Author Archive for Jeff White

Stocks & Commodities Magazine Interview

February 15, 2008 at 6:15 am

I’m honored to be appearing in the March ’08 issue of Stocks & Commodities Magazine as the feature interview, as it’s a great publication that I’ve read for years. They have interviewed some great traders over the years whom I’ve learned a great deal from, so when asked about my interest in being included I didn’t even hesitate. Here’s a snippet of the interview on the S&C website, but you can buy the full issue at any major bookstore.

To those of you S&C readers who arrived here as a result of that interview, let me welcome you to the blog! For a quick tour of the blog, this post is a good place to begin as it hits some of the highlights and favorite posts.

Thanks for stopping by to visit, and I hope you’ll return often. Enjoy the long holiday weekend!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

[tags]Stock Market, Day Trading, Stock Trading, Swing Trading, Trader Interviews, Stocks & Commodities Magazine[/tags]

Jack of All Trades, Master of 1 or 2

February 13, 2008 at 6:15 am

Most of us have heard the phrase, “jack of all trades, master of none.” What’s funny is that I don’t think that phrase was actually created to describe a trader, even though there are quite a few who certainly fit that description. For whatever reason, beginning traders especially seem to want to try a little bit of everything, kind of like a trading sampler platter.

What is it about us that makes us want to learn every way to skin the cat? Curiosity, perhaps. Drive, determination, ambition? Yes, probably. I’d say a lack of patience when chasing success also plays a part. But what so many of us tend to forget is that good trading doesn’t have to be complicated trading.

Even the most basic of technical analysis books will point out a number of different chart patterns worth studying, but the reality is that not all of them have to be traded. You can actually do quite well just sticking with a couple of favorite setups, provided of course that you stay consistent in how you enter and exit. You don’t have to master every trading style out there in order to be profitable – just getting good with 1 or 2 that you’re comfortable with is enough.

Trying to learn every trading style and expecting to apply them correctly in order to extract profits from the market is simply unnecessary. That’s not the objective of a successful trader. The experienced trader probably has a few tactics in his arsenal, but he knows he doesn’t have to use them all in order to do well. He can be profitable just by exploiting one or two good strategies, so long as he patiently waits for the proper times to apply them.

Does that mean you never try to grow or learn? Absolutely not! Successful traders will slowly add new strategies to their trading repertoire as time goes by, so strive to do the same. Finding new and different ways to profit is part of the fun of trading, and the market will at times reward your ability to adapt. So make an effort to become a well-rounded trader, but remember your bread-and-butter setups!

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]

Step up the Risk Ladder

February 5, 2008 at 11:49 am

Improving as a trader will include many things for you. Sure, you’ll learn to evaluate market conditions better as time goes by, and you’ll find better ways to respond to trading situations which in the past may have caused you to panic. As you improve, even your repertoire of trade types will increase as you add more advanced approaches like gap-fill plays and reversals. However, possibly the most important aspect of becoming a bigger and better trader is learning to increase your trade size effectively.

I’m a big believer in the notion that if you aren’t making money trading small that you won’t make money trading big. That concept sets the precedent here, so if you’re struggling to produce profits trading 100-lots, don’t even think about getting to 1000-lots. If you’re in that boat, keep refining your approach and set aside the notion that you should be trading bigger. You’ll know when the time is right.

Ready For More

When you’re consistently getting your P&L in the green, it’s probably time to start trading a little bigger. And while it’s easy to see on paper that simply quadrupling your position size may mean 4 times the profits, in reality it doesn’t usually work that way. After all, there are those pesky nerves to deal with!

The idea of multiplying the size of your profits is indeed an exciting one, but remember to approach everything first by way of risk management. Just as there are losing trades on smaller-sized positions, there will of course be losses on larger ones as well. Making certain that you can not only withstand larger hits to your account, but also the potential loss of confidence which could come as a result of larger-sized losses is imperative. Being “ready” to trade larger doesn’t simply boil down to having a bigger account which allows more buying power – it really comes down to your ability to accept increased levels of risk.

Baby Steps

Most experienced traders would agree that it’s not usually a great idea to find success at 100-share level or $100 risk-per-trade level and then jump straight to 500. The best approach is to incrementally add risk as you get more comfortable with the bigger numbers you’ll see on that P&L screen. Those good intentions of becoming a more profitable trader can get you into trouble if you jump too quickly into the deep end of the pool before you know how to swim well. A big increase in trade size puts your confidence to the test, and you want to be ready for that. Confidence is tricky in trading, as you have to have it to operate, but too much of it can cost you your objectivity. Protect it at all costs, and you’ll be glad you did.

