Blog Of Chris Dunn

How To Elegantly Pass Up Incredible Opportunities – Why I Turned Down $170,000 Instant Equity And $2,245 Cash Flow

Chris Dunn — Fri, 20 Jan 2012 19:18:26 +0000

Real Estate Investing – Deal Of The Year Or A Disaster Waiting To Happen?

The other day one of my wholesaler friends found an incredible real estate deal to add as a long-term investment. It was a package of 7 properties that had about $170,000 of instant equity. Since the seller was motivated, we could buy the properties at a hug discount. They were all currently rented out and producing about $4,500 a month in rental income. After a small down payment and private investor financing, my net cash flow would have been over $2,000 a month. So, why did I pass up this incredible deal?

It’s all about risk tolerance. A lot of real estate investors and daytraders only think about the possible profit on a deal or trade. But professional investors look at the potential income and wealth that can be generated, but they also look at the risks associated with the deal.

In day trading, any time you put on a trade you’re accepting risk. The nice thing about trading is that you can determine the maximum amount of capital you’ll lose before getting into the trade. In real estate, there are a lot more “unknowns”, which makes it harder to mitigate risks.

Here’s an incomplete list of risks to consider when investing in real estate:

Declines in property value
Loss of rental income
Property repairs
Time, energy, and money finding deals
Managing tenants
Many more…

Here are 7 popular tactics to limit risk in real estate:

Buy at huge discounts (make sure you find the REAL and conservative value)
Hire a GREAT property manager
Set up legal entities to protect yourself
Have an intense screening process for potential tenants
Don’t over-extend yourself
Be conservative with values, rents, and repair costs
Do “quick-turn” real estate deals like Deed Flipping

The Deals – 7 Properties Rated in 3 Tiers

Tier 1 Houses - Two of the deals were in good “blue collar” neighborhoods, had solid foundations, and only needed regular maintenance to keep it rented at about 2% monthly income of our purchase price. These were priced at a 65%+ discount of the retail values. Each property had about $50,000 instant equity, which gave me plenty of room in case we needed to fix-n-flip.

Tier 2 Houses - Three deals were in lower income neighborhoods, would need some repairs over the next few years, and only had about $25,000 – $30,000 in equity. Now, that instant equity isn’t anything to snub your nose at, but if I had to use a ”fix-n-flip” exit strategy, then I wouldn’t be left with much profit. And if prices came down any more in the future, there’s a good chance I would only break-even or lose money on these houses. Also, I wasn’t sure if the area was desirable by the biggest portion of the population.

Tier 3 Houses - The two lowest priced homes were basically crack houses. I’m talking about a neighborhood that you wouldn’t want to get out of your car, much less knock on the door. And according to the property manager, there are significant foundation issues. Also, comps were extremely difficult to find because crack houses don’t sell that often. The best “as-is” estimated value I could come up with was $20,000 – $25,000 per house. And if it costed $20k – $30k to fix them up, then I’d definitely lose money on a fix-n-flip. So, my only option would be a long-term rental situation in a BAD area.

The Deal Got Even Sweeter When…

With one call we were able to get the seller to drop an additional $30,000 off the package price. The exciting part was that my friend negotiated seller financing terms. I almost bought the houses sight-unseen. This would increase the monthly cash flow and allow me to save my cash and private investors’ cash for another deal. However, I quickly remembered that I needed to think through the risks, not just the cash flow and equity.

My offer & Why I Lost the Deal

After thinking for two seconds, the obvious decision for me was to cut out the tier 3 houses right away. I have ZERO experience in managing crack houses, and even if they can be profitable that’s extremely outside my risk tolerance and experience.

Also, I wanted to make sure I personally saw the neighborhoods of the tier-two houses. Being the biggest batch of houses (3), I wanted to make sure that these were houses I wanted to own and maintain for decades to come. And if not, I needed an exit strategy that limited risk.

The seller was offering the package of houses at such a discount because he was extremely motivated to sell them ALL very quickly. The owner is an 80 something year old man in bad health, and his children wanted to sell them all so they didn’t have to go through probate. I felt like we could really help this family by taking over all the houses for them, but I knew there was no way I’d be able to handle the Tier 3 houses.

