Author Archive for Jeff White

Change

January 14, 2013 at 6:10 pm

Change. It’s a word that often means opportunity.

Today, that’s exactly what it is!

We’re improving the premium service we offer in a few ways. Here’s a quick 5-minute video explaining all the details.

You’re going to love it!

Trade Like a Bandit!

Jeff White
Producer of The Bandit Blueprint

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The Zurich Axioms

January 25, 2012 at 12:08 pm

I first learned about The Zurich Axioms by Max Gunther in the daily Worden Report when Don mentioned it among his favorite trading books a few years ago. Soon after, I picked up a copy and found it was indeed packed with some great insights – enough to be a must-have trading book.

There are 12 major axioms highlighted in the book, with a chapter devoted to each, as well as 16 minor axioms.  It’s a relatively short book at only about 123 pages, but the “Rules of Risk and Reward Used by Generations of Swiss Bankers” offers no shortage of wisdom and insights for any trader or speculator.

Without disclosing all of the Axioms, I’ll summarize two of my favorites.

Always Play for Meaningful Stakes.

This minor axiom highlights the importance of trading with enough size for it to matter.  This goes beyond the learning stages in which a developing trader needs to hone his skills and not fixate on the money.  Rather, playing for meaningful stakes is about getting over the fear of getting hurt in such a way that when a play works, it’s well worth the risk taken.

A story is told in the book about the oil tycoon J. Paul Getty, who grew up rich, but once he became an adult he was sent out on his own.  Wanting to enter the oil business, he shunned various opportunities to invest $50 in the early 1900’s in favor of betting nearly his entire savings of $500 on an oil lease he felt was more promising.  After paydirt was hit, he sold his holdings for $12,000 just a short time later.

Getty mentioned that if he had not struck oil, the $500 would have hurt, but that he could have found a way to save that amount back up again.  He was quoted as saying “it seemed to me I had a lot more to win than to lose.”  That’s playing for meaningful stakes.

As a trader, it’s not about walking a tightrope where bankruptcy is the result if you slip.  It means you don’t nickel-and-dime your way throughout the entire year if you want to get somewhere interesting.

Optimism means expecting the best, but confidence means knowing how you will handle the worst.  Never make a move if you are merely optimistic.

What an excellent reminder for traders!  Gunther makes the point that without some level of optimism, one cannot trade to begin with.  However, there is general optimism and there is specific optimism.  According to Gunther, it’s the venture-specific optimism which can become dangerous if you allow it.

The latter mention of what true confidence is just cannot be ignored here.  Do you know how you will handle the worst?  If you do, then you’ve got arguably the most difficult element of a trading plan already in place – the adverse exit.  The ability to fail gracefully in trading – over and over – is what will ultimately define how long you can stay in the game.  Your success may eventually be tremendous, but if you’re unable to handle losing the right way, you’ll be taken out long before the big wins can ever come along.

My advice? Pick up a copy of The Zurich Axioms and get a pen ready to mark up the margins and underline key points.  It’s a quick read and one you’ll return to often.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

Follow TheStockBandit on Twitter or get our free newsletter to keep up!

Uptrend Aside, Trading Scene Set to Improve

November 1, 2010 at 10:45 am

August seems so long ago, doesn’t it?  Stocks had rebounded from their July lows, briefly, and had turned back down hard for a test.  The test passed, as an important higher low was established.

From there, we all know the story of how the seasonally-weak September and October stood conventional wisdom on its head to post big gains.  What’s not been spoken of much, however, is the way this 2-month rally has changed in recent weeks.

What began as a rip-roaring rise ripe with short-covering has evolved into a slower, more steady uptrend channel.  The pace has cooled off a bit, while still continuing to make upward progress.  In fact, new intraday highs were posted multiple times last week, despite the indecision we saw between the opening and closing bells each day.  Today we’re seeing more of the same, as early strength has delivered new highs while modest profit-taking has caused the indexes to back down from their best levels.

To put it another way, the “dumb money” has had great success in recent weeks.  Those who waited for strength to return before becoming confident enough to join in have been fortunate enough to chase extended markets and stocks and still profit.  But for those of us who prefer to see some kind of rhythm associated with market moves, it’s been a one-way street without many ways to play the long side while still protecting the downside.

Astute traders have instead found it a bit more difficult to navigate the current environment, as anyone with an ounce of discipline has felt the uneasiness of adding long-sided exposure for overnights while simultaneously recognizing the limited opportunity of trading intraday.  It has left many of us to do more scalping while waiting for more lively day-to-day price action and higher-quality bases to come along.  Those bases often rely on some back-and-forth price action, which we simply haven’t seen of late.

