Archive for April, 2007
Tips for Finding Day Trading Candidates
April 12, 2007 at 8:52 am
With more traders taking a shortened timeframe in recent months, discussions are turning to just what makes for a good day trading (or scalping) candidate. Some scalpers have a handful of stocks they exclusively trade, but if you don’t, here’s a checklist to run when looking for trades to catch a piece of the action:
Trade Stocks With Volatility
Check to be sure that stocks you’re considering for day trades tend to move a lot each day. Average True Range (ATR) is a common way to gauge movement, and many charting programs will allow you to scan for this. A stock which fluctuates plenty each day will offer lots of potential for scalping, so make this a requirement.
Trade Stocks With Momentum
Whether they’re in the news or just making big waves in the market, stocks with momentum are the go-to day trading stocks. Pure day traders are willing to go long or short, so the momentum factor is applied for both directions. Recently the solar-related stocks and biotechs have been in play on the long side, while homebuilding stocks and mortgage-related stocks have been day trader favorites on the short side.
Trade Stocks With High Volume
High daily volume levels make it much easier to dart in and out of stocks with minimal slippage. Numerous orders resting at each price level or plenty of shares showing in your market depth window are what you’ll want to watch for. Because day trading usually means frequenting the same stocks multiple times during the day, making sure that the liquidity is there can prevent getting stuck in a trade without a smooth exit.
One other note is that when you find a stock which has already broken out and you’re too late for swing trading it, the odds are high that some money can still be squeezed out of it on a day trading timeframe. Use the criteria above to be sure it passes the test, and then hit it for a few dimes!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
Beware the Double Whammy!
April 11, 2007 at 8:24 am
Recovery plays are always higher-risk, and while a stock may be closer to $0 than it once was, it can still fall 100% from your entry level. However, there still seems to be some appeal to traders and investors in search of “a good deal.” Be sure you know what you’re getting into when that’s your aim, because as one stock just proved, cheap stocks often get cheaper!
As a trader, I pay very close attention to the recent history of a stock’s behavior. Sure, there are occasional surprises, but stocks which make steady moves tend to keep doing the same. And stocks which have a history of large price gaps are usually prone to more big gaps in the future.
Take ADLR for example. Back in September, the stock lost 52% overnight! Then it cratered again in November, losing 39% overnight. Ouch!
(Click for full size.) Chart Courtesy of TeleChart.But it gets worse….
On Tuesday of this week, the stock did virtually the same thing. After closing on Monday at 8.72, it shed 56% overnight.
(Click for full size.) Chart Courtesy of TeleChart.The lesson here is to avoid stocks with an ugly history! If you dare venture into a stock hoping for a recovery, consider taking a smaller sized position because these rebound plays are far more speculative and you’ll want a lot less of them in the event of a disaster.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
Gap Lessons: When Trades Get Lucky
April 10, 2007 at 9:21 am
I’ll never forget when it happened. I had been swing trading the stock regularly, and it had been very good to me in the weeks leading up to the big gap. I was sticking and moving, making a few points here and there, and my account was getting bigger because of it.
And then came January 3rd, 2000. Emulex (ELX) gapped up a whopping 47.5%. It was completely huge, and I was stunned. I had never caught a gap so large, and I was instantly frozen in disbelief and excitement. “This stock is headed to the moon, and today must be the day,” I thought.
Or was it??
Soon after it opened, it marked the high of the session roughly up $29 (just about $2 higher than the opening level), and soon worked its way lower to finish positive by only about $7. BUT, I got lucky three times that day…
The first way I was lucky was that it gapped higher to begin with.
The second way I was lucky was that I panicked and sold after it started falling like a rock, getting out well above the closing price.
The third way I was lucky was that I learned a valuable lesson: TAKE THE MARKET’S GIFTS!
Times Have Changed – Slightly
The gaps aren’t as big these days because the market’s not as volatile, but gifts still come from the market and you just might get one if you’re lucky. When it happens for you, keep a couple of things in mind:
* It’s alright to sell at least SOME of your shares. Too many investors and traders think they must be in a full position or close the trade completely. But with commissions so inexpensive these days, it can really pay to make partial sales and pay the commissions for multiple exits. Why not lighten up your exposure and make some of those gains real?
