WIAcademy EducateBlog

Getting Started By Joe Inman

The greatest hurdle beginning traders have to overcome is feeling at a loss when it comes to knowing how to get started. It is important to realize that, in reality, you have already started on your journey to becoming a successful trader. You have probably read many books and magazine articles on the subject, you may have gone to seminars, and hopefully, you have taken Wealth Intelligence courses to increase your knowledge and confidence.

Now you are ready to take the next step by getting in touch with a broker and opening your trading account. Although this is a very exciting time, it is important to exercise caution and proceed slowly. The wisest decision you can make at this time is to establish your trading account with a broker who offers a trading program with a simulation package. Besides the necessary practice this program provides, there are other benefits to simulation trading.

Working on a simulation program will allow you to establish and develop a familiarity with the charts you may wish to follow and use. This is an area where the Edu-Trader™ software can be of great assistance. Edu-Trader software will provide you with charts you will use in your trading strategy, and will assist you in developing a watch list for your individual stocks. By starting with a simulation program, rather than starting live, you will be able to develop your skills as a stock or options trader in a no-risk setting.

Another benefit to simulating your trading is that it will help you become more proficient at proper money management. Understanding your trading capital is paramount to becoming a successful trader. It is absolutely imperative that you protect your capital as fiercely as a tiger protects her cubs. One of the most important ways to do this is to be comfortable with the dollar amount that you are willing to commit to any one particular trade. You need to be aware of the actual dollar investment of your trades, rather than merely focusing on the number of contracts or the number of shares which you are trading.

For example, if you are considering a directional-options trade and have about $20,000 in your trading account, one option may cost $3 per share, meaning that 10 contracts would cost you $3,000, whereas another option may be worth $9 a share, for a total trade value of $9,000 for 10 contracts. It is important that you do not become fixated on buying 10 contracts merely because that seems like an appropriate number. Rather, you should make the decision of how many contracts to purchase based on the total dollar cost of your trade, which must be an amount with which you are comfortable. If you are comfortable with a $1,000 trade amount and the option costs $3, buy three contracts; but if the option costs $9, buy only one. Remember, a successful trader does not act out of ego, but acts in accordance with a carefully thought out plan.

It is also very important to simulate your trading while you are developing your individual trading rules. The rules you develop will depend on your risk tolerance, as well as the amount of capital you are willing to commit to your trading strategy. Some of the points that are important to address in your rules are: an individual trade size, where to place your stop loss, where to place your profit target, which charts you will be analyzing, and how you will define the point at which your trade sets up for you. A successful trader always follows the rules that he has developed.

For example, assume that you have decided to watch five charts that are related to a stock that you are tracking. Let us further assume that one of your rules is the stock must set up on all five of these charts before you enter into a trade. It is a great temptation to enter the trade early, at a point where only four of the charts set up correctly. A successful trader will be patient and wait until all five charts have set up. He will not enter the trade unless they have. You will find that if you start breaking the rules you have established for yourself, it will be only a matter of time until you see your profitability suffer and your capital diminish.

The rules you implement for yourself, which charts you use, and how you manage your money are all individual decisions that you alone can make. As you are aware, one of the basic tenants of successful trading is the reduction of risk. By starting with a simulated program, you will be able to learn and develop skills in these areas in a very conservative and safe manner. The question then becomes how you will know when the time is right for you to move on from your simulated trading to actual trading. This is a question no one can answer for you. Your Mentor can assist you in making that judgment call, but ultimately, you are the only one who will know when the time is right. When you know which charts you will follow, how to manage your capital, and the rules that you will follow, and you are comfortable not only with your strategy, but also your execution, you will possess the necessary confidence to move on to actual trading.

Joe Inman is a stock mentor for Wealth Intelligence Academy™.