Watch The Horizon

Any trader worth his salt knows that conditions will shift.  Maybe not immediately, but eventually.

That doesn’t mean prediction is necessary, because it isn’t, but it does mean staying alert.

When trading well, keep doing what works but be on the lookout for signs the setup may be changing.  When trading poorly, it’s imperative to employ some other methods which are more suitable to the conditions.  At the same time, hope can be had that a shake-up in the price action will bring more opportunities.

Right now, the market is in an interesting spot.  The rally has brought the spring highs into play as we’re essentially testing them in this area.  That’s a logical resistance area that could prompt some selling, depending upon the news flow.  The uptrend channels seen in the averages could easily be penetrated to the downside, heightening concerns of whether that’s the end of the run.  The other side of the coin is that the trend is still up, and no evidence has surfaced to suggest it’s changing.

So as a trader, here’s how I’m dealing with all this.  The trend is up, so I’m favoring the long side while keeping timeframes short in order to offset the risk of walking the highwire here.  I’m also mindful of potential shifts which could emerge anytime.  We’re in the midst of earnings season, and that could easily sour the mood.  We have the November elections tomorrow and the political implications of that, which is a major event.  And then mid-week we have the FOMC, and with all eyes on the economy, the attention of traders will definitely be on Wednesday’s announcement and policy statement.

We could ramp from here and take out the spring highs before a pullback begins.  It’s possible.  We could break the uptrend channels and see some selling accelerate as traders recognize the trend line break and move quickly to lock in profits.  Several scenarios are possible, and it’s important to keep an open mind here for that very reason.

I will say this:  I’m expecting volatility to pick up sooner than later, and that means more opportunities for trading multiple timeframes.  That’s where the real money is made, as you can have capital working for multi-day moves while still maneuvering to catch intraday moves for profits.  Look alive out there, this is no time to get lulled to sleep.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

Are you following me on Twitter yet?

Stay Sharp

October 25, 2010 at 12:52 pm

A year ago, I was in a surgeon’s waiting room.  He was running late after having to do an emergency appendectomy.  He hadn’t overslept or blown off his appointments for a tee time – he was operating, just as I’d expect a surgeon to.

With scheduled surgeries on the calendar, as well as the emergencies which inevitably pop up, he wakes up every day knowing he must be on his toes.  He has to be prepared for whatever comes along.  Routine procedures will even occasionally throw the proverbial curve ball his way, and he’s the one that must respond accordingly for the well being of his patients.

Some of you might be surgeons, but I’m confident that all of you reading this are traders. And at this point, hopefully you know exactly where I’m going with all this.

Maintain Your Edge

As a trader, it’s important that you stay active and stay sharp.  You’ll of course take vacations (hopefully of the exotic type) and have times when life calls your attention elsewhere temporarily.  That’s fine, and I’m certainly not suggesting putting your trading before all else – that would be unhealthy and out of balance.  I’m all for maintaining perspective and priorities.  However, if you truly want to get good and continually improve, you’ve got to be in the game on a regular basis to some extent.

I attended a couple of preseason NBA games this week.  During the offseason, one player in particular had just signed a huge contract.  Now, preseason games don’t mean anything at all.  The fans love them, of course, but they’re generally treated like scrimmages and an opportunity for teams to start developing some chemistry after a few months apart.

Watching the game, it was quite clear who’s been working hard over the summer and who probably took the mindset of “it’s a long season, I’ll eventually get sharp.” The aforementioned big-contract player was of the former attitude.  It was clear he worked on his (already great) game, and he was eager to get all the playing time he could – even in a preseason, so-called meaningless game.

This guy wants it, and he shows up to play every time out.  In terms of dollars, he’s long since arrived and would have a hard time spending what he’s already amassed.  But money is not his sole definition of success, and it’s clear in how he plays the game.

Plan & Play to Win

As you reflect on your trading, I wonder if you’re seeing some glaring problems standing in the way of your success.  Some take more time to work out, such as learning to accept a loss or understanding the times when sizing up isn’t appropriate.  But if it’s just more “minutes on the court” that you truly need, that’s a much easier goal to reach…and one which will pay many dividends.

The end of the year is approaching, but it isn’t here yet.  You’ve still got a couple of months before you’ll need to review 2010 and look ahead to 2011 and set appropriate goals.  That time will come.

For now, you still have time to make 2010 better.  You still have time to gain some momentum into the end of the year, so that you can hit the ground running when January hits.  But you’ve got to look at each day as an opportunity to grow.