And when I asked if they would sell just the Tier 1 or Tier 2 houses, they shut me down. I think they knew the lower priced houses would be extremely difficult to sell, and they didn’t want to deal with them any more.

The next day my wholesaler friend found a cash buyer and got a $40,000 assignment fee. I felt a little sense of loss, but realized there are a ton of other deals that do fit my criteria.

Lessons Learned & Plan of Action Moving Forward

I think the biggest take-away from this is to define the risk you’re willing to take on before you start analyzing properties. That way, if a property doesn’t meet your “risk tolerance”, then you can back out without getting mezmerized by the income potential.

My non-nogotiables are:

Fixer-uppers are fine, but no crack houses
Must have multiple exit strategies (flip or hold)
No foundation issues

Just like day traders get over-leveraged and under-capitalized, real estate investors can get themselves into sticky situations that, even if profitable, can cause more stress and time than it’s worth.

If you’re someone who’s looking to generate income from treating real estate as a business, it’s probably better to use quick-turn strategies that work in today’s market. In day trading, we call that “scalping” or short-term trading. And since a large percentage of people are upside-down on their homes, it’s probably best to learn a strategy like deed flipping.

If you’re a true “real estate investor” looking to build wealth for the long-haul, then look to acquire properties with built-in equity and immediate cash flow. I think now’s the best time to invest in real estate and I’m putting a significant time and energy into building my portfolio.

And I know there’s a lot of people who would dissagree with me…

The majority of people are scared of real estate right now. And I think that’s a great thing. As the great investor Warren Buffett said, “When people are scared, be greedy. When people are greedy, be scared.” Boy did I take this lesson to heart when I “got greedy” at the height of the market in 2005.

Even if this isn’t the EXACT market bottom we’re damn close and, if we buy right, we can build massive wealth over the long-haul.

Here are some resources I’ve found relevant and helpful:

David Montelongo’s Deed Flipping Blueprint - Teaches quick-turn and wealth building strategies that work in today’s market.

Mobilehomeinvesting.net - Awesome way to get big ROI on a small budget.

BiggerPockets.com – A HUGE resources for real estate investors

3 Steps to Have Your Best Year Ever (Without Disappointing Resolutions)

Chris Dunn — Sat, 31 Dec 2011 20:26:05 +0000

According to a study done by the University of Bristol, about 78% people who set New Year resolutions fail. So, ever since 2007 I haven’t worried about committing to “new years resolutions”. And every year since then has been more fun and productive than the last.

In this post I’m going to lay out the 3 steps I use to make each year even better than the last…

Step 1 – Write Down Your “Top 10 Experiences” From This Year

Can you think of a few big things you did this year? Instead of starting the year by making big promises to yourself about changes you’ll make, why not take a minute to reflect on the some fulfilling experiences you had over the past 12 months? After all, gratitude plays the biggest factor in someone’s level of happiness.

Here’s an example of my top 10 list for 2011:

Trekked the Himalayals in Bhutan - My biggest physical challenge of 2o11 was a trek through the Himalayan Mountains with Outward Bound International. My first time above 16,000 feet was tough but very rewarding.
Hosted a 7 day trading seminar - We had our first week long trading event in Austin, Texas for Emini Academy students.
Hiked part of the Appellation Train with my Dad – This is my highlight of the year! There’s nothing more rewarding than “surviving” and connecting with my Pops while disconnected in a beautiful part of the country.
Launched a new Real Estate company - I partnered with one of the biggest real estate investors in Texas to take advantage of this depressed real estate market.
Learned important lessons about hiring and firing – I like to consider myself a great vision planner, but not a great manager. I’ll be posting about some of the top lessons I’ve learned when hiring and managing team members.
Hosted 2 mastermind meetings for top trading companies – The New York and Las Vegas mastermind parties turned out to be great times and extremely productive.
The birth of my nephew – My sister keeps popping out amazing kids. It’s keeping my parents off my back, for the time being.
Kicked-back in the U.S. Virgin Islands - My fiance and I took a pre-honeymoon on St. Thomas and some other Virgin Islands. It’s definitely underrated!
Wrestled tigers in Thailand - Before setting off into the Himalayas I got to jump into a pit with over a dozen full-sized tigers.
Started 3 other projects with top-level entrepreneurs

Step 2 – Plan for Your “Top 10 Opportunities & Experiences for the Coming Year”

Forget setting meaning less goals. Achievement is great, but at the end of the day the most important thing is experiencing life! Making a million dollars doesn’t mean much if you didn’t enjoy the process.

