If you were to list the top five people in the stock market/investing education industry, today’s special guest would probably be among them. 

He’s the author of Options Made Easy (now in its second edition) and The Bible of Options Strategies – both of which are on the bestseller list and feature topics that are right up our street here at the Smart Profits Report. He’s got another coming soon called Volatile Markets Made Easy – a subject I talked about here a few days ago. 

His name is Guy Cohen. Having obtained his MBA in Finance from Cass Business School in London, Guy’s clients include the New York Stock Exchange Euronext and he has introduced well over 100,000 investors around the world to his user-friendly and stress-free trading methodology. 

Today, I want to introduce you to him. I sat down with Guy recently to ask him about all manner of investing topics, including… 

• How to overcome the differences between investing theory and practice
• The two most powerful charting tools he uses
• The six key characteristics of successful investors
• The most frequent questions that investors ask 

And here’s what he had to say…

An Interview With Investing Expert, Guy Cohen – Part I

Karim
Okay, Guy… first off, tell me how you got involved with trading in general – and more specifically, options?

Guy
Thanks for giving me the opportunity to talk to your readers. I got into options while I was studying for my MBA, where I took specialist options classes.But it wasn’t until I had a solid grasp of the academics and completed my options exams that launched into trading options for real. That’s when I discovered a key lesson: There’s a difference between understanding how options work, and the more practical test of how to actually trade options.Just as important, though, was the discovery that in order to trade options successfully, I really needed to understand how to trade stocks successfully first.

Karim
Yes, there’s a mountain of difference between theory and practice. How did you solve that challenge? 

Guy
Well, for stocks it was really a question of tireless, obsessive research until I found a method that I could use consistently. It also needed to fit my psychology, which is naturally risk-averse, yet I also like to play for big returns.In terms of options, the software available at the time wasn’t very helpful, so the only way for me to progress was to build my own application. I needed one where I could see my risk profile and other important factors to do with my trade. I began in Microsoft Excel and from the original spreadsheet, I started to add new strategies.

In all, I wrote about 64 strategies into the spreadsheet manually. This is where I began to understand the intricacies of each one and why and how they moved in different timeframes. I traded each strategy, which really intensified the learning experience. Nothing like having some real chips on the table to help focus the mind!Karim Rahemtulla

Karim
That sounds like an unusual way into the markets, but I imagine it’s a bit like a mechanic who learns how an engine works by dismantling and rebuilding it thousands of times.

Guy
That’s a perfect analogy – and one of the reasons why I have such a wide range of options knowledge in my head. It’s almost like a natural part of me now. I’ve seen how everything fits together for dozens of strategies, hundreds of times. 

Karim
What charting software do you use and what do you have on your charts?

Guy
I use TradeStation and Telechart. I like TradeStation because I can program almost anything into it, and Telechart because it’s really simple and my students can use it.As for what I include on them, I keep it really simple and uncluttered. Just candlesticks, a 200-day moving average, and volume readings.

Karim
Guy, what do you see as the common characteristics of highly successful investors?

Guy
Successful investors have all come to a point where they know that they have to be systematic with their trading. By that, I mean…  

•  They understand that they have to be as relaxed as possible
• They are not desperate
• They don’t have a gambling mentality
• They’re structured
• They’re disciplined
• They’re not using 20 different indicators… they’re just using a couple of things

In trading there’s a real beauty in simplicity. And as that simplicity actually becomes fascinating, it’s more fun – and the money will come to you more easily as a result.

Karim
We’ll get back to how you mastered trading stocks later. But first, how did you get into writing books?

Guy
Well, as I was building my software in Excel, I was also writing comprehensive educational notes alongside it. I showed those notes to a trader who knew the Financial Times and at the meeting with the FT, the paper offered me a book deal there and then! 

Karim
Your books are quite different because they’re: (a)… very informally written and quite chatty, and (b)… they have literally hundreds of diagrams, which makes them very readable and easy to understand.

Guy
Thanks! Yes, that’s the way I understand investing – and options in particular. In pictures. It helps explain complex topics with real simplicity that most people can understand a lot quicker. It’s become my trademark. 

Karim
So what’s the most frequent investing/trading question you’re asked?

Guy
Something along the lines of: “How can I make $10,000 every month if I’m only starting with $100 trading capital?!”While that’s pretty improbable, I’ve seen plenty of folks grow a modest sum into something pretty big. For example, one of my best students took his account from $10,000 to $140,000 in just two years. And on a personal level, I took one of my own accounts from $14,000 to $187,000 in about five months.

Karim
Impressive. Can you show me how you did that?

Guy
Sure. It leads into the area of how to keep your wealth after such a big percentage gain in your account. This is more challenging than people might think after the euphoria of a big success and a wave of emotions – and it’s something I tell all my successful students.Stay tuned. We’ll have the answer to that question – and much more – in Part II of my interview with Guy next week. You’ll learn…  

• How Guy trades stocks
• How to trade on “breakouts” so you’re in a “win-win” position
• The simplest, most effective 4-step trading plan – and why not having it sets you up to fail from the start
• How Guy made 1,400% in 5-6 months – and how he plans to beat it in the coming months
• Why psychology is critical to your chances of investment success
• Essential advice for novice investors – and the crucial mistakes to avoid

Until then, have a great weekend.

Karim Rahemtulla
Smart Profits Report