If you’re considering bumping up your trade size, think of it as a ladder. Climb each step one at a time, and only move up to the next one when you’re ready. That approach will serve you well, letting you slowly add risk as you are comfortable so that you can keep making good trading decisions. Those good decisions don’t come from impulsive reactions to your P&L – they come from following your game plan for each trade. Patiently growing your trade size will help you stay focused on your trading plan, which is where profitability is rooted.

Remember, trading is a marathon, not a sprint, so be sure to sep up the risk ladder at a pace you can maintain.

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

[tags]Stock Market, Day Trading, Stock Trading, Risk, Investing, Swing Trading[/tags]

Storing Watch Lists in Worden’s TeleChart

January 24, 2008 at 1:47 pm

I have discussed watch list management before and how it’s an important responsibility for active traders. I store my watch lists in my charting program, which is TeleChart Platinum from Worden, and it’s nice knowing that at any time I can pull up a group of stocks with tradable charts. Watch lists truly are at the core of my swing trading method, and the constant review of daily charts is where I locate new trading opportunities and update important levels on my existing trades.

Storing my watch lists in TeleChart has a number of benefits, but here are several reasons why I do it:

Backup Watch Lists
Technology is great and it is the driving force at any trader’s desk, BUT it only takes one hard drive failure to send all of your hard work right out the window! I have dual hard drives in my desktop PC’s, along with external backup drives running at regular intervals to ensure that my data is recoverable in the event my primary technology fails. (I encourage you to do the same)! However, some of my watch lists have slowly been compiled across years of trading. TeleChart allows me to upload all of my chart settings (watch lists, trend lines, notes, etc.) to the Worden server, giving me added redundancy with my important chart data. Furthermore, when I edit settings on one of my PC’s, I can download the new settings straight from the Worden server to sync up all of my computers. This is huge when I am traveling and working on my laptop.

Store Multiple Watch Lists
The organization of your trading ideas is what will enable you to act quickly and decisively when the time comes to place trades. This can be as simple as separating long from short ideas, or as complicated as dividing up market sectors or even indicator-based scans. I particularly like this feature of TeleChart, because I don’t have to try to mentally separate certain ideas from others. The ability to create and label new lists helps me to compartmentalize my trade setups according to direction, timeframes, industry, or anything else I may specify.

Copy All or Selected Stocks Across Watch Lists
This is a major part of my daily routine, as I will manually screen several watch lists each evening in search of setups for the following day. The “flag” feature of TeleChart lets me hit the ‘F’ key to flag or unflag a stock, allowing me to mark stocks of interest as I go along. So for example, while working my way through a list of 500 stocks, I can hit ‘F’ anytime I see a stock which interests me and be able to pull those needles out of the haystack once I’ve completed the list by viewing these flagged items. Even better, I can copy only those flagged symbols to another list, or even remove them from a list altogether.

Another aspect of the “copy all or selected stocks” choice is that I can sort a list to separate only those stocks which fit my criteria, and then copy those symbols to a list. So for example, say I want to review a master watch list but I only care about stocks which had volume today of 500k. I can sort the list by 1-day volume, flag those symbols, and then copy them to another list. This is an excellent way to filter out only the stocks you want to review closer, cutting down the work load considerably.

At the end of the day, you need a system of some kind to keep your trading ideas organized. Having the right setups at the ready is a major part of a well-formulated game plan for your trading, and it’s much more difficult to act with speed or precision otherwise. Determine a way to keep locating new setups in the charts, and decide to stay organized with your trading ideas. It will keep you a step ahead of the pack.

Trade well today,

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]

Deal or No Deal

January 22, 2008 at 12:00 am

One television show I find myself mindlessly watching probably once a week is Deal or No Deal. Perhaps the allure of the spotlight is simply too much to turn down, but it’s uncanny how the first good offer is never taken and the participant’s greed overcomes them to make poor financial decisions.

Often they are lower-income earners with a shot at a million, and something like $200k just isn’t enough for some reason. I can’t help but wonder if for many of them they had been offered $200k before they even taped the show that they’d take it, yet when on the air it’s a completely different story. The show offers them a gift and they turn it down.

You’ve no doubt made the same comparison, but I can’t help but relate this to trading. A good trade turns great on news or a major market move, and all of a sudden a home run isn’t enough – you want a grand slam.

My suggestion? Don’t fall victim to that mentality on Tuesday if you’re short coming into the day.

The giant gap we’re poised to see is a gift to you from the market, so push that big button quickly and ring the register! You might even have an opportunity to flip the position if we start to see buyers step in to scoop up bargains, but otherwise you could take the rest of the day off! When you see your P&L and it’s larger than you expected, it’s time to take the market’s gift.

