WIAcademy EducateBlog

By Noah Davidson

"Analysis Paralysis." As an active trader, you have encountered that phrase before, and probably experienced paralysis by analysis first hand. Perhaps you have spent a quiet evening at home pouring over chart after chart until you found that perfect technical setup. You did all of the things you have been trained to do — checked the news, earnings, and fundamentals and put the stock into your watch list. Then did just that — WATCHED. Instead of patting yourself on the back for making another great trade, you wound up kicking yourself for failing to pull the trigger.

If you have been trading for any measure of time, then you are probably nodding your head in agreement; you've been there and done that. It is all too easy for traders to relate because we have all missed an opportunity which we, in hindsight, can see would have made a tidy profit. While you can take comfort in the fact that you are not alone, let's not take comfort in our mutual dissatisfaction. Take action, and learn how the pros do it.

Once a trading opportunity has been identified, the best way to take action on a trade is to use a trigger. A trigger, by definition, initiates a process or starts a reaction. When talking about trading, a trigger would be something that initiates the process of buying or selling the stock. That being said, what would qualify as a trigger? Let's take a closer look at what some traders might consider to be triggers.

Many traders look for indicator confirmation to help them make a decision to buy or to sell. Let's take a look at some of the tools, such as a Stochastics (see illustration 1below) crossing the 20 or a MACD 2 line cross, that traders use. Can these be considered triggers?

Illustration 1 Crossing MACD or Stochastic lines are NOT a trigger. Chart supplied by Edu-Trader™

No, not unless you have a broker who can auto-execute a trade from a technical signal. Since the vast majority of brokerage firms do not offer and are not even capable of that type of order execution, we may assume this is not the case. These types of technical signals are just that — signals — and cannot be considered triggers because they do not initiate a process or a reaction. At best, they make a trader think about buying and/or selling.

Since indicator signals cannot be considered triggers, what is a trigger? A trigger is a stop order. When most new traders think of the word stop, they automatically associate it with the commonly used application of a protective stop, like the stop loss; however, the stop loss is just one application of a stop order.

Stop orders are triggers that initiate either a market order or a limit order that your broker will then execute. When placing a stop order with your broker, the order ticket requires that you input a specific price. The price that you enter will then be used by your broker to trigger the specified action to either buy or sell at market, or to buy or sell with a limit.

Stops are used for both buying and selling. This concept is difficult for new traders because they most often associate the word stop with an action that ends a trade. The disciplined use of stop loss orders is pounded into the heads of new traders so aggressively that when they are introduced to the concept of entering a trade using a stop order, it fails to compute. A simple trick that often helps new traders get beyond the common usage of the word stop is closing their eyes and picturing a traffic stop sign. What do you do at a stop sign? Naturally, you stop. However, a stop sign is also where you start.

The word Stop = Trigger. A Trigger = A call to action. Therefore, a Stop Order = A call to action. To place a stop order, you need to specify a price and an action. The price you choose is the trigger that initiates the process or the action. The action can typically be an order to buy or sell at market, or buy or sell with a limit.

Proper use of stop orders in entering into trades will help mitigate emotions and automatically trigger the trade when the predetermined price conditions have been met. Let's take a look at this technique as it is properly prescribed in the Master Trader™ course. In the below example, we see a stock in an upward trend with a bull pullback pattern. In this situation, the master trader will trigger into the trade once price action resumes in the direction of the upward trend.

Illustration 2 Place a Buy Stop Order above yesterday's candlestick high. If in the event price action turns upward as is expected with this pattern, the trade will automatically be triggered upon our entry criteria being met. Chart supplied by Edu-Trader™

Too often, new traders sit impatiently in front of the monitor, reacting to price movement and chasing trades using either limit or market orders. This creates problems, not only with market timing, but also with the trader's psychology and emotions. Traders who are trying to tame an itchy trigger finger or who are frantically trying to react to an indicator confirmation are most often their own worst enemy.

Placing a buy stop or a buy stop limit order will initiate the trade when, and if, our price criteria have been met. By placing these types of orders before the market opens, the trader can get triggered into trades without having to be glued to the monitor.

Rather than kicking yourself for prior failure to act, get into the habit of using proper trading triggers by using buy and sell stops to enter into your trades. Don't forget to couple those trigger orders with proper stop losses and reasonable targets, and most importantly, don't let “Analysis Paralysis” keep you from getting into the game. Noah Davidson is a Stock Coach, Mentor, and an Instructor of the Master Trader™ Course for Wealth Intelligence Academy™.

