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Trading success through knowledge

303, 55 Holt St Surry Hills, NSW 2010 Tel: 1300 882 893 Fax: +61 2 8088 4732

The Truth About Trading For A Living

By Andrew Baxter C.E.O Elite Traders

Elite Traders

Elite Traders Disclaimer Australian Investment Education (t/a Elite Traders Group) is an authorised representative (#338875) of The International Securities & Derivatives Group Pty Ltd (ABN 22 103 552 683) AFSL #227544. The provision of financial product advice to clients of Australian Investment Education may be made by licensees other than The International Securities & Derivatives Group Pty Ltd. Please refer to the PDS provided by your broker prior to acting on any financial product advice received. Any trading advice contained in this communication is of a general nature only, and your personal financial circumstances have not been considered in its preparation. Please be aware that trading in financial markets will result in both profit and loss.

Last Updated October 30, 2009.

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"10 Things Every Investor Should Know Before Putting a Single Dollar in the Stock Market"
Hi there, Andrew Baxter here. I am going to start off by giving you a share of my background and here I came from because as you go through and learn more about our trading process you will realize that where you are or where youve come from in life just happens to be the start of that journey, and it definitely is not the conclusion. I grew up in a blue-collar family in the UK, working class, with 2 parents that worked very hard. It was a household that didnt really have any extras at all. We had very little money; we just had a lot of love. Its a great way of growing up and a very happy way. That in itself is a lesson, money does not equal happiness. My parents gave me a lot of advice over the years and they always encouraged me to work hard at school so that I could get a good job. So I did exactly that, I worked hard at school and got myself into University where I ended up getting an honours degree in Business and Finance. This really paved the way for me to start my professional career as far as investing is concerned. I have always had an interest in markets, and after getting my degree I was able to commence my career working in the city of London. Beginning in London was a truly interesting experience for me, as following my goal or having my dream job, as it was for me at the time, was a big achievement; however, that achievement came at a price. I quickly realized that it is an extremely competitive and aggressive environment to work in. I worked for two of the largest investment companies in the city of London, and my typical working week was probably close to 60 or 70 hours per week and at one stage I managed to peak out drinking 23 cups of coffee a day. I enjoyed what I was doing, I was making plenty of money, and I was following my dream. However, I realized that the stress and strain of working in an environment like that was actually taking me further and further away from my goal in life, which was a goal to be happy, which ultimately is one that most people have. I realized there has to be a better way to actually own my life. At that point I was more fortunate than I could have ever realised. I had the opportunity to immigrate here to Australia. This really was the start for me in building a business that gave me not only lifestyle, but that also gave the people within my business, staff and clients alike, the opportunity to build a lifestyle they really wanted. I began helping a friend of mine writing an education program. He wanted to educate his clients on how to trade, and obviously I could trade based on my 6 or 7 years of experience in the City of London. That business was rather successful and we ended up sending a significant amount of referrals every single month to a broking firm, which over time I became very close to and eventually joined to oversee the relationship and others, as a Director. After working there for a period I began to see things that I wasnt happy with. Mainly I was unhappy the level of care that clients