Let me be clear though – it won’t happen from the sidelines.  You’ve got to make it a habit to be in the market regularly.  Modify your timeframes if you need to, and trade small when you’re struggling to get a feel for the tape, but be active, stay sharp and on your toes.

Surgeons operate, and get their hands (gloves) dirty.  Athletes play and sweat and push for improvement.  Traders trade and face the pressure and find ways to grow.  The best simply do not allow themselves to go cold.

Earlier this year, I completed a major trader training project which required a lot of my time.  It took a few months to finish it all.  I could have cut that time at least in half, but I maintained a daily devotion to trading, even in the midst of a big undertaking.

I write blog posts like this one every week, and I produce a nightly stock newsletter for subscribers over at TheStockBandit.com.  I’m a husband and a dad, and trading isn’t my entire world.  But I’m in the market every day, moving my money into and out of opportunities as I see them.  It’s the focus of my work day, and it’s what my evening preparation points to.  Staying in the game is how I stay sharp.

Are you doing the same?

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

Are you following me on Twitter yet?

Be Patient Buying Dips

June 23, 2010 at 6:56 am

Novice traders are equipped with very little useful information, as even your grandmother knows to “buy low and sell high.”

With the recent correction, many stocks now are starting to appear ‘low’ on the scale, and that’s enticing – but dangerous – to those who have been waiting for a shot at getting in. The trouble is, that age-old “wisdom” doesn’t tell the whole story.

Cause for Caution

Merely buying a stock on the basis that it’s cheaper now than it used to be is no formula for success.  The goal is to be buying when there’s an expectation of higher prices. When prices are declining, the trend is of course down, which means it’s best to wait for some technical proof that the correction has ended before aggressively buying.

Think of it this way.  At the department store, escalators come in pairs.  There’s an up escalator, and a down escalator.  Buying stocks on the slide in expectation that they’re going to go right back up is like getting on the down escalator in hopes of it rising.  It makes no sense.  Eventually, the down escalator will end at a level floor, which in the world of technical analysis will be support.  Only once that’s found can you step onto the up escalator with a realistic expectation of a ride back up.  Wait for stocks to do the same thing.

Proof of Change is Needed

After a long-lasting bull market like we saw from March 2009 to April 2010, there’s going to be new money attracted to the game.  So we know right now there are some new traders in the mix who are aiming to buy low, and it’s no surprise many are getting hurt with the recent ‘discounts’ we’ve seen in prices.  The market has been in a correction phase for several weeks now, and it hasn’t been pretty.  More importantly, it might not be done yet.

The real key here is to wait for the technicals to shift, and that will come in the form of a higher low on the daily chart.  We’ve already seen higher highs get established in the NAZ, S&P 500, and DJIA, but they have yet to create higher lows.  That may happen soon, or it might be a while, but that’s the next element to watch for before committing to the long side for anything but quick trades.  On the premium site, that’s the stance I’m taking for now, and June’s been good so far because of it.

Trade Like a Bandit!

Jeff White
Swing Trading & Day Trading Service
www.TheStockBandit.com

Are you following me on Twitter yet?

The Envy of Other Traders

January 7, 2010 at 7:30 am

If you have traded for virtually any length of time, you’ve no doubt found yourself on both ends of the spectrum when it comes to winning and losing.

At times we can do no wrong, nailing trades with concise entries and the ability to scale out at our own prices.  It’s nice.  And during those times when it feels much more easy to fatten our accounts, it seems like such a foreign concept to lose.  How could I ever have done that?

The Grass P&L is Greener on the Other Side

Other times, we find ourselves dead wrong with terrible timing.  We’re dead wrong, and it feels like the moment a trade is entered, it begins moving against us.  Frustration builds while confidence erodes, and you wonder if there’s something else you should try – anything to stop the bleeding.  To top it off, knowing that we’re building the accounts of those guys on the other side of our trades is completely awful!

When we’re at our best, the traders we’re going against know the P&L is greener on the other side.  Our side. It’s not about keeping “them” down, but rather ourselves up with consistency.

If there is one reality of trading, it is that we will indeed have losing trades.  But how can we find ways to increase our odds of staying on the winning side more often?

5 Ways to Maintain an Edge

Put Yourself in Their Shoes. Considering the other side of your trades on a regular basis can give you a valuable taste of the emotions driving your competition to take action.  Recognizing the greed or fear of traders by way of the price action will give you a valuable edge, whether by way of timing a new trade or adding to your confidence in an existing position.

