Archive for March, 2006
Little Things
March 29, 2006 at 12:36 pm
Here’s one for all of you human calculators. A trader starts out with only $5,000 in his account, but is able to gain .5% each trading day. (That’s just ½ of 1% per day.) The first day he’d only make $25 profit, but how much would he have after 5 years?
$100,000? $500,000?
Would you believe it’s over $3,000,000.00? Wow! I’d say that little things make a big difference!
Have you examined your habits lately? They can have a giant impact on your trading results, so it’s worth taking a closer look at them.
Obeying stops is one habit we can all be reminded to check. It’s easy to “just give it a little more room” and soon after realize that you’re in a spot where you feel it’s too late to exit (which is never true). Doing your homework is always a great habit to be in. Showing up with your game face is another one. Remember how small mistakes = small consequences? Habits like those can keep you on the right track as a trader and pay off nicely as time goes by. Making a habit just to show up prepared every day for whatever the market throws at you can have a tremendous impact on your progress and consistency as a trader….not to mention your P&L!
Eating a bowl of ice cream late tonight won’t make you fat, but make it a habit and soon your pants start getting tight! The little things you do can add up to big differences over time. Acorns grow into great big oaks…..and your trading account can be the same way. Take a look at your habits and how they’re affecting your trading results. Keep the ones that are helpful. But like the garage this time of year, clean out those which are hindering your progress!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Three for Three
March 28, 2006 at 1:08 pm
The results are in, and today’s t-shirt for the Jack Black trivia has been claimed! Congratulations to Keith B. of Minneapolis, MN on winning today’s trivia! His 3-part answer was one of the fastest ever submitted (perhaps Keith is a GOOG market-maker?). Keith, nice work – your t-shirt is on its way!
The correct answers were:
– Jack Black’s real character in School of Rock was Dewey Finn, but he posed as his roommate Ned Schneebly so that he could substitute teach for extra cash
– Jack Black’s student band in the movie calls itself School of Rock
– Jack Black’s real-life band is called Tenacious D
Thanks to all who participated in today’s diversion ahead of the big Fed announcement today. Those of you who answered correctly but weren’t the first to do so, take heart! Next week, T-Shirt Trivia will return on Tuesday and you’ll have another shot at it. Thanks again for participating and for reading TheStockBandit.net!
See you back here tomorrow for more market chatter and trader talk!
Remember to subscribe to this feed so you won’t ever miss a post!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
T-Shirt Trivia Three!
March 28, 2006 at 10:48 am
My attention slips away pretty easily on a Fed day until the announcement is made and things really get moving. Hopefully later we’ll see some fireworks and get this market out of the recent trading range. In the meantime, we’ll keep our attention diverted and tend to some trivia!
I noticed that King Kong comes out today on video – I haven’t seen it yet, but I’ll check it out! So, in honor of Jack Black, today’s trivia pertains to his 2003 performance in School of Rock.
The first person to answer all 3 questions correctly will win a free T-shirt from TheStockBandit.com!
Only a few rules apply:
1. You must use the contact form when you submit your answer.
2. Include your name & mailing address when you submit your answer.
3. Only the first completely correct answer submitted will win a t-shirt.
Today’s T-Shirt Trivia has 3 parts:
1) In School of Rock, which other character did Jack Black pretend to be in addition to “Dewey Finn?”
2) What is the name of Jack Black’s student band in the movie?
3) What is the name of Jack Black’s real-life band?
If you know the answers, send me your name & address (and shirt size) via the contact form, and the first to correctly answer all 3 questions wins today’s t-shirt! Good luck!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Too Thin to Win
March 27, 2006 at 8:07 am
Although I’m a big proponent of trading with the use of chart patterns, a stock’s volume simply cannot be ignored.
I run across literally thousands of stocks every day in search of not only the best technical setups, but also the proper conditions under which to trade those stocks. I ultimately locate the cream of the crop for subscribers of my stock newsletter, and it results in consistently profitable trading.
There are many stocks which come through the scans with “the right look” to them, but a closer examination reveals some glaring reasons to avoid the stock as a potential trade. The most common reason pertains to volume, and particularly the risks associated with low volume.
Volume is the total number of shares traded for a given timeframe. It is a measure of liquidity for a stock, because it represents participation. High volume makes for a more competitive market with narrower spreads and more consistent price action. Low volume, however, is a warning sign to move on to the next trading idea.
Low volume stocks should not be trusted for several reasons:
Low volume means low participation. If very few people are active in a stock, then what appeal does the stock have? If participation remains low, that stock may simply sit idle while you have your cash parked in it, leaving you with fewer opportunities for profits.
