1 and the price of the stock is $25, then
the PE Ratio is 25. A PE Ratio is usually high on those stocks that are growing rapidly,
while those that are slowing have lower PE Ratios.
SHORTS:
No, not the piece of clothing you wear when it is hot. When a stock is shorted, you are
basically betting that the stock is going down. For example, you notice that YHOO is going
down after shooting up like a rocket. If you short the stock when it is at $100, then cash
out when it hits $90, you just made 10% on your money. Note:
You must have enough funds to cover the stock at that high price you short it at. The
money you use will usually be charged margin interest by your broker. Also, the rules
state that there must be an uptick in the stock before it can be shorted.
Cover: In order to
close a short position, you must cover it...hopefully at a lower price.
STOPS: A stop is
generally used to prevent you from losing too much money. For example, if you purchase 100
shares of XYZ for $100 per share, you might want to set a stop at $94. That way, if you
are not around and there is suddenly bad news about XYZ, your order to sell all your
shares at market will occur when the stock hits $94 or lower. The problem with this is
that the stock might gap down to $80 and still be triggered. Just because the stop is set
at $94 does not mean you will always sell out at $94. On the plus side, for the majority
of the time, stops will work. Note: Some brokers
charge more for stop loss orders. You can also set stops for buying into a stock.
Buy Stops: You can also
buy a stock using a "buy stop." For example, if you want to buy on strength, you
might set your buy stop at $101 when the stock is down at $100. When the stock trades at
or above $101, it turns into a market order. We often enter trades this way. If you want
to get in at an exact price, use limits (below).
STOP LIMIT:
If you want to get into or out of a position once an exact price
is hit, a stop limit order can be used. The drawbacks and
advantages for limit orders are noted above. Buy example:
"Buy to open 500 shares INTC at a stop of 24.45 and limit
of $24.51". Once your stop price is hit, it becomes a limit
order (in this case, you will only be filled at 25.51 or lower).
This is the preferred entry method.
What are Index Funds?
Index funds mimic stock
averages like the Dow or the S&P 500. The American exchange allows you trade these
averages just like a stock. For example, you can trade the S&P 500 under the ticker:
SPY. The price is based on 1/10th the value of the index.
What are Index Futures?
Index futures are
basically contracts that enable you to by an index like the Dow or S&P 500 for a
certain price. You are not really buying all the stocks in the index, rather you are just
settling in cash. It sounds like it would be hard to profit except for the fact that
margin requirements are extremely low.
For example, if the S&P 500 is trading at 1000
and you want to buy one E-mini contract, it would cost you about $50,000 if you weren't
trading on margin. However, using margin to buy the contract, it would cost
about
$5600. Now for every point the index moves, you can gain or lose $50 (The multiplier is 50
for e-mini's. S&P's have a multiplier of 250 and are more expensive to trade). The
S&P 500 can easily move 20 points from high to low everyday. The bad part is that you
risk a huge amount of money when buying. The good part is that you can use stops to
protect yourself from losses.
Note that futures can be shorted, allowing
you to make money in any kind of market. Futures are settled in cash the following
morning, which means funds are taken out or put in your account automatically.
Futures, due to their
perceived high risk, are probably the most over-looked method for trading the over-all
stock market. However, they do require much more attention than stocks or spiders, as the
potential for profit or loss is very high.
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The results listed herein are based on hypothetical trades.
Plainly speaking, these trades were not actually executed. Hypothetical or
simulated performance results have certain inherent limitations. Unlike an
actual performance record, simulated results do not represent actual trading.
Also, since the trades have not actually been executed, the results may have
under (or over) compensated for the impact, if any, of certain market factors
such as lack of liquidity. You may have done better or worse than the results
portrayed.