Posted 04:06 PM | Permalink | Comments (0)

By Jacquelyn Lynn

E-mail has become one of the most common methods of business and personal communication. It's fast, efficient, and convenient, but it can be dangerous. Consider these tips for getting the maximum benefit from e-mail while avoiding its pitfalls, whether you are at work or home.

• Remember that e-mail is not private.
You can add to your signature line as many disclaimers as you like that your e-mails are "privileged and confidential," but the reality is that once you put something out on the Internet, or even on your company's internal system, you have no control over where it ultimately ends up and who sees it. Don't count on simply deleting messages to protect you; most e-mail systems have automatic storage features, meaning that your e-mails could eventually be recovered. No matter how much you trust the person you are corresponding with, the best rule is to never put in an e-mail anything that you would not want on the front page of a newspaper or as the lead news story on television.

• Casual is okay, sloppy is not.
E-mails do not require the structure of traditional, formal, written correspondence. It's perfectly acceptable to begin an e-mail with "Hi, Bill," or even just "Bill," instead of "Dear Mr. Smith:" but take care to use correct grammar and make sure everything is spelled properly. Proofread, proofread, proofread! It's far too easy to accidentally leave out a word that changes the entire meaning of your message.

• Observe accepted e-mail etiquette.
Be concise and to the point. Don't type in all capital letters (that's considered shouting), but don't type entirely in lower case, either; capitalize where appropriate. Don't spam, forward messages or attachments without permission, forward chain letters, or send or forward e-mails that contain libelous, defamatory, offensive, racist, sexist, or obscene comments.

• Before you hit send, be sure your message is complete and is going to the right person.
Sending a blank or incomplete message can be embarrassing or worse. When replying to an e-mail, take care not to hit the “send” button prematurely. For e-mails you originate, make entering the address the last thing you do so the message can't be sent until you are ready, and always check to make sure the address is accurate. We may laugh at stories of people who have sent messages to the wrong people, but the reality is, such errors can damage your reputation, cost you business and money, and ruin relationships.

• Remember that e-mail is not 100 percent reliable.
Spam filters and system failures can cause messages to end up lost in cyberspace. If it's important, request a receipt confirmation, either by using the tool in your e-mail software or by specifically asking the receiver to acknowledge the message.

• Use your out-of-office auto-reply if you are not going to be able to answer e-mails promptly.
If you won't have access to your e-mail for a day or more, use an auto-reply to let people know that there will be a delay in your response. Let them know who to contact if the situation is urgent. When you are in the office, answer your e-mails as promptly as possible while still maintaining your productivity. You may, for example, want to set aside two or three times a day that you read and reply to e-mail. Stopping to read and reply each time a message comes in could mean you will do little else besides deal with e-mail. Conversely, be understanding when you do not receive prompt replies from others. Recognize that they may be busy, in meetings, or out of the office, and be patient. If an immediate response is required, pick up the phone.

• Be cautious with abbreviations and acronyms.
E-mail has spawned a language of its own, but don't use abbreviations and acronyms your reader might not understand, or worse, might misunderstand. For example, SWAG usually means "scientific, wild-ass guess" but in some circles, it also means "soft ware and giveaways." Even the common LOL, which usually means “laughing out loud," could instead be intended to mean "lots of luck." It's always better to spell things out and be clear.

• Use humor sparingly or not at all.
E-mail is a one-dimensional communication without the benefit of tone or facial expression. Even including a smiley face or other humor indicator may not achieve the desired effect. It's much safer to just avoid using humor completely.

• E-mail praise, but not reprimands.
E-mail is a great tool for quick and timely electronic pats on the back, but should never be used for any sort of negative appraisal.

• Include a subject line appropriate for your message.
Focus on one issue per e-mail and make it clear in your subject line so the recipient can find your message quickly and will know what it's about. If you develop a long email exchange and the subject shifts, change the subject line.

• Use a signature line with your full name, title, and contact information in case the person you are e-mailing wants to contact you by a means other than e-mail. Include links to your website and blog if you have one. A brief marketing message is also acceptable.

• Do not let e-mail replace human interaction.
E-mail may be efficient, but we still need real face-to-face conversation.

If you have a business, it should have a comprehensive e-mail policy, and every employee should be trained on what that policy includes. Make e-mail work for you, not against you.