So, instead of worrying so much about the end result, why not start by imagining what the experiences are going to be like?

Here’s an example list from some of my possible opportunities and experiences for 2012:

Implement the latest trading technology into our futures trading strategies and software
Help create solutions for would-be home buyers that can’t buy and desperate sellers who are upside down on their homes. Create a massive real estate portfolio and income stream in the meantime.
Get married!
Enjoy the process of increasing my trading skills and kicking off a trading journal to help other traders learn from my mistakes and breakthroughs.
Take 3-4 months away from “producing” to experience new cultures, people, and food
Learn to ski in Vail, Colorado with my new wife
Continue to build my team of bad-ass key players by filling 3 key positions
Publish and launch “project-x” for active traders
Evaluate big opportunities each week and be flexible and open to ideas
Start one new passion project that helps an emerging segment of entrepreneurs

Step 3 – Create a Plan for Hunting for Opportunities Every Day

Day traders are constantly hunting for “high profit potential trades”. In other words, they’re constantly on the prowl for trades they know have a high probability of winning. The concept of “hunting for opportunities” can apply to any area of life for entrepreneurs, business owners, and anyone who wants to grow.

There are a million and one reasons why only 12% of people actually follow through on their New Years Resolutions. Overwhelm, lack of focus, and procrastination are among the biggest reasons. But I think most people just get bored with chasing meaningless or difficult tasks.

How much better would your life be if you stopped chasing and started living? I think the difference between frustration and freedom starts with the quality of your questions. For example, check out these questions that could turn your focus from goals to living:

What’s the one thing I could do to make today a great experience?
What am I taking for granted or ignoring that could lead to huge growth?
Why am I spending time on this right now? Is it bringing me closer to my vision?

I hope you have the best year yet. And feel free to leave me a comment if there’s anything else you like to do to prepare for a coming year.

Three Simple Steps For Breaking Stress & Commanding Instant Focus, Relaxation, and Productivity in Less Than 2 Minutes

Chris Dunn — Tue, 26 Apr 2011 21:22:36 +0000

You will always have stress in your life. The problem is that most people don’t know the most effective way for handling stress. In a recent guest post, David Rendall explained why you need more stress, and how you can recharge your mind and body.

For anyone who’s an entrepreneur, day trader, or high-performer in any activity, it’s vital to develop the skill of recognizing the reasons why you get stressed out, then put together a game-plan for handling that stress. Those that are close to me know that I work great under pressure, but I let stress build up for so long that it tears my body down to the point of getting physically sick.

The 100/10/10 Exercise

As I come to the end of a 120 day “working marathon sprint”, I’ve not only made huge strides in my businesses, but I’ve learned a hell of a lot. And I’d like to share one trick I’ve been practicing called the 100/10/10 exercise.

The 100/10/10 exercise is something I came up with as a quick, simple, and reliable way of breaking stress and tension. This exercise is a great way to regain focus and increase your productivity exponentially.

Can you remember a time when you were so stressed out it felt like your head could explode? Well, what do you do in those moments? Yell at your kids, spouse, employees, or co-workers? Next time that happens I invite you to use the 100/10/10 exercise…

Allow yourself to take about 100 seconds to take 10 deep breaths. During each breath, think of one thing you’re grateful for. This may sound kind of cheesy, but trust me it works!

Next time you’re stressed out, don’t lash out at the person sitting next to you. Instead, just remember these 3 easy steps:

Step 1 – Sit down and allow yourself to be still for around 100 seconds (Anyone can take 1.66 minutes for themselves)

Step 2 – Take a very deep breath through your mouth while extending your belly so you can take in as much air as possible (repeat for 10 breaths)

Step 3 – For each breath, think of one thing you’re thankful for. You don’t have to force or obsess over something; just view an image of the thing you’re thankful for.

