Archive for March, 2009
Focus on the Process Now, Results Later (Part 2)
March 27, 2009 at 11:21 am
In recently looking through some archived posts, one that caught my eye was Dave Mabe’s from last summer. In that post, Dave covered some very important aspects to sticking with your trading plan.
Then in catching up on some reading, I saw where David from Trade-Ideas was just discussing this yesterday over on the Trade-Ideas blog. He brings forth some very good points, and I’d encourage you to check it out.
All of this got me thinking about where should our focus be as traders?
I’ve discussed this subject before (in Part 1), but it’s certainly worth revisiting and expanding on.
The Game vs. The Score
One of the ideas that I’m continually reminding myself of is that how you play the game is absolutely crucial to success. It’s about the process. Today’s trading platforms tell us the “score” at any point in time as measured by our P&L, and while that’s pretty nifty, it isn’t always beneficial. I feel it’s generally more important to focus on the process rather than purely the results. Here’s why.
“There’ll be time enough for countin’
When the dealin’s done.”
With those lyrics, Kenny Rogers said it about as good as it can be stated, but I’m still going to try to build on it! I’ve had a Kenny poster on my office wall for several years, and while he may have been talking cards (or life), the same lesson applies to trading!
I’m sure you’d agree that the trader who is focused more on his method than on his P&L has a distinct advantage over the trader who lives and dies by the red and green numbers flickering in his position window. If you can get to the point as a trader where you’re confident enough in your approach to stick with it for even a single session without relapse, you’ll be in a great position to build on that as a habit. And good habits pay off.
Driven By Numbers
The market dishes out regular lessons on this topic to me, so it’s something I’m continually working to improve on. It’s not uncommon to start reacting to the P&L as the day progresses, backing off when mental thresholds for a “good” or “bad” day are approached. That can be a 2-way street though. It can allow you to retain profits or prevent additional losses, but how can you add to your bottom line if you’re in a constant dilemma of whether or not to take that next signal?
You’ve got to play in order to win.
Anytime I get too focused on the results (P&L) during the process (in the middle of trading), my decisions tend to be adversely affected, which in turn has led to a plethora of mistakes. It happens when my attention is fixated on my P&L – when it begins to cloud my thinking and skew my view.
Sometimes striving to achieve some set level of profits for the day can result in overstaying my welcome in trades. At other times, that desire to secure a good day has caused me to exit prematurely from good trades which were giving no reason to bail. Both are cases in which my P&L was the driving force behind my decisions. But the tape should serve that purpose.
Maybe you’ve been there too.
The Buzzer
Flexibility and a willingness to adjust your plan when conditions deem it necessary doesn’t have to mean going into shut-down mode. If there’s clearly a reason to call it a day or a week, then don’t force the issue. Whether that means a lack of setups to play or just poor risk/reward conditions, submit to it. And if you’ve hit a drawdown level that tells you it’s time to stop losing, then do it.
But barring that max-loss situation, when it comes to trading vs. not trading, the deciding factor shouldn’t solely be your P&L. Commit to deciding on a per-trade basis, and see where it gets you. Take the good entries which come your way if you know they are suitable for your method and the overall conditions are in favor for your approach. Otherwise, pass and continue waiting.
At the end of the day, add it all up. Some days will be mediocre, some will be excellent, and some you’ll be eager to forget about. But as long as you keep doing the things which you know will deliver success over time, there’s no reason to let the scoreboard distract you. That’s just one of many ways to get beaten.
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]
Now on Twitter
March 26, 2009 at 4:59 pm
Knowing that Twitter probably ‘tipped’ some time ago, I have nonetheless been reluctant to join the ranks of Twitter just because I was afraid it might be a time sponge. And with much more going on in life besides trading, my time is valuable – just like yours.
But as a semi-early adopter in the world of blogging (guys like Charles Kirk and TraderMike both began before me), I knew it would be something that might make me better. A better trader, a better writer, and better at interacting with those in the trading community. The trading community is kind of a small world when you get down to it, and I love being in the conversation if there is one.
So, just wanted to punch out a quick post to let you know that I’m now on Twitter and you can follow me @thestockbandit if you’re on there too. I’ll be putting up some thoughts & ideas there, some quality links worth checking out, and I definitely hope to have some good conversations with you as well!
See you 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]
SEC Fees Set to Quadruple on April 1
March 16, 2009 at 6:45 am
This is no April Fool’s joke. I wish it were – it’d save me a lot of money! But the SEC is making a mid-year adjustment to transaction fees, effective April 1, and it’s a significant one.
Right now, traders pay $5.60 per million dollars in sales, which granted, doesn’t sound like much. It’s a cost of doing business for traders, and not a very steep one at that when added to commissions.
However, in 2 weeks when the SEC fees change, it will go to $25.70 per million – more than 4 1/2 times higher. That’s not quite as bad as the proposed Trader Tax which was recently making so many headlines, but it’s more real and it’s going to happen.
Putting the Pen to Paper
If you’re actively day trading, here’s what this translates into. Depending upon your level of activity and the size you tend to trade, this could translate into several thousand dollars more per year in fees for you.
For example, let’s say you sell an average of $1M in stock each day. That’s a very feasible number considering you could sell 20,000 shares (buy + sell = 40,000 total) over the course of the day at an average price of $50 (20,000 X $50 = $1M). For that activity level right now, that would basically cost you $5.60 in SEC fees on top of whatever your commission is. With the new structure, you’d pay $25.70.
Do that 5 days a week, and it’s $100 more per week. Trade every week at that level, and you’re looking at a hike of $5,200 over the course of the year.
