Archive for November, 2008
Freedom in Cash
November 25, 2008 at 8:18 am
Having cash on hand as a trader offers tremendous freedom, there is no doubt about it. For quite some time now (many weeks), I’ve been in cash on an overnight basis while this market corrects. I’m thankful that has been the case, allowing me to enjoy that freedom of picking and choosing my spots for when I want to be involved in this tape and when I want to be sidelined. As a result, I’ve been focused on day trading so that I can manage my risk effectively and avoid getting caught on the wrong side of one of the many giant overnight gaps which have come along.
The downtrend has been absolutely brutal to those who are invested, trapping them at higher levels and removing their ability to act quickly when they see trade-worthy opportunities. Those who have refused to take small losses or who have attempted to buy at levels they felt would be turning points have instead found themselves handcuffed by their positions. I know because I’ve heard from them lately, and because there were times in the past when I’ve been there too. The market-wide frustration of late which has been caused by that is enormous, and we’ve seen the effects of it by way of huge volatility and heavy selling even after a major decline. Nobody would choose to sell after such a big slide, so those who are doing it clearly have to.
If this selloff caught you by surprise and you’ve become a stock-, er, stuckholder because of it, there are some lessons you’ll no doubt learn from this process. Let’s take a look at a few in particular…
- Anytime you need the market to make a move in order to bail you out, you’ve gotten yourself into a tough spot. That’s not a fun place to be, and is very much a situation worth making a continual effort to avoid. If you’re a trader, stay a trader. Use stops, eat losses when necessary, but don’t get stuck where you’re unable to move.
- Greed is a major root of frustration. The greed of not taking a loss is always a major issue with those caught on the wrong side of the market. The mentality which requires getting back to breakeven leaves so many would-be traders sitting in bad positions just wanting to not be wrong. If instead they would focus on what could happen next, they’d be more proactive on bailing out when they know they should.
- Impatience is another source of frustration. Those who jumped in on the long side in hopes that the market was oversold enough for a good bounce were clearly very early – repeatedly – over the past couple of months. The desire to just get in rather than wait patiently before putting cash to work has left the capital of many would-be traders all tied up. What began as impatience now leaves them facing greed (see previous point).
Remember, there’s tremendous freedom for those holding cash – especially right now. Far too many traders don’t have that luxury at the moment, so if you do, congratulations. If you don’t, then you’re going to have added incentive to move to the sidelines the next time you see a market correction starting. When that occurs, if you’re able to stay flexible and keep trading (move to cash when necessary), you’ll recognize that there are two kinds of good markets. The best kind of course doesn’t require higher prices for you to be able to make money.
Returning to cash offers opportunities like nothing else. Not only does it clear your head and leave you fully objective when viewing the price action, but you can sit on your hands until your favorite setups come along. You’re able to watch the price action and move quickly when you see the need. And most of all, you can preserve capital.
Trade well this week,
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
<a href=”http://www.thestockbandit.com/?utm_source=blog&utm_medium=linked_text”>www.TheStockBandit.com</a>
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
Market View Video November 23, 2008
November 23, 2008 at 5:32 pm
New 52-week lows were seen last week across the board, and in spite of a Friday rebound, the market suffered another setback.
The technical picture remains far from pretty, but as we head into a holiday-shortened trading week, there’s a chance for some upside in the short term. Historically, the bulls have been able to produce some strength on these typically light-volume weeks, so we’ll see if this week is any different.
As you start piecing together a trading plan for the coming week, be sure to stop by and check out this week’s Market View video over at the main site for a closer look at the current conditions.
(Click image to view video)
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]
Conquering Crippled Confidence
November 20, 2008 at 11:19 am
(This is a follow-up post to Triumph Over the Trading Jinx.)
photo credit: Daquella manera
Anyone who has traded for virtually any length of time is familiar with the feelings losses bring. Frustration, irritability, and maybe even some despair if the streak has continued long enough. But possibly even more damaging, more crippling, is the loss of confidence.
Every trader has some risk capital to be used for their trading operations, but what many often forget about is the amount of psychological capital they have. We all begin with some amount of confidence that we can turn a profit with our trading, which of course can grow or shrink based upon our results. And while we can locate more money to trade with (if needed), it’s not as if we can locate a fresh pool of confidence! As a result, it becomes incredibly important to protect what confidence we do have.
Decisions, Decisions
If you’ve been struggling with your trading, you aren’t the first to feel that way, nor will you be the last. At times it almost feels like our timing could’nt be worse, and that’s just going to happen occasionally to those of us who trade. Markets are uncertain, so if there’s one thing we can count on it is being dead wrong at times.