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

Posted 04:01 PM | Permalink | Comments (0)

By David L. Boyd

"Life's tough; it's even tougher if you're stupid." – John Wayne

Wouldn't it be nice if there was a simple formula that guaranteed success in the real estate investment business? Getting started in real estate investing is challenging at best, and there are no magic formulas for success. However, there are some basic rules that, if followed, can help you avoid committing the deadly "sins," or mistakes that could knock you completely out of the real estate game.

No matter their level of expertise, all real estate investors get careless at times and make one or more of these 13 common errors. Usually, a seasoned investor will get up and keep going. Unfortunately, when new investors make any of these mistakes, they sometimes walk away from the real estate investing business before they have really even gotten started.

Life is much easier if you know the rules. By becoming aware of these 13 commonly made mistakes, the new investor can avoid being forced out of the game before he or she has even learned to play.

Sin #1 – Lack of Basic Real Estate Investing Education
While most investors realize the importance of learning the basics of real estate investing before jumping into the market, there are many new investors who feel as if reading a book or two should supply them with enough knowledge to make a killing in real estate. Don't shortchange yourself. Get all the education you can. You should spend at least an hour each day improving yourself and studying the real estate investing business. Learn something new every day. Expand your mind.

Not too long ago, a fledgling investor had to look long and hard to find good information on real estate investing. Today we have easy access to information in virtually every facet of the real estate investing business. The Wealth Intelligence Academy™ provides some of the best education available anywhere. Its live classes are taught in numerous cities throughout the country, and are even available in your own home via the Internet, leaving no excuse for not getting a proper education.

Sin #2 – Not Taking Action
Although extremely important, education is only part of the success equation. You must take action to make things happen! Simply obtaining an education will not make you successful; rather, it is the application of that education which will put you on the path to success. A good real estate coach can help you apply the education you have obtained through real estate books, classes and seminars. A good coach will keep you focused on your goals and help you keep going when you hit roadblocks on your path to success.

Look at yourself in the mirror and ask yourself, "Am I taking action, or am I just making excuses?" The list of excuses is endless, but none of them produce results. Take action, and do it now. Nothing will help you overcome your fear better than taking action.

Sin #3 – Rushing into the First Deal Just to Get That First Deal
New investors are under an extreme amount of pressure to do that first deal. They often endure numerous disparaging and discouraging comments from family and friends who believe they will fail because real estate investing doesn't really work. This sort of criticism makes even the most confident rookies anxious to prove to the naysayers—and themselves—that they are capable of success. While this ambition can be a powerful motivator, too much eagerness can make one impatient enough to disregard the rules and jump at the first "deal" that comes along. This can spell disaster. A bad deal is certainly worse than no deal at all. In fact, it is crucial that your first deal be a good deal, so take your time. Make sure the numbers work; if they don't, go on to the next deal.

Take massive action now! Make a multitude of offers, but remember that every one of those offers will, at a minimum, be contingent upon a final inspection and approval by your associates. Including a provision for an inspection period gives you time to thoroughly inspect the property and meticulously reanalyze the deal to be sure that you will benefit from the transaction. If the deal turns out to not be a good one after all, do not hesitate to walk away. A bad first deal ruins a countless many new investors.

Sin #4 – Not Starting with the End in Mind
Steven Covey said that highly successful people always begin with the end in mind. These are words to live by. While this is of especial importance to the beginning investor, it is an area in which even seasoned investors need to improve. Far too often, investors get so swept away by excitement over the potential profitability of a prospective deal that they fail to think all the way through the process. Many new investors buy a property without having a clear picture of their exit strategy; this is a big mistake! It is of crucial importance to have a plan for a property before you buy it!

Determining whether or not a property suits your purposes is a fairly simple process. For example, if your end goal is to sell, then buy a property that will be easy to sell. If you are in search of a rental property, buy a property that will be easy to rent.

Sin #5 – Not Conducting Your Own Due Diligence
When you encounter a deal that, according to the "experts," appears to have a considerable potential for profit, keep in mind that the speculations of others are not necessarily factual. Even the opinions of so-called experts are just that—opinions. It is imperative that you always run the numbers yourself. It really doesn't take that much time, and it is time well-spent. Once you have the property under contract, have the professional inspector on your Power Team do a detailed inspection. Make sure you get good repair estimates based on that inspection and, because it is quite rare to complete all repairs under budget, add several thousand dollars to the estimate to ensure you have a good cushion. Once you have determined the revised amount of the repairs estimate, recheck your numbers to be sure you do have a good deal.