Posted 02:20 PM | Permalink | Comments (0)

By Dick Pexton

When I was in high school, I often rode the city bus to and from school before I was old enough to drive. I frequently observed a man riding the same bus. The moment he sat down, he opened a book and began to read. This man, Richard L. Evans, was the announcer of a nationally syndicated radio program. He wrote and delivered a brief, two-minute thought each week. While two minutes may seem to be an insignificant amount of time, he delivered over 2,000 of these messages before his unexpected death in 1971.

Richard L. Evans also edited a monthly magazine, served a year as president of Rotary International, and wrote 19 books, with much of the material coming from his two minute talks. I am not suggesting he accomplished all of this while riding around town, though I do think that many of the things that appeared in his books or talks began forming in his mind during the time he spent reading on the bus. While other passengers were just content to be riding instead of walking, Mr. Evans used the time to accomplish great things in his chosen field.

Plato said, "Nothing is more unworthy of a wise man or ought to trouble him more, than to have allowed more time for trifling and useless things than they deserved." What a strong message this is to those of us who have a tendency to major in minor things! Sometimes the world just pushes in, and our good intentions to work on our investing business get pushed out. While there are certainly times that our passion for real estate investing should defer to our employment needs, emergencies, family time, staying fit, and other activities that improve our quality of life, it should never be placed on the back burner for lack of time. Some people accomplish so much and some so little, yet we all have the same amount of time. I have learned through study, observation, and experience that those who accomplish more are goal-oriented, task-driven, and are aware of the value of time. So what do you value enough to do with your time?

There are wonderful tools available to help us organize our lives. Before personal computers became a common household item, I carried a daily planner in a slim leather case that fit in my suit pocket. With a glance, I could see my tasks for the day and the week, and I made all my notes in it. I carried my driver's license in the planner to ensure I always carried the planner with me. Now I use Microsoft Outlook, which synchronizes with every hand-held device. Pricey hand-held devices are a lot of fun, but inexpensive planners work just as well. Microsoft Word has many calendar templates you can print out and use. You do not have to spend very much money; just do something now to get started.

Every evening or morning, review your daily tasks from the previous day. Transfer any important, unfinished tasks to today's tasks; ignore the less important ones that did not get done. Now you will assign each task a value. You will have A, B, C, and D tasks. Furthermore, you will assign each A task a value, i.e. A1, A2, A3. Do the same with your B, C, and D tasks. B, C, and D tasks are probably more pleasant to perform, which is why we tend to gravitate toward these tasks and accomplish very little of substance if we do not become organized. Work on your A1 until you can't do any more for the day. Then go to A2 and do the same. Then go to A3, and so on. If you never get to the Cs and Ds, it's alright. They are probably not going to help you build wealth.

Now, I would like to discuss numbers. If, on average, it takes making ten written offers to get a deal, and if I write one offer a month, it will take me ten months to get a deal. At this rate, I will do only 1.2 deals a year. If I write one offer a week, it will take me ten weeks to get a deal, meaning I will do 5.2 deals a year. If I write five offers a week, I will get a deal every two weeks, which totals to twenty-six deals for the year. It's obvious that larger numbers produce better results. Because we all have so many demands on our time, how we choose to use our time is very important. Success in real estate investing is largely a matter of making offers. It is the only way to determine if a seller is really motivated and needs to sell at a price the investor is willing to pay.

I urge you to take time to set realistic long term, intermediate term, and short term goals. Understand the numbers it will take to accomplish your goals. Speed up the process by using good daily organization to collapse time frames. Act now! Success will not wait. This is the time, this is the place, and you are the one!

Dick Pexton is a real estate coach for Wealth Intelligence Academy™.

Posted 02:19 PM | Permalink | Comments (0)

By Jacquelyn Lynn

The rate of foreclosures and the potential profits they offer to investors mean that they are likely to remain a popular real estate strategy for the foreseeable future. But there's an old saying, "the devil is in the details," meaning that the fate of even the largest projects depends on the success of its smallest components, a fact that is certainly true when it comes to foreclosure investing. One of those details you need to understand and keep in mind is the right of redemption.