Remember that Cash IS a Position. At times you’ll need to move to the sidelines, and others will wish they were with you.  Feeling like you need to be in something all the time is a major but common mistake.  When you see no great opportunities, sit on your hands.

Maintain High Standards. This goes hand in hand with the previous point, but those who overtrade are not keeping the bar set high.  They’re lowering the barriers to entry, so to speak, by accepting mediocre setups, sloppy patterns, and generally trades with risk/reward profiles that aren’t in the upper echelon.

Zig and Zag. Many of us do have a directional bias with our trading, which may simply be a part of our nature.  But trading isn’t about making ourselves comfortable – it’s about extracting profits.  Sometimes that requires us to lean against or, dare I say, step a little outside those outer boundaries of our comfort zones.  Consider the occasional short sale, because there are always weak stocks (even in a bull market).  And even within a bear market, there will be strong stocks to focus on.  Keep an eye on the outliers, there’s opportunity there.

Don’t Hesitate. When you see the writing on the wall that you’re poorly positioned (on the wrong side, or on the sidelines), act immediately.  Hesitation opens the door for doubt, which results in costly delays.  You either end up chasing a stock too far and end up with a poor entry, or you miss it entirely.  So the moment you know you need to be out of a trade or into another, do it.  Stay sharp, and show up focused.  Speed is everything in this game, and absolutely includes your decision-making.

Trade Like a Bandit!

Jeff White

Are you following me on Twitter yet?

Always Something to Worry About

November 11, 2009 at 12:12 pm

Ever get spooked out of good trades? It’s one of the worst feelings in trading, knowing you were right and just couldn’t stick with the play long enough to get paid a fair amount.

The back-and-forth nature of the market makes it easy to jump to conclusions that a turn may be right around the corner, perhaps even a painful one.  As a result, it can be really difficult to stay in good trades, or to continue riding a trend which has gotten a little bit long in the tooth.  The flight to safety plagues us all from time to time – often prematurely.

An example is the current environment.  The indexes have made a tremendous move up from the March lows, making it hard for those with inventory to stay long or for those with cash on hand to put it to work after such a surge.  What if the trend changes?

Or take that trade you were in last week.  You nailed it – well, the entry at least.  Sure would be nice if you were still in there, huh?

Well, I’ve been there.  I’m familiar with that frustrating feeling.  And you know what I’ve come to realize?

There’s always something to worry about in the stock market.

Earnings, upgrades/downgrades, the Fed, interest rates and inflation, terrorism, nukes, the economy, elections, geopolitical events, strained relations with other countries, etc. It’s virtually an endless list.  Looking back over my past 11 years in the market, I can recall “major” concerns for every calendar year.  And yet for every single year, there were some phenomenal stretches of trading.

There’s literally always something going on.  That something may be a driver of prices, or it may simply be a sideshow – a distraction, if you will.

But here’s the thing… for traders like you and me, what matters is how we respond to the conditions – not what the actual conditions are or our ability to determine what’s going to happen next.  We have to walk that fine line between making wise decisions to protect our capital and allowing some fluctuations to occur so we remain on the right side of the tape and fatten our accounts.

Profits come from putting money at risk when there’s some potential payoff.  For individual traders like you & me, it means we need to be agile enough to hop on board with whatever it is the big money is doing.  Doesn’t matter why they’re doing it.  It only matters that we pay close enough attention to determine the trend and find appropriate spots to take action.  We get paid for taking risks – especially the right kind.

Silence is Golden

Don’t be surprised if you can at any point in time find arguments for why the next bear market is about to begin, or why prices will never decline again.  Not only is there a constant difference of opinion, but there often is some decent logic behind those arguments, whether bullish or bearish.  That’s what makes a market – thank goodness!

But those opinions will be shrugged off many times, so our flexibility is critical.

Bears and bulls alike will constantly beat their drums as to why they’re positioned the way they are. Don’t let that be the reason you put cash to work or pull cash out of good trades.  Get long during uptrends, and get short during downtrends and you’ll come out just fine. It isn’t necessarily ‘easy’ but it is simple.

Stick to the charts and keep ‘reasoning’ in check, because the market can defy logic for extended periods of time.  Is it doing that right now?  Who cares!  Prices will do what they do, and it’s our job as traders not to predict anything – but to react accordingly.  Trade what you see – not what you think – and you’ll usually be far better off.

Thanks for stopping by and I’ll see you here soon with more.

Until then… Trade Like a Bandit!

Jeff White

Are you following me on Twitter yet?