One note of caution: there are groups that look for excited, new investors, and try to sell them a "deal." If you come across a deal in which the real estate agent informs you that he or she has a friend who can get you the financing, and the financer tries to sway you toward using his or her “preferred” appraiser, be very cautious. Double check the property value and analyze the real estate market in that area to ensure you do not get taken to the cleaners.

Sin #6 – Overanalyzing
This is where a lot of new investors get stuck. Because they are so afraid of making a mistake, they overanalyze a property so long that by the time they decide to make an offer, the property is already under contract with another investor. Learn to quickly analyze the data you have and make a fast offer (always subject to a final inspection and approval of your associates, of course). Once the property is under contract, you will have time to gather the specific data you need to perform a more detailed, accurate analysis. If the numbers still look good, buy; if the numbers don't look good, re-negotiate a lower price or walk away.

Sin #7 – Paying Too Much for a Property
This is the biggest mistake a new investor can make. In order to avoid this common pitfall, you must learn to perform an analysis which takes into account all of the expenses. Remember, the analysis for a "buy, fix, and sell" is completely different from the analysis of a "buy and rent" property, in that your goal for a "buy, fix, and sell" is to make a profit when you sell, while your goal for a rental is to acquire a positive cash flow right from the start.

Sin #8 – Not Having Proper Reserves for Your Rental Properties
As you know, most new businesses fail due to a lack of positive cash flow and sufficient operating capital. Assume that after correctly analyzing a potential rental property, you proceeded to purchase it at a price that produces a positive cash flow. As part of your analysis, you should have included a vacancy factor and a future repair fund, meaning that each and every month, a portion of the rental income should be set aside in your operating account and saved for that rainy day. I assure you, that rainy day will come. No matter how well-managed your property is, at some point, you will have some vacancy and you will need to perform some repairs. If you have money set aside to cover those expenses, you can weather the storm; otherwise, you had better have some deep pockets. In order to keep the property long enough for your equity to grow into a nice nest egg, you must plan for these inevitable occurrences.

Sin #9 – Underestimating Repair Costs
Not much needs be said on this point, save that the importance of becoming adept at making repairs estimates cannot be overstated. Having the ability to perform a cursory evaluation of properties will allow you to make offers expeditiously on suitable properties. Once the property is under contract, get a professional inspection to more accurately assess the cost of repairs. Get several bids on repairs, and interview as many contractors as is necessary to find a contractor you can trust at a price that fits within your budget.

Sin #10 – Overestimating Rental Income
Never take someone else's word on the price at which a property will rent. Do your own homework. Drive around and get to know the area, and research the amounts at which similar properties are renting. Be sure to compare apples to apples. When in doubt, err on the side of caution when calculating your maximum allowable offer by underestimating the rate of rent and aiming to buy the property at a lower price. If you are then able to charge a higher rent than you allowed for in your calculation, you will have improved your cash flow, which is a much more pleasant surprise than the alternative.

Sin #11 – Trying to Do It All Yourself
While you should strive to learn as much as possible about all aspects of real estate investing, you needn't—and shouldn't—attempt to handle every aspect of your business on your own. No matter how educated, talented, skilled, or motivated you may be, there are only 24 hours in a day. Build a team of hand-picked experts, and be willing to delegate a lot of your work to those team members. Doing so will allow you to spend more of your time on finding, analyzing, and negotiating potential deals.

Sin #12 – Quitting Your Day Job Too Soon

Confidence, commitment, and enthusiasm are valuable traits that are vital to the success of any investor. While it's great to jump in with both feet, unless you have at least a year's worth of living expenses in savings, you would be wise not to quit your day job just yet. There are many investors who make good money fairly quickly and are tempted to do just that. Although this is a personal decision, it is usually best to hang onto that job until you have a system in place and are consistently generating a steady income from your real estate investing business. Even then, have a good cash reserve set aside for living expenses before you tell your boss goodbye forever, just in case.

Sin #13 – Not Working With a Coach

You have heard it said many times before, "Even an expert needs a coach." In fact, I would argue that the greater your knowledge and skill, the greater your need for a coach. New investors in particular have a need for proper coaching in order to effectively apply their new knowledge. A good coach can keep the new investor on track and help him or her to avoid committing any of the 13 deadly real estate investor sins.

David Boyd is a real estate investor and owner of Wasatch Front Properties in Farmington, Utah. He is also a licensed securities agent with Regent Capital Group, specializing in 1031 Exchanges and Tenant-in-Common investments.

Posted 03:58 PM | Permalink | Comments (0)