Has this worked for you?

How Tim Made His First MILLION (by the end of freshmen year)

Chris Dunn — Wed, 06 Apr 2011 17:06:45 +0000

My good friend Tim Sykes is known as the “bad boy” of penny stock trading. His no B.S. approach to trading is a breath of fresh air in an industry riddled with scams. He’s hated by evil penny stock promoters, and loved by his subscribers.

I had the opportunity to sit down and get an inside look into his $250,000+ yearly business plan. Check out the video below:

Visit http://www.timtradespennies.com to take advantage of Tim’s decade of making a killing in penny stocks.

…

Click To Continue Reading

The Work-Life Balance Myth – How Successful Entrepreneurs Do Big Things & Still Live With Freedom

Chris Dunn — Mon, 07 Mar 2011 01:12:46 +0000

The “work-life balance” says you should separate your business life and personal life. It says you should focus some time on your work life and some in your personal life. Well, I’m here to tell you that it’s not possible for entrepreneurs to operate that way. For business owners, their business is their life. Now, that doesn’t mean someone has to be a slave to their business. Quite the opposite actually…

Working in Sprints – Keeping Life Exciting and Motivating

“But what about the four hour work week Chris? You’re a huge proponent of that idea. Is that lifestyle really possible?”, my buddy asked me at dinner last night. As much as I love to travel and spend as time “off the grid”, it’s impossible to only work 4 hours a week every week and develop, build, or create something of value. It takes a tremendous amount of focus and energy to create a cash-flowing business, develop a skill like day trading, or put together a high-performance team of employees.

My “work” strategy is similar to the way a sprinter competes. I take long breaks and plenty of me time, but there are short bursts of intense-focused activity. For example, after I got back from my month in Australia, I went on a 90 day business sprint where I launched a new company, coordinated a major launch, and published two experts.

Next, I’m breaking away from the daily grind by flying out to Bejing, China… then hopping over to the pristine mountain ranges of Bhutan for a 70-mile trek through the Himalayas. I’ll get to re-group and plan out my next sprint all while meditating with some Buddhist Monks.

For me, this sprinting routine is the best way to keep my life exciting. I always have something to look forward to that isn’t the same mundane routine of going to an office. There’s always room to grow and expand, and always time to do and experience incredible things around the world.

3 Steps To Creating a Seven Figure Business with 5% of the Effort

Chris Dunn — Wed, 09 Feb 2011 19:22:19 +0000

One of the biggest questions I get from entrepreneurs is, “How can I create a seven figure business without killing myself?” There seems to be this misconception among aspiring millionaires that they must work longer hours, and do the plethora of tasks they hate.

In this post I’m going to show you how I increased my income by 1,109% in less than 6 months, while cutting my workload by over 90%. After implementing these 3 steps, I freed up over 7 hours a day to do the things that truly inspire me. And it’s at that point that exponential growth becomes almost effortless.

Thanks to this new way of doing business, I was able to accomplished more on this two-hour cruise around Sydney Harbor in Australia than I used to get done in a month!

I gave a talk at the Top Performing Entrepreneurs Society titled “Top Down Productivity – Eliminating the Bullshit from your day”. Today I’m giving you the top 3 things you could put into your daily routine that could literally take you from wherever you are today, to a point of total freedom to do what you want, when you want, with whom you want.

Step 1 – Write Out Your Life Mantra

Before you dig into the income producing stuff, you need to take a few minutes to figure out why you’re doing what you’re doing. This is similar to “finding your purpose”, but this gives you something practical that you can use every day.

Assuming you live with no financial, geographical, or time restrictions, what do you want to experience every day? This is much deeper than surface-level materialistic things. This could be a state of mind or feeling you get when you do something that really turns you on.

My life manta is as follows:

“I live with gratitude all the time. I have an eagle eye focus on achieving my goals, while enjoying every step in the process and being thankful for every moment. I live with no stones in my shoes.”

In other words, it doesn’t matter what I’m doing or the situations I’m going through, I can always turn inward to being grateful. After all, you could have billions in the bank or all the time in the world, but if you’re not grateful, then none of that matters.