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were receiving, after all we were referring clients outside of our business into somebody elses. I believed that there had to be a better way of doing something like this, whereby clients receive service and care in a way that compliments the way they have been educated or taught to trade. As a result, I decided to set up my own broking business, and thats really where this journey really begins in terms of building a lifestyle program. I have incorporated a lot of the advice that my parents in particular have given me over the years into the way our business is run, and we will talk more about this when it comes to things like order placement and focusing on what we do to help our clients find freedom. As things stand, education through Elite Options Mastery has a direct relationship with my broking firm, Halifax Investment Services. By doing this we have been able to provide a seamless link whereby you are working with experienced brokers who understand the way that you have been taught to trade. That support, that ability to be on the same page has been absolutely essential, and is one of the key factors in the success of our clients. My business works on the basis that we look to educate clients for life, to give them the benefits of extra income with minimal time input providing them with their own chance at freedom. You can be anywhere in the world and trade with minimal time input using the strategies and the techniques that we encourage you to trade with. Our means of communication are very much in the 21st century. Instead of having to download data, analyse charts, and spend hours of your time working on what seems like a second job, you can have the convenience of trade recommendations delivered right into your lap via SMS. This way of doing business appealed to me in particular because my one of my passions in life is travel. This means of course I spend more time out of the office these days than I do in it, and I have deliberately built my business this way. Even if I am out of the office I can still trade perfectly, in the way that I like to, and Im informed of whats going on in the market through a series of communication channels. SMS messages are used for trades, because thats obviously something thats very timely, but also webinars and other forms of broadcast that I can dial into from wherever I am in the world. Additionally, of course, if I am mentoring a group of clients, I can host those webinars from wherever I may be providing my clients with the very best of service and coaching, while also enabling me to enjoy my time too. We have done this from a variety of locations around the world reflecting the power of the opportunity that you have in front of you. Experience is a great teacher, and it is easier to learn off somebody elses. You often hear people say things like that, and if you look at how our business is run you will see that the level of experience held by our traders and trainers is instrumental in your future success. The average age of our team is 47, bringing a massive amount of weight to the experience that our clients are able to leverage off. Effectively this will enable you to compress literally decades of experience into days.

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A lot people say they want to get started on this journey to making additional income and becoming financially free in the process, but you need to understand what is your why. Mine was that I wanted to be free to spend my time with my family, my friends, to have fun and to be fulfilled. By applying the knowledge and strategies that we teach in our program, using exchange traded options, you will have the opportunity to get your freedom back - having the ability to generate money from wherever you are in the world or whatever you are doing in life. Over the course of time, I have had the privilege of working with many different people. I speak to roughly 40,000 to 50,000 people a year, and Ive educated well in excess of 15,000 people from all over the world on how to trade using our systems. This has enabled me to speak on a number of platforms including working with the likes of Tony Robbins Wealth Mastery and Robert Kiyosaki, as well as more locally with the Australian Investors Association and the Australian Stock Exchange. One of the maxims I would like to share with you is something that has served me well in my journey - learn something properly and live off it for a lifetime. I am sure when you were a kid you learned your times tables, and you probably still know them now. If we say that six 6s are 36 you would definitely know that seven 7s are 49, and this is a great example of learning something once but being able to live off of it for the rest of your life. We have already done most of that work for you. All you have to do is follow our recipe book. You do not need to be a Master Chef to cook a great meal in this market, just a good recipe book, and that was our goal when we set up this business. We wanted to provide a way where any person could pick up the ball and run with it and make money from trading, irrespective of their education level, irrespective of their age, and irrespective of how busy they are with their day to day lives. When the process is right the results always follow, and this recipe book that weve put together for you is literally based on many decades of experience. That is a snippet of my journey so far. Success is an interesting thing, it is often a long and windy road. Sadly most people do not travel far enough along it, and give up early - Dont! Keep plugging away and keep moving forward. I hope this book helps you in that journey along the way and that this journey is one of fun, fulfillment and set you free!

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Know your reason Why

Before getting started in the market, it is extremely important to get a good understanding of yourself and why you want to get started. In my experience, many people want to start for the excitement, cache or buzz they may get from trading. This can be very dangerous as inherently, there is an emotional attachment to trading. So what is your why? Most likely looking for additional income or to grow your asset base and this is a good reason for considering trading but it is not your why! Your why is likely to be far more deep seated and emotional. Here are some examples You may want your kids to go to a better school where they have more opportunity You may want to cut your working week back by a number of hours to spend time with those people important to you You may want to go on a trip, that requires a chunk of cash to pay for it You may wish to be able to provide aged care for your parents Your present car doesnt work anymore and isnt safe, so you need a newer car You want to buy another investment property or move to a larger home You cannot afford to retire when you want to You have a large amount of debt that you need to pay off These may ring true to you or they could be a million miles away the point is you need to have something that emotionally is very important to you and it needs to be a total must for you to achieve this, not an I should do this Why? Because this will give you the motivation to take action. Without having a strong reason why, I know from more than a decade of working with people, that you will not have a strong enough momentum to see this journey out. We have a very simple and easy to follow process at Elite Traders - where much of the work is even done for you but nonetheless, you still need to do something. As a result, really knowing and understanding your reason why will help get you from A to B, even when the going can be tough.