* The professionals are probably selling. Market makers and fund traders love to flip shares into strength, knowing they will be able to reload at lower prices after the euphoria wears off and the little guys stop buying. They are the big dogs that can really move the markets, so follow their lead and use your agility to book profits when the getting is good.
* Regret is a loser’s game. Too many individual investors and traders see a big gain start to disappear, and they quickly resolve to exit the trade once it returns to its high-water mark. When it continues to sink lower and lower, regret sets in like a millstone around their necks and prevents them from bailing out while they still can. Don’t let regret dictate your decisions. Use your head – making logical decisions under the gun can mean the difference between failure and survival in the market, so don’t get greedy or you’ll regret it. The idea is to compound your money, not your mistakes!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
Grandmas, Ferraris and Big Profits
April 9, 2007 at 9:21 pm
This week’s Free Newsletter over at TheStockBandit.com discusses the topic of how Wider Stops Can Mean Huge Rewards in trading. It’s not always easy to give stocks plenty of room to move, but it can pay off huge – especially when you’re trading the volatile momentum stocks.
TSL is a stock we just caught a great move in, so stop by to read this week’s free newsletter to find out how we caught it and how we stayed in. And once you’re there, the title of this post will make a LOT more sense – I promise!
By the way, you can sign up for the free newsletter on the Free Newsletter page at TheStockBandit.com and we’ll notify you every time one is published. An opt-in form is provided at the top of the page which puts you in full control of your email subscription at all times.
Trade well this week!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
Setting Stop Loss Levels and Profit Targets
April 3, 2007 at 10:25 am
The perfect entry is a lot easier to find than the perfect exit. Just look at your last few trades, because while you might be able to pick out a well-defined chart pattern to determine a trade entry, it’s never quite as easy to nail the exit. (Which is another reason that cleaner is better when it comes to charts.)
When speaking of exits, it’s important to always remember that perfection isn’t required to do well in trading. To turn steady profits in our accounts, we don’t have to sell the top. What we DO need to strive for is giving ourselves the best chance for a timely exit, win or lose.
When to Update Stops and Targets
I set key levels for my nightly swing trading candidates in the evening, including both stops and targets. The market is obviously closed, and that’s no coincidence. I’m in the right frame of mind and I’m unbiased (in the case of new positions). I am also unable to immediately act (in the case of existing positions), which removes emotion from the equation. That means I get to think through what I need to do, without the concerns or the pressure of a market which may be fast on the move!
Benefits of Evening Adjustments
Updating stop loss levels and targets in the evening (outside of market hours) can do wonders for your psyche, which in turn can do wonders for your trading. You make your decisions in a level-headed state of mind, you set your conditional orders, and you let your game plan play out. Setting my stops and targets outside of market hours has made the trading sessions much more relaxing for me, without diminishing the importance of my trading.
Now, I’m certainly not saying that your trades shouldn’t be important to you. They should be – it’s your money on the line! A subscriber of my service recently mentioned this to me via email, noting that they “are always worried” about their positions. Put it this way…..while some level of interest/concern in your trades is healthy, if you’re too anxious about it, the trade is probably too big. That is another topic altogether, but the point I’m trying to make is that if you feel like your decision-making could stand some improvement, consider setting your key levels outside of market hours. You’ll find your level of stress is lowered and you’ll have greater confidence in your trades because your job during the regular session is purely about executions – not fretting over when to buy or sell!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
Trading Plans & Self-Honesty
April 2, 2007 at 10:13 am
This week’s Free Newsletter over at TheStockBandit.com discusses the topic of Trading Plans & Self-Honesty in trading. It’s hard to argue that knowing yourself is the first step towards developing the right trading plan.
Our strengths and weaknesses must all be evaluated when it comes to devising the proper plan for our own trading, so stop by to read this week’s free newsletter for my thoughts on the topic.
By the way, you can sign up for the free newsletter on the Free Newsletter page at TheStockBandit.com and we’ll notify you every time one is published. An opt-in form is provided at the top of the page which puts you in full control of your email subscription at all times.
Trade well this week!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