It’s important to note that your life mantra should be written in the present tense. This isn’t something you hope, wish or dream for in the future; it’s something you live today.

Step 2 – Determine Your Top Profit Generating Activities

“Work, work, work. If I work just a little bit harder, then I’ll reach my goal.” This is the typical mindset of an entrepreneur spinning his or her wheels. Some people think if they only work a little longer, smarter, or harder they’ll achieve their goals.

But it doesn’t matter how hard you work if you’re doing the wrong things. The highest performing (and often the wealthiest) entrepreneurs I know really only do one or two things throughout the day. Seriously, I suggest that there’s an indirect relationship between the amount of work someone does and the amount of money they make. For example, Richard Branson once said that he only spends about 15 minutes a day “working in or on his business”.

The real magic happens when you start doing what you’re programmed to do the best. Some people, myself included, are great at implementing visions, but hate tracking the small details to bring a project to completion. Where others, like my Operations Manager, are great at tracking and managing details crucial to finishing a project. On the other hand, you have people that hate details and high-level thinking, but have a knack for connecting the right people.

My buddy David Gonzalez, co-founder of the Austin Internet Marketing Party, recommended an awesome Wealth Survey to me a few weeks ago. For about $100, you can take a test that gives you a 30-page breakdown of what wealth building activities will yield you the highest result. It also shows you who you should align yourself with to do all the other tasks in which you’re not predisposed to excel.

According to this test, there are only 8 ways to generate wealth. Instead of trying to copy the actions of other successful entrepreneurs, this test tells you exactly where you should aim your focus and effort. Even more importantly, it tells you what you shouldn’t waste your time doing. It’s like that old saying that goes, “Focus on increasing your strengths, not trying to improve your weaknesses”.

If you want to take the wealth survey, click Dave’s affiliate link here to show him some love for sharing this with us.

Step 3 – List and Track Your Big Active Projects

Now that you know the top one or two activities that will deliver the biggest profits and personal fulfillment, it’s time to brainstorm a few things that you can start working on that will produce huge results. Just as the title says, these are “big active projects” that will require many actions, and may require the help from different people.

For example, one of my biggest active projects right now is developing a mental training program for high-performers in skill-focused activities like trading, sports, or professional speaking. There’s no way I could complete this project on my own. In fact, I’ve partnered with two other trainers who have extensive knowledge on the cognitive mental structures of high performers. And as a creator, my role in this project is to take the high-level vision and design the business systems. I don’t need to be involved in every aspect of the project. If I was a control freak and felt like I had to do everything, it would create massive bottlenecks that would drag out the completion date, if not kill the project all together.

The Ultimate Secret to Becoming a Millionaire in a Fraction of the Time

There’s something I remind myself of every day – “Things usually take twice as long and cost twice as much, so bust your ass to control the controllable and forget about everything else”. Even though I’m only in my mid-20′s, that idea has probably saved me from a few mental breakdowns and gray hairs. It’s also given me the power to persevere through times where it seemed like there was no hope. In fact, it’s when I break through those pivotal moments that I see the greatest progress.

If you want to get on the fast track to earning seven figures while living your dream lifestyle, then simply start by doing the following:

1. Write out your life mantra

2. Discover your one or two top income producing activities

3. List out and track your big active projects

You probably won’t be able to just quit doing everything you don’t like today, but the first step is becoming aware of the things that will generate the biggest results for you. From there, you can start working to eliminate or delegate everything that you shouldn’t be doing. And if you push to spend the majority of your time on your top income producing activities, you’ll see greater progress in six months that you’d see in 10 years just trying to “work” your way through life.

Got questions or comments? Connect with me by popping in a comment below!

You Need More Stress

Chris Dunn — Fri, 29 Oct 2010 19:17:25 +0000

This week’s guest post is from David Rendall, an expert in leadership and stress management.

Most of us think we have too much stress. We talk about being stressed out and everyone we know is stressed out as well. This problem seems to have an obvious solution. If we have too much stress, the solution is to reduce our stress by avoiding stressful events or eliminating stressful activities. It seems simple.

But it’s not that simple because we have an incomplete understanding of what stress really is. We use the term “stress” to refer exclusively to negative events. However, there are two kinds of stress, distress and eustress.