Additionally, a stock with very low volume will often trade with a wide spread, which increases slippage when entering and exiting trades. Trading is hard enough without handicapping yourself with more difficult executions!
It is also far more difficult to accurately read the price action in a stock which might only trade every 10 to 15 minutes during the day. When a stock only trades 25,000 shares a day, what defines a big seller? 2000 shares? What defines momentum? A 20-cent move? It isn’t worth it.
And finally, a low-volume stock can be awfully hard to get out of if the tide turns against you and you need to get out. When the music stops and you need a chair, it’s going to be extremely competitive to get a good price when you go to sell your stock, which makes your losing trade even worse.
Let’s look at an example. PCYO showed up this weekend on my scans as having “the right look” to it. However, one glance at volume was all it took to see that this stock is too thinly traded for my liking. This stock averages fewer than 25,000 shares a day, which is entirely too light no matter how good the pattern might be.
PCYO looks great, but the low volume says to me, “stay away!”PCYO has a very nice bullish consolidation which can easily be seen with the converging trend lines on the chart shown above, but this stock has hardly anyone trading it! This stock may take off and run higher, but the risk associated with the low volume of this stock tells me I would be far better off finding something else to trade.
When you screen for chart patterns, be sure to include volume in your requirements for potential trades. Just because the chart looks pretty doesn’t mean that stock should be traded. With literally thousands of stocks out there to trade, be strict with your criteria and put the odds in your favor every chance you get. Or, become a member at TheStockBandit.com and let us do the work for you!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
The Flip Side
March 23, 2006 at 8:08 am
You’ve probably heard the phrase, “you’re not trading the stock, you’re trading the people on the other side of the stock.” It’s a valid point that I can agree with to an extent.
As much as you might follow a trading strategy, there will likely be emotions to battle while you’re in the middle of a trade. Almost every trade will have some fear and greed associated with it, but the memorable trades are really packed with emotion on both sides. Keeping close tabs on your emotions while maintaining some awareness of what your competition is facing can greatly help you improve your exit timing as well as your P&L.
Meet paranoid trader Rich Quick
As traders, it’s certainly important to understand which emotions are impacting those on the other sides of our trades. For example, If I’m long XYZ stock and I’m losing money, the trader who’s short XYZ may well be getting greedy. As a result, he’s probably in no hurry to buy back the stock (which would help to support price and help out my trade). Knowing this and staying aware of it during the trade would remind me that I am probably better off taking the small loss and moving on to the next trade rather than making matters worse. I can always wait for a better spot and re-enter if I still like the trade.
In another example, say I buy ABC stock on a reversal play off of support. The trader who sold it to me is likely short the stock, and once ABC catches a bid, I know he’s in trouble. As momentum picks up steam, I might offer some out into the strength, but I’ll be looking to ride that stock further just knowing the emotions and disbelief that those on the other side of my trade are dealing with. Ultimately, they’ll capitulate and drive my trade higher, allowing me to capture greater gains.
Consider your own emotions during a trade, but also the emotions of those on the other side of the trade. Even a quick rundown of what the guy on the other side of your trade must be feeling could prevent further losses or help you maximize an already successful trade.
Remember to subscribe to this feed so you won’t ever miss a post!
Jeff White
The Stock Bandit, Inc.
www.TheStockBandit.com
Interview at Stocktickr
March 21, 2006 at 6:19 pm
Here’s a big thanks to Stocktickr for the interview with yours truly this week! I hope you can learn something from it. Check it out, and feel free to post questions here on this blog or there below the interview as I’ll be happy to answer them.
And if you haven’t checked out Stocktickr’s site and service, you ought to! They have a number of very cool and useful features which any trader can benefit from.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Coast to Coast, Congrats are in Order!
March 21, 2006 at 1:42 pm
The results are in, and today’s t-shirt for the Seinfeld trivia has been claimed! Congratulations to Debra O. of Eugene, OR on winning today’s trivia with incredible accuracy! Her fast execution would certainly make her broker very proud! Debra, your t-shirt is on its way!
The correct answers were:
– George Costanza found a Titleist golf ball in the whale’s blowhole
– Cosmo Kramer hit the golf ball out into the ocean (it was the “one really good ball that went way out.”)
It’s fun to see trivia winners go coast to coast in only the first 2 weeks! Last week’s winner D.M. of North Carolina is representing TheStockBandit.com on the east coast while Debra will now be flaunting our logo way out west.
Those of you who answered correctly but weren’t the first to do so, take heart! Next week, T-Shirt Trivia will return on Tuesday and you’ll have another shot at it. Thanks for participating and for reading TheStockBandit.net!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
