What They Don’t Tell You About Covered Calls
The first thing most so-called trading experts won’t tell you about conventional covered calls is that you most likely won’t succeed trading them.
Not even in bull markets. Because of the inherent, and dramatically skewed risks that are against you. If you trade conventional covered calls consistently, one move down and you’re done.
That’s the reality… Conventional covered call strategies are junk.
And the unbelievable misinformation surrounding them is even worse…especially in social media blogs.
No matter how you look at it, the overall, long-term risk-reward metrics in covered calls are negative in almost every case.
That’s why the CashFlow Covered Call strategy is on a completely different level.
- Risks are reduced by 90%+
- Annualized Returns Increase by as Much as 10x+
- Super Easy to Implement
- Requires Very Little Capital
There simply is no comparison.
This is all FULLY REVEALED in the CashFlow Covered Call video series.
CLICK HERE TO WATCH THE VIDEO NOW
How to Avoid the Number 1 Mistake Traders Make
If a strategy goes into a drawdown, and you are trading a larger trade size in order to meet your aggressive investment goals
You will find yourself dealing with the mental problems of the anxiety, the fear, the sleepless nights… this is all based on OVER-TRADING.
And so it is really important for you to have a solid grasp on what you can handle mentally.
I want to discuss what I believe is the best way to deal with this.
It is very simple…
Start off trading with the minimum trade size.
And that goes counterintuitive to a lot of these to a lot of the investment goals, right?
Because you have an aggressive investment goal and you think that in order to achieve that goal, you need to trade with a larger trade size.
But that creates all sorts of mental stress.
That mental stress causes you to not follow the rules of the strategy or the trades.
This is so overreaching into every area of trading, you have to deal with it.
So, let's talk about how to avoid making this mistake and still achieve your goals.
The power of proper compounding
And this is really what precipitates everything else you need to understand.
If you understand this, then you'll understand how it helps with everything else.
And so I'm going to circle this one.
Everything else is predicated on this.
You need to understand the power of proper compounding.
You need to do everything you can to understand the power of proper compounding.
Why?
1. It creates geometric growth in your account.
You have aggressive investment goals, you can create geometric growth in your account to not only achieve those goals, but blow them out of the water.
2. If you understand proper compounding, you know that you don't have to start with a large trade size, you can start with the minimum trade size.
This means that in your failed trading attempts, you will not be losing a whole lot, right?
IF you haven't grossly miscalculated the risk of the overall strategy, yes.
I've talked to thousands of traders and I don't know of anyone who does not have at least one failed strategy attempt under their belt.
If they've been trading for two years or more, it is going to happen.
And so the key is that during those failed strategy attempts, you're not losing very much.
That means you give yourself freedom to start with a small trade size because you understand that the power of the growth is in proper compounding.
3. It allows for a large margin for error in a strategy.
Let’s say you are taking a small lot size and you are expecting a 5000 drawdown but you recalculated it at some point.
And you realize it can actually be about 7000 and you’re at a 5000 drawdown and you can continue trading it.
It's not going to stop you from trading it because you're in a small trade size.
4. It requires the strategy to prove itself before more risk is taken
You don't start off with a large trade size.
You start off with a small trade size and as it proves itself, then you increase your trade size.
And that is going to slowly and methodically, based on a very calculated trade size formula, increase your risk only after the strategy has proven itself.
That is going to free you up to make the right trading decisions.
5. It allows you to follow the strategy rules.
You're not worried about a large loss because you're trading a low, small trade size compared to the account size.
And what allows you to do that is understanding that the wealth is going to be created through compounding.
6. It empowers you to keep trading even after a drawdown, which has to do with giving you a large margin for error.
By understanding the power of compounding, you can avoid most mistakes because you're going to start with a small trade size.
If you think trade size doesn’t matter, you are seriously mistaken.
The concept of trade size has been the single most important component in my entire trading career.
Compounding through proper trade size management provides the ability to grow a very small account (2,000) into as much as 5-fold the first year averaging only $30 per week.
By the end of the second year, a 2,000 account can conservatively explode to as much as 98,720, all through the powerful compounding plan.
If you start with 10,000, that grows into as much as 493,600 after only 2-years following a slightly more aggressive compounding plan.
This concept can be applied to any consistent low-risk high-probability strategy.
It is basic math and will be the most important concept you can apply to your trading.
And that is the Truth About Trading.
Trade Smart,
Ryan Jones
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