Archive for September, 2006
4th and Goal
September 30, 2006 at 11:23 am
The home stretch is here. The 4th quarter is all we have left for 2006, so get ready to make it count! Where are you with your trading goals? Has it been a great year and you want to mostly hang onto gains? If so, stay picky and you’ll be fine. Have you had a mediocre year and you’d love to make some progress before the fat lady sings? If so, sit tight – there should be plenty of chances to make some good trades if you do your homework and look for them. Enjoy the weekend but take a moment to remind yourself of what you want to have achieved by New Year’s Eve
Whatever your situation is, bring your game face – it all starts Monday!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Watch me trade the 4th Quarter here.
[tags]Stocks, Investing, Stock Trading, Trading, Stock Market[/tags]
The Slow Drift
September 29, 2006 at 8:34 am
This market just keeps on trucking! I wouldn’t want to be short it, but the slow drift higher also is making it tougher to find good setups for new longs these past few days. Some rest or even a brief pullback would help to create bases for many stocks which could get reset and produce stronger upside bursts in the coming weeks. I suspect there are quite a few who still want into the market, and that crowd is likely to keep the dips shallow for a little while here.
I’ve been trading the long side heavily and am still positioned long, but it’s a good time to be patient with adding new trades here on a Friday at the end of the quarter. Don’t force trades if they aren’t there. Once we see a rest there should be plenty of new opportunities arise, but until then the best bet is probably to stay long if you’re already in or stand aside if you’re sitting on cash.
HOPE is Not a Trading Strategy
September 27, 2006 at 1:49 pm
He is the Wiz, and nobody beats him.
It’s true – I’m a huge Market Wizards fan. All 3 of these interview-style trading books by Jack Schwager are excellent, and they continue to teach and remind me of highly important lessons about trading. My copies are all marked up with underlines, highlights, and margin notes, and I seem to add more every time I open them up.
Recently, I ran across a great quote by Larry Hite in Market Wizards:
“First, if you never bet your lifestyle, from a trading standpoint, nothing bad will ever happen to you. Second, if you know what the worst possible outcome is, it gives you tremendous freedom. The truth is that, while you can’t quantify reward, you can quantify risk.”
What a nice, basic concept. Know your risk…..on every trade, at any given time.
I know a trader who’s struggling to follow this advice right now. After getting caught on the wrong side of the market a few times in recent weeks, he’s suffered a series of tremendous setbacks. He isn’t quantifying his risk – now he’s only thinking of the rewards….praying he can recover from it quickly. As a result, he is swinging for the fences and hoping for a miracle. I’m afraid it’s just a matter of time before he’s right back to square one and looking for another trading stake. I’ve expressed my concern to him, but it’s a decision he’s going to have to make for himself.
HOPE is not a trading strategy! The market doesn’t care what side you’re on, and it has far greater staying power than you do. Arguing with the market is a futile endeavor, so the best we can do is to quantify our risk before putting trades on, and once our stop loss levels are hit we’ve gotta exit. The hard part isn’t knowing when you’re wrong (your P&L will tell you at all times). The hard part is replacing that hope of a miracle with the resolve to take action and stop losing (they call them ‘stop loss’ orders for a reason!).
It is easier to put a giant dent in your trading account when you’re trading with leverage. Futures, options, and even just day trading margin in a stock account can greatly accelerate losses compared to just trading a handful of stocks well within your buying power. Be sure you understand the risks you’re taking, because trading with leverage will compound your errors and bring the pain even faster.
We can all heed Hite’s advice, whether trading well or poorly. It’s timeless and it’s dead on. How can you argue with the idea of knowing your downside? You might be a part-time trader looking to make some extra cash on the side and possibly become a full-time trader one day. Or, you might already be a full-time trader. Regardless, the idea is to keep yourself in the game. Don’t blow out your account. Quantify your risk on every trade, and survive whatever the market throws at you. We’re all going to be wrong at times…..just don’t stay wrong when you know it’s time to bail out.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Find out how I quantify my risk here.
[tags]Stocks, Investing, Stock Trading, Trading, Stop Loss, Market Wizards[/tags]
StockTickr Does it Again
September 21, 2006 at 8:45 am
I still can’t believe how inexpensive StockTickr is for such a fantastic feature-rich product. Even more, the guys at StockTickr are always working hard to improve and add new features to their already great product. Well, they just did it again.