Manage your Emotions

A Trading is often described as 80% psychology, 20% process. Successful trading is easier to achieve when there is less emotional inference or feeling toward the activity. This may sounds easier said than done but one of the biggest tips I can offer anyone starting out is to not treat your trading results as money but merely a scorecard. If for example we talked about a thousand dollars, for some, that is a large amount of money for others, it is not. If we treat it as money by making it relative i.e. $1000 is 50 slabs of beer, a weekend away, a flight to LA, or monthly repayments on a decent car, suddenly it is

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tangible. This becoming tangible then can influence our decision making as we focus on what could be done with the cash, rather than the process of trading. By treating it as a thousand points, something a little more inert, it is easier to step into the trading environment. How does this work well psychologist call this the endowment effect ie when we attach meaning or personalise something, our objectivity falls away. When it comes to trading, remaining objective as to what is going on and why, is extremely important because we work on facts and a process, not a feeling or intuition. This is a key distinction, as it means the process of trading is learnable i.e. it is a process not an instinct that some have and others dont. More specifically, remaining objective will enable you to take each and every trade as a new trade, without the euphoria or disappointment of the previous trade clouding your judgement, analysis and decision making. I cannot stress how important this objectivity really is and the fact that anybody can apply that process and be objective. In my experience, traders who fail to overcome this obstacle, experience significantly higher levels of stress. Additionally they generally make weaker decisions, for example, on the back of a losing trade, the next trade they will likely take on, will be a smaller position. If the trade works, they make less profit and get more frustrated, if it goes badly, this poor decision making has been rewarded and becomes conditioned as being a good thing. In actual fact the trade should have been treated totally independent of the previous loser and the position size should have been as per the guidelines of the process, not driven by the psychological negative of the previous losing trade. Treating your profit and losses as a scorecard, rather than dollars will certainly assist you by desensitising you from winners and losers and keeps the focus on the process.


Experience is a great teacher

I think experience and leveraging off experience is extremely important and most successful people or businesses are merely leveraging off of someone elses model. Many people in the market talk about paper trading when really that is not experience it is just an excuse. You can never learn anything from pretend trading. So my advice to anyone starting in the market is get that experience as quickly as you can and that means starting as quickly as you can. Now of course there are some things that you need to know before you start, and we will run through those shortly, but paper trading is just simply a stalling tactic and its doesnt give you the real experience of the emotion that you go through having money running in the market. To accelerate your experience leveraging off the knowledge and experience that other people have is a key and strong way to be up and running far more quickly. Always work with people that have experience in doing what you want to do and that are getting the results you want to get then get assistance from them.

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You can literally compress decades into days something we refer to extensively in our coaching and mentoring business. It is certainly possible to do and is an extremely important step in helping your confidence grow. You learn far more being involved in live trades whether good or bad and you always learn from each and every trade. It is important to get that real experience, even if it is with a relatively small amount of money in the beginning. It is better to start small, and then build on that as you gain confidence along the journey. In summary start as soon as you possibly can get that real experience that feeling of having money in the market for real and in doing so you will learn the valuable lessons in not only gaining true experience but also managing your emotions. If you do, you are so much further along the path to trading success than most people, who simply stall, pretend and never get there.


Which instrument will you trade?

