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would multiply 50% times 365. The result is a staggering return of 18,Poppy Handbags,250%. (Now if your stomach is turning by this type of deceit, GOOD!)
I offer you the MATH below:
Buy Price 1
Sell Price 1.5
Profit $0.5000
Gross Profit $50.00
% Return 50%
# of Days 1
# of periods in a year (365 days) 365
Initial $ Investment $100.00
Net Profit $50.00
Annualized Return 18,250%
Now what infuriates me about these promoters is how successfulthey are at providing the public with this type of "financialsnake oil!" One promoter in particular has actually written abest-selling book on options that is filled with these types ofmisleading and deceitful computations. Hard to believe but an18,250% return will barely pay for the price of the book!
Although this is a technical point. many of you have probablyrealized that the above example is further complicated by thefact that the financial markets are not open 365 days a year.If you take weekends and holidays into account you literally only have 252 days to play with. So the more mathematically oriented con men would offer you the following calculation:
Buy 1
Sell 1.5
Profit $0.5000
Gross Profit $50.00
% Return 50%
# of Days 1
# of periods in a year (252 days) 252
Net Profit $50.00
Annualized Return 12,600%
Hey 12,600% annualized return...sure beats those low yieldingMUTUAL FUNDS!
Now,Moncler hat/neckcloth, I wish I was making this stuff up, but my mailbox is filledeveryday with variations of these examples. No mention is evermade of the fact that your profit BEFORE commissions was $50bucks which is not bad and might pay for DINNER out on the town.
This may seem extremely elementary and basic to many of you.However, I have seen many extremely successful individuals takenin by this type of deceit. I think you'll agree that althoughthe numbers are accurate they are completely unrealistic and the INTENTIONS of the promoters are what is in question. Nonetheless, you'd be surprised how many $3,500 seminars the above example will SELL.
The financial markets only require one thing of you if you areto be successful and that is that you manage your risk on eachand every trade. THERE IS NO OTHER SECRET. In my own trading Imust admit that it took me years to learn how to TAKE a LOSS. Once I learned how to lose and accept it as part of doing business my trading dramatically improved. Although I consider this to be among the most profound truths that I have learned regarding trading I readily recognize that it is nowhere near as marketable as promoting 18,Moncler Women's Jackets,250% returns. Or was that 12,600%? After all 50 bucks IS 50 bucks!
Sometimes it is difficult to differentiate between FACT andOPINION. In those instances I heed the words of the great YogiBerra, "You can observe a lot by just looking." Nuff said.
Next article I'll get back to LOW RISK trading ideas in thesehigh risk markets.
Study away.....and remember, let's be careful out there!
Dowjonesfully,
-Harald Anderson
http://www.eOptionsTrader.com.
Harald Anderson is the founder and Chief Analyst of eOptionsTrader.com a leading online resource of Options Trading Information. He writes regularly for financial publications on Risk Management and Trading Strategies. His goal in life is to become the kind of person that his dog already thinks he is. http://www.eOptionsTrader.com.