Distress is what we’re usually talking about when we talk about stress and . . .

- it is harmful

- it breaks us down

- it makes us weaker

- it drains our energy

Eustress is a different kind of stress and . . .

- it is helpful

- it builds us up

- it makes us stronger

- it renews our energy

This new understanding of stress points us to different solutions. If we are broken down because we have too much distress (bad stress), then we need to build ourselves back up by seeking out eustress (good stress), instead of trying to simply avoid all types of stress.

Additionally, there are four different kinds of eustress . . .

- Mental

- Physical

- Psychological/Emotional

- Spiritual

Too much stress, even eustress, in any of these areas can cause problems.

Day trading involves a lot of mental and psychological stress, but not very much physical stress. The exhaustion you sometimes feel after work might lead you to believe that you need to relax, watch TV or take a nap. But what you actually need is more stress in a different area. For example, you probably need more physical stress. You would feel better if you went for a walk, lifted weights, ran a few miles or did some yard work.

When distress drains your energy, you need eustress to recharge.

We’ll discuss all these ideas in more detail at the bootcamp in November. I’m looking forward to meeting you all then.

If you want to learn more, the video clip below offers another strategy for dealing with stress.

David Rendall is a management professor, speaker, trainer and entrepreneur, specializing in personal and interpersonal effectiveness. He has served people throughout the United States, Canada, Australia, India and the United Kingdom. You can find him at www.drendall.com and on Twitter @daverendall.

Day Trading & Travelling – Next Stop, Australia!

Chris Dunn — Mon, 25 Oct 2010 16:31:10 +0000

Over the past couple of years we’ve had some incredible day trading travelling experiences. Everything from trading at the base of a live volcano in Costa Rica, to having a “pro trader pow-wow” in the heart of Buenos Aires, Argentina. Our next stop is going to take us all over the east coast of Australia…

The Mission – Maintain a high level of trading performance while trading at 2:00 am Australia time

Focus, discipline, and patience. These are all behavioral habits professional traders have ingrained into their psyche. For a lot of us, focus means being awake and fully present to watch the market. So, one would think that trading at night would have a negative effect on their trading results. However, the Emini Academy has many student traders from all over Australia. And many of them have told me that the time difference is only an issue for a short period of time.

The Plan of Action – Get comfortable with the time change, then execute regular S&P 500 emini trades

We’re flying into Sydney, Australia on November 12th at approximately 8:00 am local time. From my past experiences with travelling to the other side of the world, it takes 2 – 3 days to become completely comfortable with the time change. So, the first few days in Syndey we’re going to take it easy on Bondi Beach.

After our short stent in Sydney, we’re staying in beach side condos on the Gold and Sunshine Coasts. This will give us the quiet environment we need to focus on the market. I plan on hosting a few of our live trading classes and comparing my performance to how I usually do when I’m in the states.

This should be interesting…

To finish off the trip, we’re going to be cage diving with some great white sharks! We decided it would be best to save this for the end of the trip just in case anything goes wrong. ;-)

I have plans to meet up with traders in Sydney, Gold Coast, Sunshine Coast, Melbourne, and Port Lincoln. If anyone else would like to join us, feel free to shoot me an email at chris (at) eminiacademy (dot) com. I’d love to meet up with you! Also, please let me know if you have any recommendations about things that could help our trading journey be a memorable one!

Stay frosty,

Chris

Flipping Coins vs. Playing Casino – How to Tell If You Can Win at Day Trading

Chris Dunn — Tue, 28 Sep 2010 20:13:49 +0000

Bare with me for a minute because I’m about to go off on a little rant…

I just heard a “trading guru” say that making money day trading the futures market is as easy as flipping a coin. Seriously, this guy was just telling people that if they can flip a coin, they can make money in the e-mini markets. Then he went on to place a trade on the S&P e-mini with a 2 point stop and “took profit” at one tick. ”This is just like a video game”, he proudly exclaimed after he claimed his profit.

Is day trading as easy as flipping a coin?

There seems to be some big misconceptions with people looking at risk management. Let’s just take a look at some elementary arithmetic and test a hypothetical risk management plan.