Now when you enter and exit trades and post them in your journal (public or private – your choice), the StockTickr Chart Review automatically captures chart images for you and even notates on the charts where you got into or out of the trade. Even better, multiple timeframes are provided (5 minute, 10 minute, 15 minute, and 30 minute bars) as well as intraday charts of SPY and QQQQ to help you see what the market was doing when you got into or out of your trades. Any trader can see what a valuable tool this is to be able to review not only trading performance data generated by the StockTickr Journal, but to also see the charts of your trades when reviewing your results.
Check out the StockTickr Chart Review post for more details. And to the guys at StockTickr, keep up the great work!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Stocks, Stock Trading, Trading, Trading Journal, StockTickr[/tags]
How to Get Short
September 19, 2006 at 10:41 am
On the heels of my order types post, I wanted to point out a useful tool to direct-access traders which only the more active day traders are likely to already know. Active traders who diversify are willing to trade both sides of the market, and aside from the uptick rule, getting filled on a short sale order is often the hardest part to catching the trade on the dark side.
Direct-access trading platforms offer hotkey choices to traders, allowing you to set up specific keys for sending out designated kinds of orders which are routed through your chosen venue. I have found that the ARCA market short/sell is probably my most valued hotkey for a couple of reasons. When I want out of a long position, I hit that key to send out a market sell order, regardless of whether I’m trading a listed stock or a Nasdaq stock. However, that same key is also the one I use when I am short selling a stock and need to enter the trade quickly. And fortunately for me, my trading platform automatically checks whether I’m already long, short, or flat so that I don’t need to set up different hotkeys for selling vs. short selling. For those of you hunting for the best direct-access broker, you might want to consider whether or not you’ll have to send out different order types for selling and shorting. Personally, I like to keep things simple!
The ARCA market short/sell is a proactive order, which means it will effectively ‘chase’ the market lower until either your order is filled or you cancel the order. On Nasdaq stocks, I find that using this key will get me into the trade almost instantly (it is scary fast), and on listed stocks (NYSE) it does a great job of helping me get filled when I want to get short.
Remember that short selling in a strong market can be tricky, but there’s still opportunities out there to catch pullbacks if you look for them in this environment. Once you find them, if you aren’t using the ARCA market short/sell order, you should be. It will make a world of difference to those of you who are willing to trade the short side.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Stocks, Investing, Stock Trading, Trading, Short Selling, Diversification[/tags]
Hidden Benefits of a Large Watch List
September 18, 2006 at 11:28 am
Bring wide eyes to your watch lists!
I’ve written before about my homework and the process I go through nightly to locate trading setups, but there’s a hidden benefit to my process that I feel greatly adds to my trading results.
Every afternoon after the market closes, I run my TeleChart scans and I end up with a ton of stocks in one big watch list. This big list is where I locate my trading candidates. Although I’ve seen software that offers to locate chart patterns and provide me with a potential shortcut, I feel strongly that a trained eye is better at picking up subtle nuances of a chart that may be extremely hard to mathematically define for a chart recognition software program. That is the primary reason why I flip through so many charts every night, but there is a huge added benefit I’ve noticed from taking the longer road – getting a feel for the overall market.
While I do take a close look at the market indexes every night in my newsletter (incidentally, every Sunday night you can get a look at my index charts on the free Market View page), there is an understated value in looking at a large watch list of individual stocks. Although it’s not too difficult to pick up on developing trends or trading ranges in the index charts, flipping through 2000 stocks manually tends to give me a much more complete view of how many stocks are setting up bullish patterns or if too many are getting extended. This in turn helps me to gauge how aggressive I should be the following day with adding new positions or paring back those which I am already in.
Flipping through such a long watch list takes me a little over an hour each afternoon, but I’ve found it’s time well spent for me. I started small with more like 50 stocks in my watch list, but as time has evolved, I’ve added more stocks to my tradable universe and my eyes have also become better trained to quickly locate the kinds of patterns I tend to trade. This has allowed me to look through many more charts in the same amount of time it used to require to examine those first 50. Making it a nightly habit will do the same for you!
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Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Stocks, Investing, Stock Trading, Trading, Stock Watch List, Chart Patterns[/tags]
Keep it Orderly
September 12, 2006 at 1:43 pm
There are a lot of ways to buy and sell stocks these days, and virtually any kind of order you can think of is now available to traders. Because of my trading strategy, I’m often asked by subscribers of my swing trading service which order types I use to execute trades. The debate between Market & Limit Orders is an old one, but I’ve got pretty clear reasons for which type I prefer and when I use them. Let’s do a little Order Type 101 and look at some of the basics. Then I’ll wrap things up with a look at my personal preference.