Having said that, the one thing we CAN do is choose how we respond. We can decide we’ll never be a success, and we’ll be correct if that is our choice. Or, we can choose to find a way to trade profitably. There are many ways to skin the market cat, but we need only to find 1 or 2 of them to turn a profit.
Our response not only includes the attitude with which we approach trading, but also how we manage our money. When we’re trading well, we want more at-bats. When trading is bad, we want fewer at-bats and smaller trades even when we do play. Backing down your trade size while waiting for clarity is your top priority when you aren’t seeing the ball well. It’ll help to preserve your confidence and your account, making it far easier to make up lost ground in both categories once you hit your stride again.
Break the Cycle
If you’ve felt caught in a rut lately with your trading, I’d encourage you to re-assess your attitude, and base it not solely on the results you’re getting but on your entire process.
If you’re staying disciplined and taking only high-quality setups for trades, then you’re doing your part and it’s an uncooperative market (and time to back down or employ a different method).
However, if you’re pressing when you’re down and trying too hard by forcing trades to work, attempting all sorts of trades just hoping that something will hit, then you aren’t following a method that’s going to pay off or restore your confidence. Take a step back for a few days and evaluate how you trade your best and what changes you need to make right away. And then make them.
Always Be Willing to Adjust
Trading the market isn’t easy, and it requires this ongoing assessment of ourselves and our method. When what we’re doing isn’t working, it’s time to slow down, trade smaller and less frequently, and work on getting our heads clear again. Sometimes our problem lies in our method, other times it’s caused by our attitude or impatience. Once that’s done, then we go back up in size and trade frequency. But it’s far too easy to let poor performance press us into more bad mistakes in an effort to make it back quickly. And the path to good trading just isn’t found overnight.
Trade well out there!
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]
Triumph Over the Trading Jinx
November 17, 2008 at 1:29 pm
Recently I was chatting with another trader who was pretty down in the mouth. He had suffered a handful of setbacks (read: losing trades), leaving both his confidence and his account at lower levels than previously seen. The harder he tried to recover, the more he became fixated on the recovery. He had forgotten that improvement is a process, and therefore wasn’t focused on making high-quality trades and wise decisions. Instead, he was impatient, irritated and convinced of one thing – he was jinxed.
Although I am not superstitious, I’m definitely familiar with those times when it feels like I’m more wrong than right. When it’s more than just the occasional broken trade and losing money starts to occur too frequently. It’s never fun to endure, but it is something that happens to every last one of us at some point in our trading. It’s simply part of the process as a trader to be wrong sometimes. We slip into a funk, and we want out immediately.
The losing streak is my biggest fear as a trader, so I try to stay on top of things as best I can and adjust quickly when I start to see my performance slip. Here are a few ways in which I attempt to combat those periods.
5 Ways to Overcome Tough Trading Periods:
1. Accept it – they happen! If acceptance is the first step in a popular 12-step program, then it’s fitting to put it first on this list. Seriously though, having the maturity to recognize that you’re not at your best is actually a sign of confidence – not weakness. A great trader is willing to continually improve, which sometimes means going through a few growing pains even when it doesn’t feel very convenient. Just like the best athletes in the world continually consult video footage of their performances, a great trader reviews what’s taking place in their trading and refuses to ignore those areas which need some attention. Psychologically, our ability to deal with events as they occur is largely due to our willingness to mentally prepare for their possible arrival. It doesn’t mean we think negatively that a losing streak may soon begin, but rather, we decide ahead of time how we’ll respond. Poor stretches of trading will happen, so accepting that is going to put you well ahead of those who simply deny it.
2. When you lose, lose small. As soon as you see that you’re drifting away from being at your best, shore up those positions and cut down your size on any new trades. If you aren’t seeing things clearly, there’s no reason to push it. Recognize even a small string of losses as a warning sign that it’s time to trade smaller, and then do it. And of course, don’t lose the lesson.
3. Balance out your life. Those who live and die by their trading results are in for a long road. There will inevitably be both profitable and pitiful periods, and so the key is not to let your emotions take over. Take the tough times in stride, just as you view the good times with a level head. Build your relationships outside of trading. Pursue some other interests away from the market, and you’ll be glad to have those diversions when you need them. After all, if trading is the only thing you ever do or care about, you’ll find it extremely difficult to ever get away from it – and times will come when you’re going to need a break.
4. Work on it. The best get good and then stay good. That means they never stop working to grow and improve. Seeking out ways to continually improve will give you other methods to turn to when your favorite approach finds friction, allowing you to shift slightly when conditions warrant.