Decide what instrument you want to trade and why. Over my career, which now spans in excess of 16 years as a professional trader, I have traded every single instrument available in the marketplace including foreign exchange, futures, bonds, equities, CFDs and options. You need to be very focused, and decide why you want to trade a particular instrument. Every financial instrument we can trade has its own specific advantages, but it also has its own set of specific disadvantages. I recommend always trading an instrument that is exchange traded. This is one of the key issues that weve seen emerge with CFDs, where the price effectively is a shadow market versus the real market, the spreads may be wide, and there is the potential for liquidity issues and credit risk associated with them. Alternatively, if you trade an instrument that is exchange traded, like shares, futures or options, the novation process in markets guarantees there is no risk of the counterparty failing to settle the trade and as a result you have a major risk factor taken care of. Equally, you need to understand specifically the characteristics of the instrument that you want to trade. Many of the instruments available to us offer great leverage. In other words this means you need a relatively small amount of money to begin, which is geared up effectively in those products. Leverage is very useful, but you need to be aware that it is a double-sided sword. If the trade goes wrong, your losses are also potentially amplified. Being mindful of the specific characteristics of the instrument you are trading is key. For example, if we were to look at shares, which are probably the most basic form of market related investment, they are very powerful and can be traded in combination with options. However, you need to have cash to trade them because you need to buy the shares in the first place. This means they can be more capital intensive than say foreign exchange, futures or options simply because of the leverage that those particular instruments have. Know what it is you want to trade and why. Be aware of the limitations of them, be aware of the nuances of them, and how susceptible the instruments are to news flow. For example, in foreign exchange we can see currency pairs move very violently very quickly, and because its a 24 hour market often those moves can happen while you are asleep. This may mean that you are not in front of your trading screen and are unable to manage your positions. By trading stocks or options in the time zone

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that you live, you have the advantage of being contactable and in a position where you can make a decision to either to take profit or use your stop loss. The majority of my trading these days is orientated around exchange traded options sometimes in conjunction with shares, sometimes simply just the options. Why have I arrived at this point, having traded all instruments. Options offer me some distinct advantages that I like. I can make money in a rising or falling market the same could also be said for CFDs, Shares and FX. However, I can also make money in a flat market where prices are not moving around also in extremely volatile conditions and perhaps my preferred reason I can be paid for time passing by, and these advantages are unique to exchange traded options. In addition, they are traded between 10 and 4 each day something again which is appealing, versus having to follow the markets throughout the night or sit in front of the screen for sustained periods of time, neither of which appeal to me. In addition, options offer a unique proposition by way of them being used for risk management specifically enabling the trader to have a predefined level of risk that is clear prior to the position being established. The peace of mind that comes with understanding and knowing that risk is contained, if not guaranteed, is highly appealing.


How much time do you have?

Know how much time or how hands on you intend to be with your investment and trading strategy. When we trade or invest our objective is obviously to make money. In doing that we need to assess the level of risk we are prepared to take, but also how much time we need to put into our particular investment. For example, some strategies are exceptionally time consuming. Day trading would be the ultimate example of that because it is an incredibly active strategy that requires you to constantly sit in front of the market during trading hours. So for someone who works, and is intending to develop a second income it is not an ideal approach to take, simply because you have to invest a significant amount of time on an ongoing basis. Likewise, other people may be more content to follow the market as perhaps more of a hobby. I hate to use the word hobby to describe trading or investing because hobbies cost money whereas a business makes us money. Finding the balance between these two, and deciding how much time you want to dedicate to trading is very important. In my experience over the last decade, most people do not and are not interested in putting in significant amounts of time. What they are looking for is a second income without having to take on a second job. Therefore finding instruments that do not require you to be watching them constantly throughout the trading day, or require you to download data, and spend hours at home analysing, appeals to many people. This is due to the fact that most people are looking for the extra income, but not the extra work that traditionally may be associated with that.