Win ratio = 50% (For the sake of argument, let’s just assume it’s as simple as flipping a coin to get a 50% win ratio)

Risk management = risk 2 points for 2 ticks profit (let’s be generous and assume he actually gets 2 ticks profit per trade)

After 100 trades, you’d have 50 winners and 50 losers. Your total gross profit on the ES would be $1,250. Your total amount of losses would be $5,000. So, after 100 trades you would have lost $3,750!

Stop playing games and day trade like a casino!

Do you think Las Vegas was built on a strategy equal to flipping a coin? Hell no! All the beatiful lights and casinos were built from the casinos knowing ahead of time that they have a huge statistical edge over traders, and that the emotional behavior of the gamblers will keep the profits pouring in. And the mindset is the exact same for all professional traders.

The money is made in anticipation of what the mass majority of traders is going to do next. In other words, the more confirmation you have on a trade, the more you’ll pay for it. For example, I entered at the absolute highest probability area at 1,139,50 on the sp500 emini. You’ll notice that I got long as price was pulling back into the area, which is considered risky for some traders. However, it’s actually the least risky area to look at this trade opportunity with around 1 pt of risk, have a potential winning ratio on the setup, and have an initial profit target over 3 points. That’s a possible 3/1 reward-to-risk ratio.

Many traders had buy stops above resistance at 1,140.00 for a breakout trade. That entry area could hold a higher winning probability, but it increases the risk to over 2X my entry, and decreases the profit potential by about 50%. I’m not saying the “retail buyers entry” wasn’t a good trade. The only “right decision” is the one that fits your personality and has a winning expectancy.

So run like hell the next time you hear someone say trading is like a video game or “easy as flipping a coin”! Let’s go out as day trading professionals, define our edge like a casino, and trade in a way that fits our own personality.

How to Profit From the Irrational Behavior of over 92% of Day Traders

Chris Dunn — Thu, 23 Sep 2010 18:02:49 +0000

Today we arrived at Caesar’s Palace in Las Vegas for the 2010 Futures and Forex Expo. As I was walking around the casino floor, I couldn’t help but think about the ironic similarities between the casual gamblers and most day traders.

The correlation between gamblers and most day traders

There was a guy sitting next to me at the Blackjack table; I could see the hope and anticipation in his eyes. First, he gets a 7 which doesn’t get anything but a mild frown. Second, he lands a 4. His eyes light up like a slot machine that just hit a jackpot! As a fellow “participant”, I can’t help but cheer him on when he doubled down. Boom, the dealer slams down a King. ”21 baby!”, he shouts.

It wasn’t a split second after his big hit that I realized how ridiculous his (and my) enthusiasm was about the prospect of making money at the Blackjack table. Sure, one can play a strategy that has the best odds… but ultimately, the house has the edge. After all, the Vegas strip wasn’t built making gamblers rich. Some people don’t even know the rules of Blackjack, let alone have the confidence that they’re playing a winning strategy. Yet some still have this unrealistic hope that they’re going to make a fortune sitting at that table.

Almost every day I talk to traders who are day trading FOREX or swing trading e-mini futures, who don’t know if their strategy has a possible positive expectancy. Some traders know their trading system isn’t winning, but out of sheer desperation and not having any better options, continue to risk their capital.

Now I’m not bashing the excitement of gambling or denying the fact that some people make money gambling. In fact, next to poker, Blackjack is my favorite “training game” to get me ready for trading. I don’t sit down expecting to quadruple my money (even though it’s happened more times than once). No matter if it’s trading eminis or gambing, the end result is the same: to make money.

The only way to run your business like a successful day trader

So, I think we should all take a step back and realize the only true way to become successful at this game of odds. We have to become the house! It’s vital that we find an “edge”, or something that shows you a profit potential. Now I’m not talking about just over optimizing for historical conditions like the piece of junk trading robots. I’m talking about using a trading strategy that gives you a statistical edge over other market participants, properly managing your risk and profits, and developing your skill to execute your strategy in the live market. It’s easier said than done.

The market needs participants with the “gambler” mindset. In the end, it’s the emotional decisions of the irrational traders that feed the small minority of profitable day traders.