5. Get up. We all fall down from time to time, but it’s how you get up that will really define your abilities. It’s never fun to lose money trading, but just because you take some hits doesn’t mean you need to stay down. Dust yourself off, and get back into the race. You’ll never recover by sitting around sulking and talking about what a ‘jinxed’ trader you are – that accomplishes absolutely nothing. So ditch the pity party and regain your focus. Traders trade, so even when you’re lacking that swagger that you have when at your best, step back into the ring and concentrate once again on finding your groove and booking some small gains. Be selective, but don’t be too shy to pull the trigger. The aim is to get your head right, not post an immediate, giant win. Nothing builds confidence like getting the bat back on the ball, so start small – but do start!
I’ll have a follow-up post to this one coming soon, so be sure to watch for it. In the meantime though, consider the ways in which you need to start making some adjustments in your attitude. Trading offers every one of us a ton of potential, but we’re only going to realize that potential if we approach it properly.
Trade well out there!
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]
Market View Video November 16, 2008
November 16, 2008 at 4:59 pm
More recent tests of key support came last week, and thus far they’ve proven successful. However, with the major averages still lingering near those support zones, it places a lot of importance on the price action we’ll see in the days to come. There’s no doubt all eyes will be on the bulls this week to see whether or not they will lend support to the averages.
As we’ve seen time and time again in this tape over the past several weeks, no scenario is out of the question. The day to day volatility continues to run extremely high, offering many opportunities for nimble traders, while simultaneously placing a premium on high levels of cash on an overnight basis. Needless to say, we’re at another interesting juncture as we face the week ahead!
So before you go placing any trades this week, stop by to check out the Market View page over at the main site for a closer look at the overall market as you start to formulate a trading plan.
(Click image to view video)
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]
Are Conditions Shifting For Your Timeframe?
November 3, 2008 at 1:17 pm
The recent market volatility has been providing numerous opportunities for day trading if you’re quick on the draw, but it hasn’t offered much for swing trading. Those who prefer a little longer timeframe and trades which last a few days to a few weeks have grown accustomed to finding sloppy daily charts which lack well-defined technical entry and exit levels. Sound bases have been difficult to locate in the past few weeks, to say the least. As a result, either you’ve been forced to shorten your timeframe and day trade more, or you’ve sat on your hands in cash and waited patiently for quieter times to come along.
It’s a fact that risk must be taken in order to profit, but our ability as traders to manage those risks is of utmost importance. Anytime those risks cannot be managed appropriately, it’s not the ideal time to be trading. That certainly describes the recent price action for those who prefer longer timeframes than a couple of hours, but the good news is that it won’t be that way forever. Further, it brings up an important question…
Are Conditions Shifting For Your Timeframe?
Fortunately, it looks like we just might be entering into a quieter time, although getting there won’t be an overnight event. Volatility has been running extremely high, and it’s finally starting to back down. That isn’t to say that uncertainty is disappearing, because this market still has much to deal with (election, earnings, economy, etc.). However, we’re likely to start seeing smaller day-to-day moves in the weeks to come as a result of the declining volatility – if it continues to decline. That will not exclude the occasional jaw-dropping rally or gut-wrenching selloff, but it should make it easier to locate better bases for trade candidates, as well as improve our ability to set prudent stops when protecting the downside.
Day Traders
If you’ve been day trading, I hope it’s been good for you lately. There has been no shortage of intraday opportunities in recent weeks, offering quite a bit for traders who have the ability to move quickly. There will continue to be good conditions for day trading going forward, so don’t turn your back on that approach even as things settle down further – it’s great to be skilled in more ways than 1. Instead, just be sure to adapt accordingly so that you aren’t overtrading or forcing the issue once volatility contracts.
Swing Traders
To those of you who are swing traders and have stood aside in cash as opposed to taking trades with elevated risk, congratulations – you’ve made a great decision. That willingness to step aside when conditions aren’t suitable for your primary trading style has kept you objective while simultaneously preventing losses while you were waiting. You’re now poised to resume your trading without any emotional baggage, unlike those who lacked patience during the past several weeks.
Whatever your trading style, it’s always important to remember that the market is perpetually in motion and conditions are always prone to changing. Stay on your toes and watch for even subtle clues that a shift might be coming – it’s a great habit to be in.
It’s time to get back to doing your homework and working the charts in search of setups. We could start to see some nice opportunities surface soon, and those who are digging diligently for them will have a definite edge in the days ahead once they arrive.
Trade well out there!
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]