For more market commentary, be sure to check out this week’s Market View page over at TheStockBandit.com. You might find some food for thought before you start your trading week after taking a closer look at the index charts which were posted tonight (and every Sunday). Hope you enjoy it!

Be patient this week and don’t get greedy. 😉

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]

Practical Risk vs. Reward

January 11, 2008 at 8:59 am

A close friend of mine began trading a few months ago, and in his first days we had a discussion about some things he needed clarification on. We discussed order types and stop losses and why chart patterns tend to repeat themselves, but then he asked this question:

“So, if I buy 100 shares of XYZ at $25 per share, I’ll have $2500 at risk?”

My answer was no.

I do have a calculator, so I am aware that the cost of 100 shares of a $25 stock would be $2500, but when considering what is truly at risk, it all depends on your exit strategy.

If you’re willing to hold XYZ until the bitter end and that company goes to $0, then yes the risk is the full amount. But if you’re a trader, your true risk is really limited to how much room you’re going to give the stock. With a prudent stop loss in place of, say, $24, your “risk” on the trade is only $100.

Taking the conversation to the next step, we have to consider only those trades which we feel will offer us a profit amount which is a multiple of our true risk. If you knew you might lose $100 on a given setup but might stand to make several times that, maybe $400, wouldn’t you take that trade? Absolutely. On the other hand, if you were putting $100 at risk and you felt the potential reward was only $100, would you still take the trade? I wouldn’t think so – you’d head for the blackjack tables in Vegas because their bets pay even money and the lights are prettier!

The point is this: weigh your true risk in every trade you consider taking, and only enter that position if the reward is substantial enough to justify putting your money on the line. Only take trades which offer you a lot more if you’re right than they will cost you if you’re wrong. That’s how you protect the downside.

It’ll keep you in the game and help you grow your trading account. 😉

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]

Patience Takes Courage

January 3, 2008 at 1:09 pm

Trading means many things to different people. Some love the excitement and the thrill of a financial adventure. Some people want something to talk about and discuss, while others simply want a hobby. However, plenty of us are in it for the money.

For those who are purely seeking profits, there are many ways to play the game. Different approaches and timeframes will require a variety of strategies, but we all have something in common: if we choose to play at the wrong times, it’ll cost us.

Opportunities will surface on a regular basis though, regardless of your trading style. A big part of becoming a consistently profitable trader lies in the recognition of those circumstances, so it doesn’t simply boil down to selecting a strategy. The proper implementation of your strategy is what matters most, and if you aren’t seeking to learn that then the market won’t hesitate to teach you.

I like to trade actively. The market’s always in motion, and that means certain stocks are on the move as well. It can be so easy to step off the sidelines and into the game, but timing is the biggest issue in whether those ventures will be profitable or not.

There have been some big moves in this market for the past couple of weeks, and that means there has been no shortage of opportunities. However, the moves have been swift and violent, so they’ve catered to a certain type of trader. The contrarian is one such trader, who may have been calling for a top on the way up and initiating short positions as the market climbed. Obviously that meant some pain while the advance was underway, but now it means profits. Another type of trader who has been able to benefit from the recent conditions is the momentum scalper. They are willing to chase stocks which are already on the move, darting in and out quickly to catch snippets of the moves, adding numerous small gains together to make their day’s pay.

While I have traded each of these strategies at different times in the past, neither one defines my current style. That means that when conditions changed quickly recently, my best plan was to shift into capital preservation mode. Recognizing the change of market character has saved me considerable money these past several weeks, while others have fought and lost because of their unwillingness to protect their trading capital.

Every one of us has a choice of how to manage our trading business. We can throw caution to the wind and hope that we get lucky, or we can be methodical in our approach and choose a path which improves our odds of survival at all times. Choosing the latter keeps us in the game, allowing us opportunity to collect profits when conditions do cater to our specific style.

Trading success does not come easy – we have to earn it. That includes putting in the week-to-week effort, but it also means controlling our emotions and urges in such a way that we stick with our game plan. At times those plans may need altering, but that generally comes after a prolonged period of having something else work better.

Right now the market is trading with higher volatility than we’ve seen. Of course there’s no way to know just how long the extreme moves will stick around, but fortunately as traders it isn’t our job to predict. All we have to do is react to what we see. At some point we’ll see calmer conditions surface, and that’s when those of us with a multi-day to multi-week trading timeframe will be able to return to higher levels of activity.

Until then, protection of capital is the top priority, and we simply must be patient until our favorite conditions return. That way we can pick up where we left off. It may be uneventful while we wait, but it certainly beats the situation so many others are now in who have to make up lost ground. Don’t insist on activity if you don’t see what you like. Have the courage and discipline to wait for your pitch, and if you’re new to the game spend some time determining just what you need to see in order for your strategy to work. It’ll be well worth it!

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]