Here’s a link to the SEC Mid-Year Adjustment to Fee Rates document itself for more intricate details if you want to check it out.
Bottom line: keep improving as a trader and it’ll be fine!
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]
TheStockBandit University Has Launched!
March 12, 2009 at 9:14 am
There is a lot to be thankful for right now if you’re a trader. But if you’ve been part of the buy-and-hope crowd throughout the past 16 months, it’s been a tough ride – and might not be over yet.
Ignoring account statements sure isn’t the most responsible way to react right now, and yet it’s probably incredibly common. Those familiar with that mentality are quite likely rethinking their approach, especially given the fact that the S&P 500 has actually lost 40% over the past decade.
Index funds, schmindex funds.
As a trader for the past 11 years, I’ve come to appreciate the flexibility that trading offers. I wasn’t full-time initially, and yet I still recognized the aspect of defense which trading offers – a luxury that the buy-and-hope crowd knows nothing about.
During that time, I’ve run across many people who know a little about “the market” but very little about trading. Things like hardware, software, lingo, order types, psychology, money management and much more are just not the kinds of things that automatic investment plan types are familiar with. So when the market takes an all-out beating like it has since the 2007 top, many in the longer-term crowd would consider becoming short-term but simply don’t know how.
Learning About Trading
All along, I’ve been providing a premium service for those who are swing trading and day trading, but those who don’t understand trading to begin with are not going to benefit from it. They need a trading education.
There’s a huge information gap between investors and traders, so I set out to bridge that gap with the creation of TheStockBandit University.
TheStockBandit University is a 4-week course set up in an on-demand video format to teach those with the desire to learn about trading.
To clarify…
This is not a what-to-trade course.
This is a course for the aspiring trader seeking some trading education. It is designed to take you from 0 to 60 in the trading realm in just 4 short weeks. It’s there to equip you to start taking control and stop getting shredded in this (or any other) bear market.
Stop by the homepage and check out the intro video for more information on how to learn trading if you fall into that category. Because remember, the idea isn’t to invest but to Trade Like A Bandit!
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]
Thanksgiving in March (For Some of Us)
March 10, 2009 at 7:50 am
The market was only down a few points Monday, and yet to many that probably feels like a gain. That marks the 13th session of the past 16 in which the S&P 500 lost ground. Can you say hammered?
With every benchmark index having undercut important milestones (read: 52-week lows) and the habitual selling pressure of late, the mood has been sour to say the least. And bold claims are being made by some about just how low this market might go. Dow 4000, Dow 1000.
Give me a break. I’m not saying those levels won’t be seen – they might. But the predictions are pointless and there just is no magic formula to determine where this decline will ultimately carry. What is important is that the trend is down, and it must be respected.
The conditions right now epitomize the old adage that “bear markets don’t scare you out – they wear you out.”
No Pain, No Gain?
Although the real spooky capitulation kind of fear has yet to be seen, disgust and disinterest are the dominating emotions right now. Stocks are in the dumps and investors have found it beyond difficult to locate a good place to put cash – if they still have any.
It’s at times like this, among others, that it’s sure nice to be a trader. Stocks are on the move daily, and we as traders have the flexibility to go either direction in search of profits.
The one-dimensional mindset of buy-and-hold simply doesn’t afford the advantages which traders enjoy, especially during times like this. So while it may not be real thrilling to go home in cash every night as we’ve been doing for such a long time now, the alternative is to be “invested” and feel the pain of a bear market day after day.
A Sigh of Relief
The day will come when stocks move higher once again (for more than just a bounce), but right now it’s imperative that you and I protect our capital while the Street weathers the storm. Patience pays in this game, and right now there’s just no technical reason to be making big bold bets for anything beyond the near term. The uncertainty gauge is pegged, and that means we’ve got to stay cautious and selective for now.
So I’m very thankful to be a trader right now. Hopefully you are too.
And if you’re of the longer-term mindset and you have some cash on hand, you might be thankful for the fire sale prices you now have access to. But just don’t fall in love – there is not yet a technical reason to trust that the correction is over.
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]
Steep Trend Lines Beg to Be Crossed
March 9, 2009 at 12:41 pm
This market is ugly – as in really hideous.
Fear & Panic aren’t really even the appropriate words at the moment for this price action. It’s more like sheer disgust.
Would-be buyers are trusting that they’ll see lower prices (almost by the day) to put their cash to work, so what’s the hurry? And at the same time, bears who will eventually cover aren’t having to tiptoe around – they’re strutting. Likewise, they sense no urgency for needing to exit short sales.
Such is the nature of a downtrend.
From the Mood to the Technicals
But as is often the case, there is a technical threat of a short-term reversal. And it isn’t based on the oversold indications which are quite prevalent right now. Simple is usually better in technical analysis, so in this post I’m just going to point to a couple of trend lines which are looking a bit too steep.
It’s important to note that the steeper a trend line tends to be, the more likely (and the sharper) a short-term reversal becomes. So this is no prediction, but watch for a cross of these trend lines in the coming days should it happen to occur. If it does, it just might produce a playable bounce. (Notice I said bounce.)
A Look at the Charts
Up first: the DJIA. Keep in mind this trend line is descending daily, so it changes daily. At the moment though, a push back above the 6760 area would clear it. Have a look:
StockFinder Chart courtesy of Worden
Next: the S&P 500. Here again, the trend line descends daily and therefore should be double-checked to determine its exact value. For now, a push back above the 700 level would produce an upside break and might result in a tradable bounce. Here’s the chart:
StockFinder Chart courtesy of Worden
I hope your trading week is a good one!
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]