The rate of foreclosures and the potential profits they offer to investors mean that they are likely to remain a popular real estate strategy for the foreseeable future. But there's an old saying, "the devil is in the details," meaning that the fate of even the largest projects depends on the success of its smallest components, a fact that is certainly true when it comes to foreclosure investing. One of those details you need to understand and keep in mind is the right of redemption.

The right of redemption is the right of a property owner to redeem his or her real estate from foreclosure by paying the lender the outstanding principal and interest due, plus the lender's costs in foreclosure, or to redeem foreclosed real property from whoever purchased it at the foreclosure sale. The specifics, such as how long the owner has after the property goes to auction, exactly what has to be paid, and even what the process is called, will vary by state.

There are two key reasons why a foreclosure investor needs to be familiar with the right of redemption. For one, when you buy a property at auction, you need to know whether or not the owner could regain ownership of the property if he is somehow able to come up with sufficient funds to pay the outstanding balance, accrued interest, late fees, and all other costs. It is necessary to incorporate this information into your plan for the investment. The second reason is to understand that you can buy the redemption rights to a property, whether or not you actually buy the property. You can then use those rights as part of your investing strategy.

Protecting Your Investment

In states that provide the right of redemption after the foreclosure auction, you want to be sure you're not going to be faced with a situation in which you buy the property, spend time and money fixing it up and putting it on the market, then have the owner (or another investor who has purchased the redemption rights) take the property and your potential profits away from you.

The redemption period is set by state law, and typically ends anywhere from some point before the sale to up to a year after the sale. If the redemption period in your state ends before or at the sale and you buy the property at auction, this shouldn't be an issue. But if the owner has weeks, months, or even a year after the auction to redeem the property, you will be subject to a level of uncertainty that most investors would find unacceptable.

Most people who lose a house in foreclosure aren't likely to have the means to redeem it later, but circumstances can change and financial windfalls do happen. The solution is to buy the redemption rights from the owner if at all possible. You should do this either shortly before or shortly after you purchase the property at auction, and at a price you are free to negotiate. Typically, redemption rights are sold for amounts ranging from a few hundred to a few thousand dollars. In most cases, an owner facing foreclosure who sees no realistic way to either avoid the foreclosure or recover the property afterward will be happy to sell redemption rights he never expects to use.

As an alternative to buying the redemption rights, you can try using them as a bargaining tool when negotiating the price on a foreclosed property. For example, if your state has a long right of redemption period, tell the lender that has foreclosed that you're offering less money because you are accepting the risk that the owner could possibly take the property back. The lender might not accept your logic, or your offer, but it won't hurt to try.

Acquiring Property Through Redemption Rights

Another strategy to consider is the use of redemption rights as a way to purchase property after foreclosure. Because the redemption period needs to extend beyond the foreclosure sale, the potential effectiveness of this technique will depend on state law, but this is how it might work: The redemption price is determined by a statutory formula and may be less than the property's fair market value or the total pre-foreclosure debt on the property. Assume the fair market value of the property is $300,000. The property has a first mortgage of $200,000, a second mortgage of $90,000, and a mechanic's lien for $25,000. The lender in the first mortgage position is foreclosing. At foreclosure, the second mortgage and mechanic's lien may be wiped out. The person holding the right of redemption could exercise that right after the foreclosure sale and pay the redemption price, which if all the junior liens were erased, would be $200,000 plus interest, late fees, and costs. Even if the interest, fees, and costs totaled $25,000 to $30,000, the purchaser is getting the property for far less than fair market value.

If you're going to use this strategy, it's a good idea to have your financing in place and any title issues resolved before exercising the redemption right. To get more information regarding the right of redemption in your state, start by calling your county courthouse and talking to someone who handles foreclosures. You may also want to consult with an attorney who practices real estate law.

Jacquelyn Lynn (www.jacquelynlynn.com) is a business writer and speaker, and the author of The Entrepreneur's Almanac.

Posted 02:17 PM | Permalink | Comments (0)