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Before you start you need to establish how hands on you want to be. Ask yourself, How much time do I have or want to dedicate to this? A big point to note is that putting more time in does not necessarily make you more money. We can be what is known sometimes as busy fool. Each of us needs to find the balance between the two that suits our particular lifestyle and situation perfectly. This is crucial because if this is inconsistent with your objectives, you will probably end up giving up trading because the time involved is incompatible with your particular lifestyle. Find something that suits your individual lifestyle, as this will be a crucial factor in your longevity in trading.


Risk Management

You must have a risk management statement or a risk management process. Money management is extremely important. In fact, it is the most important part of trading and investing. To give you an idea, if you lose 20% on a trade you need to make 25% just simply to get back to break even. If you lose 50% on a trade you need to make 100% to get break even. If you have weak risk management, and your losses are amplified or are substantial, it will be very difficult for you ever to really recover financially from a particular issue. Having strong, transparent and simple risk management is extremely important. I believe even if you have a trading system that is only right 30% or 40% of the time, if you have good risk management you have the potential to be far more profitable than a trader that is right perhaps 80% of the time but has weak or no risk management. One of the over used clichs in the marketplace is that All big losses used to be small losses unfortunately for some, is that we have let them get out of control, and what was a small loss becomes absolutely devastating as it runs ahead. To give you an idea using shares, holdings in some of the blue chip companies prior to the global financial crisis left investors were decimated by stocks like ABC Learning that effectively fell from $6 to zero, and Babcock & Brown that went from $34 to effectively 0. It is almost impossible to recover from that. You must, and need to have a process to tell you when to get out when things dont go well. Part of the reason we like options trading particularly, is that our risk is defined prior to placing any trade in the marketplace enabling you to go in with your eyes open. Before you even start to trade you know the worst case scenario. This is extremely beneficial as the emotion of running a live trade can sometimes take over the logic of the process for newcomers. Using put in options for insurance on your positions can also be extremely useful as is the case of using spreads, which by their definition have a predefined level of risk before you take the trade.

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Your trading strategy

Look at your strategy and why you want to trade that strategy. It is important as a trader or as an investor to have a robust methodical process that you follow each time. Trading and investing does not come down to luck. It is a very disciplined process, much like following a recipe book. You do not need to ad-lib or think outside the box. Instead, you simply need to follow the process within your trading strategy. Check and see what the results of that particular strategy have been over a sustained period of time, not just simply 1 or 2 trades, weeks or months. It is important to check the performance of the strategy in a variety of market conditions. We advocate the use of up to 11 different strategies within our program. The reason for the many different strategies is to ensure that we have a strategy to suite every market condition. For example, trading is often described as like playing a golf course. The course has the potential to offer a variety of different hazards or tricks that can hamper your progress, and markets can do the same thing. Having a

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number of strategies that enable you to profit from those different circumstances is absolutely key. If you rely on a single strategy, as is the case with shares, where you only make money if the share price increases, you are limited when the market falls or moves sideways. In fact, almost every other instrument be it futures, CFDs, or foreign exchange, only enable you to profit if a market is moving in one direction. Part of the reason why we prefer trading options is simply because they enable us to make money in a rising market, in a falling market, in a sideways market, or in an extremely volatile market. That flexibility puts us at a massive competitive advantage to other people in the marketplace that rely on directional move in order to make profit. Having a variety of strategies is key, but do not focus on too many. I mentioned we use 11 strategies, but we never use more than one or two at one time. This enables us to exploit what is going on at a particular time. We can change strategies, and we do so from time to time depending on the condition of the market. Most people that I have met that have one strategy will trade one instrument and try to force that strategy on the market. Generally and consistently these people lose money over time. Having the ability to adjust your strategy to the market conditions of the day, the month or the week, will enable you to become a profitable trader and what we call an all seasons investor; making money in a rising, falling or sideways market. Being empowered to do that is the key to success and longevity in this market, and the key to making serious money. Know your strategy, understand your strategy, but be sure to have more than one strategy at your disposal.


