Is Trade4Profits.com a Scam?
Evaluating financial sites that claim to teach you how to trade stock options, stocks, indexes, stock futures or commodity futures is one of our favorite things to do. Perhaps one reason is because we like to trade ourselves.
Today, we are going to look at Trade4Profits.com. This site claims to be one of the ‘true’ sites when it comes to training you on weekly option trading. They say that their system or systems are the best options trading systems when it comes to safety versus risk and reward.
Anytime you are considering trading stock options or weekly options strategies you need to make sure you understand the risk with options as opposed to buying and selling the underlying securities themselves. One thing we did like about trade4profits is they appear to use weekly options with capped risk. Meaning, you know your maximum potential loss going into the trade. The did trade some weekly option strategies that have slightly lower risk than trading the stock itself. That was OK because at least we can understand that risk.
One thing that is important if you are considering what would be the best options trading system is that it should be profitable. After all, who trades stocks or stock options trading strategies for the fun of it.
The point is to make money right?
One interesting thing we pulled from their website was the quote “Typically we consider ourselves successful if we are 100% right 60% of the time.” That is an interesting statement and one we have found common from successful stock traders. Especially successful stock options traders.
Think about that statement for a few minutes. If you are right 60% of the time but keep full profit and are only wrong 40% of the time and take a calculated risk. Usually this risk will need to be less than or maybe ‘slightly’ more than your potential profit for the numbers to work then you will be a successful options trader.
Look at it this way to understand the trade4profits weekly options strategy. If you win 60% of your trades and you loss 40% of your trades with a risk/reward ratio of 1:1, which means you risk as much as you make you will be a profitable weekly options trader. If you trade ten times risking $100.00 with the potential to make $100.00 with a 60% success rate then after the ten trades you would be up $200.00 after the ten trades.
You traded ten times. With a 60% win rate you won 6 of those trades making $100.00 per trade or $600.00. You lost 40% of your trades or 4 trades losing $100.00 per trade or $400.00. You net after the weekly options trades was $200.00.
What if your risk versus reward was not 1:1. What if it was 1.5:1? If this was true you could actually have a 50% weekly options winning percentage and still make money? How?
Well if you make $150.00 when you are right and lose $100.00 when you are wrong and are 50% right then let’s look at the numbers after ten trades.
You win five (50%) of your ten trades making $150.00 per trade or $750.00.
You lose five (50%) of your ten trades losing $100.00 per trade or $500.00.
Even though you were only 50% you still made $250.00, this is one of the weekly options strategies used by trade4profits. Depending on your risk versus reward you could actually only win 40% of the trades and still make money. Let’s look at a 2:1 risk reward ratio to show you how that would work.
If you are right you will make $200.00 and if you are wrong you will lose $100.00. In this example of ten trades you will be right 40% of the time on these weekly options trades.
You win four (40%) of your ten trades making $200.00 per trade or $800.00.
You lose six (60%) of your ten trades losing $100.00 per trade or $600.00.
See, even though you won less than half of your trades you are still profitable if you use the right weekly option trading strategies.
Normally, we do not give away too many of the secrets of a service we are reviewing but since most of this is on the trade4profits website we did not see a problem.
Another thing we really like about trade4profits is that they show their past trades without having to be part of a paid subscription service. Sometimes, they are older trades but you get a good feel for the way they trade without actually having to pay anything. In fact, as we right this they do not even have a paid service. They are primarily an education service, free at the moment. We will have to see if it stays that way.
As we reviewed the trade4profits older trades and followed their Facebook page and Twitter for newer trades we found they seemed to primarily use the following types of trades.
Diagonal Options Trades, where they purchased a long term in them money stock option and sold a weekly out of the money option on that same security. This in effect gave them a cheaper way to enter into a covered call position with less overall risk which in turn would give you a higher overall return. This seems to be one of their favorite strategies.
As part of this, they also traded actual covered calls with very good success according to their listed trades.
Another weekly option strategy they seem to prefer is a Calendar Option trade. This is where they purchase a long term option at strike ‘A’ and sell a weekly option against it at the same strike level of ‘A’. They are wanting the underlying security to stay in a tight range and take advantage of time decay against the weekly short position. As an adjustment we did see them convert this to a diagonal from time to time.
We also noticed a number of iron condors on indexes. They seemed to do well on these as they perform well as long as the market is range bound, which it is most of the time.
There are a number of other weekly options strategies they use to a lesser extent but these are the ones we saw the most. You can check out their site at www.trade4profits.com to see everything.
We really like the fact that they show their losses and sometimes make mistakes, we are all human so we know it happens. But, most guru’s pretend that it does not. Trade4profits embraces those as learning experiences. Nice to see. They explain what happened, why it happened and what do to better next time.
As we mentioned above, at the time of this review they did not offer a paid service. Everything is FREE. This is great and certainly makes any of these types of sites seem less like a scam. There are just so many weekly option trading systems out there that are either scams or do not give you enough information to protect yourself that it is nice to see one where everything is free.
Negatives on trade4profits.
Some of their website does not appear to be finished. We don’t like to see that, always makes us nervous.
Their updates are not consistent, things seem to get posted for a while then they don’t for a while. This does not diminish the educational value of the site, we just like to stay more consistently entertained.
Positives on trade4profits.
They offer a lot of educational material, you can look on the side of the site and see details about the different types of trades they do. Do not click the Education tab, when we did our review it was not working. Everything is on the side.
It is FREE, at least when we wrote this it was anyway. Free is always good, right.
They actually have books published, if you click the BOOKS link in the top menu it will take you to a number of books they recommend. It appears two of the books they recommend they wrote. That always makes you feel a little better about their knowledge level.
You can follow their closed and old trades on their Facebook and Twitter accounts. They are not posting as frequently as we would like. We reached out to them about that and they told us they were day trading futures a lot right now and that was taking away from them being able to update all their trades on weekly options like they would like. However, they are not ready to start posting their day trading yet as the strategy they are using is too difficult to accurately follow in real time and they were afraid people would lose money. We like that honest response.
Overall, as far as a stock options trading is concerned we do not believe trade4profits.com is a scam. They are more of an educational service. The information they provide is accurate and valid. Their books are pretty good as well.
This is not a scam, you can decide what its value is. Like we said right now everything is free so enjoy.