You do not need to know everything

Many people that are new to trading give themselves a hard time for the fact that they do not know everything there is to know about markets or trading. You do not need to know everything about markets or trading to be a successful trader. In fact, you are never going to know everything. Even with more than 16 years of experience and having done millions of dollars worth of trades with thousands of different positions, I would not say that I know everything about markets. I actually have no interest in knowing everything about markets. Instead I have an extreme interest in the things that will help me make money. As a result, I have developed and advocated an approach that I call Selective Ignorance. What do I mean by that? A simple example in everyday life would be this, we know that a microwave oven makes our food warm; however, most of us probably do not know how it does that. Does it change the outcome of making your food hot? Absolutely not! and as a result we can chose to have selective ignorance. By doing this, we are choosing not to clog our minds up with vast amounts of details on a vast amount of topics. We are just simply looking to understand and be familiar with the areas that have the ability to help us to make money. In my experience over the years, being focused is very important. Focus on your investment strategies or the market that you wish to trade, and always keep your eye them. Having knowledge of other things can and is useful. If you wish to be successful at anything, you must be focused on where you are and what you want the outcome to be. Focusing on a few selected topics allows you to become an expert in those particularly important topics. Be selectively ignorant on the things that really are irrelevant to

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your particular trading strategy or the market that you trade, and focus on the key skills that will ensure you success in what you are trading. You will never need to know everything in order to become a successful trader, you simply need to know enough about the particular strategy or market you choose to trade and focus on it.


Never be shy in taking profits

You do not need a lot of trades to make good money. All you need is a handful of quality trades. We have an approach that I suggest you follow, and that approach is to have only between 1 and 3 positions running at any one time. Having the confidence in your investment process and risk management to know that if those positions go wrong you have the discipline and skills to close out sufficiently early to minimize your losses. Equally as important we need to be mindful of getting out early, but at the same time have the skills to let our profits run During more volatile times in the market survival is key and as such, these present the sorts of circumstances where taking early profits and removing market risk is more than valid, as an approach, after all, you can never go broke taking a profit. Furthermore, one of the worst things you can do is a trader is take a trade that was profitable and mismanage the trade and turn it into a losing trade. As a result, you need to focus on quality opportunities, but also have a defined exit strategy to either get out for profit or a loss if necessary. Focus on your plan and always stick to it.


Having a Mentor or Coach

In my experience anyone who is successful has got there through having a coach or mentor to advise and support him or her on their journey. This is because experience is such a great teacher, and leveraging off other peoples experience can enable you to gain a stronger level of confidence and experience far more quickly than if you were doing so alone. The expression that nobody needs a friend when they are making money is so true in markets. It may be true when things are going well; however, when things go wrong you definitely need to have the ability to talk to someone who can assist you in getting back on track. Having a coach or a mentoring program is definitely a way of fast tracking years of study, and getting you to a higher level of success and therefore profitability in markets. Have mentor or a coach who has done and does what you are looking to do, not someone who has simply read a book about it is paramount. Having real life experience in markets is crucial, and is one of the most undervalued commodities out there when it comes to starting your own particular trading activities. As such, we strongly recommend sourcing a mentor or a coach who plays at the level you wish to play at and most importantly, listening to them!

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Join Us for an Online Live Web Seminar with a Difference

Our professional traders will share with you trading techniques in the LIVE market and demonstrate how profitable and flexible trading Options can be over other markets. In this Web Seminar you will learn: What is Option Trading? Why we trade Options and the tools you will need How the SMS recommended trades, education and advisory services are delivered How you too can follow the Options Mastery Team of professional traders and replicate their success See LIVE trades we have taken, why and the results... How you can own your own trading business with minimal investment How little time and money it takes to trade Options and make incredible returns every month How you can trade anywhere, anytime from your mobile phone Simply go to the above link at 8pm AEDST and follow the prompts this coming Monday or Tuesday evening.

Elite Traders
Level 3, 55 Holt Street Surry Hills NSW 2010 Tel: 1300 882 893 Fax: +61 (2) 8088 4732 Email: Web:

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