Author Archive for Jeff White

Don’t Forget to Prep for 2008

December 23, 2007 at 11:28 am

Lately everyone’s discussing the so-called Santa Claus rally, and I suppose that is rightfully so given the recent upside. Rarely does the Santa Claus rally actually come on time, because the market is so forward-looking. Often it happens early or simply not at all, but this year it is right on time.

OK, so that’s kinda nifty but let’s talk about something that really matters: 2008.

The holidays are officially here, giving each of us the ideal time to reflect on 2007 and look ahead to the coming year. We can review what we’ve learned and consider ways we’ll apply those lessons going forward.

The idle time between now and January 2nd should offer you an
occasion or two to find some quiet time and get real honest with yourself. Take it and put some effort into reviewing your year. Don’t just run the quick numbers on your P&L – take a good look at where you can improve. Look at your trades, look for reasons why you lost and made money, and determine how to avoid the former and increase the latter.

Do you need to improve your skill set? Find a trusted resource where you can learn about tools you’re lacking. Understand the chart patterns. Educate yourself on trading psychology. Learn to improve your execution and expand your use of various order types. Whatever it is, equip yourself with the tools necessary to be a better trader.

What about your discipline? Are you slow to cut losing trades, hanging around in lame stocks when you know you should be bailing out and moving on to the next opportunity? Discipline applies to winning trades too – make sure you’re allowing your original game plan to play out and don’t cut the legs out from under those trades which are working in your favor. And are you exhibiting the discipline each day to do your homework and get prepared for the trading day? If not, create some new habits for yourself come January 2nd that will improve your odds of success.

Every single one of us has ways we can improve as traders, and it’s an ongoing process. What is holding you back from achieving the trading success you want so badly? Let me encourage you to find that area of your trading you feel you’re lacking in the most, and make it your focus to improve it in 2008. It could mean a major difference in your performance going forward, and that progress is exactly what each of us wants.

So spend some quality time with loved ones and friends over the holidays, but be sure to reserve some time just for you so that once January hits you’ll be right on track with your objectives and goals.

Merry Christmas & Happy New Year!

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]

Take Cues From Failed Patterns

December 18, 2007 at 6:35 am

Chart patterns are great for selecting trade entries, but rarely do I see them being discussed from the perspective of risk management. One of the best things about them in my opinion is that they show me clearly when I should be in or out of a trade. When they fail, the signals are clear and I can limit my loss. What else could I possibly want when I’m wrong??

Take SOLF for example. This stock recently tripled in just a few short weeks, putting it on the radar of every momentum trader around. With ample liquidity and lots of strength, it’s no wonder it hit my watch list. I particularly liked the symmetrical triangle pattern it formed as it consolidated recent gains, creating a nice pivot point for an entry on the long side.

I bought it on Friday morning for a trade as it cleared $27.25 at the upper trend line of the triangle, but the stock couldn’t hold the breakout and failed soon afterward. I took a loss of 2% on the failed trade (I’ve certainly had worse). Although a losing trade isn’t any fun, I definitely felt the setup deserved a chance, and if faced with the same opportunity again I’d take it. However, I limited my loss because the pattern failed.

The stock is now 10% below my exit price just one session later. Taking my cue from a failed pattern really prevented additional pain, allowing me to move on to the next trade and protect my capital rather than babysit a stock which had reversed and hope for a comeback.

Here’s a look at SOLF and the failed symmetrical triangle pattern:

(Click for full-size image, courtesy of TeleChart)

Trade great setups which offer big potential rewards when you see them, but be sure to let the patterns you’re trading guide your exits as well.

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]

Recovery Facing a Test

December 16, 2007 at 6:24 pm

The current recovery is facing a test at this juncture, as the rising channels which have formed from the November lows are starting to give way to some selling. This of course introduces the threat of new lower highs if the bulls don’t step in quickly, and that places great emphasis on the next few days as we wait to see how the buyers respond.

Be sure to check out this week’s Market View page over at TheStockBandit.com before you start your trading week for a closer look at the index charts and some market commentary which were posted tonight (and every Sunday). It’s actually the top portion of the nightly Bandit Broadcast (without the trading ideas), which is published on the Market View page as a weekend bonus for readers of this blog – hope you enjoy it!

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]

Beware Late-December

December 14, 2007 at 12:54 pm

The end of the year is a great time. If you’re like me, you’ll enjoy the holidays, pig out on great food, and spend some quality time with family. There’s also that end-of-the-year examination of how our goals went this year and what adjustments we need to make for next year.

As we enter into the final couple weeks of the year, keep in mind that things are as tricky as ever. Cross-currents of all kinds are swirling during this month that aren’t seen at any other times of the year. Performance anxiety of fund managers, rebalancing of indexes, tax loss selling, and a host of other things will motivate market participants in unique ways.

Considering the already wild market environment we find ourselves in (the past few weeks have truly been volatile), December might just add fuel to the fire of confusion.

Let me caution you as you review where your year stands not to make bold year-end bets in order to reach your goals. Stick with your game plan, trade the good setups when you see them, but mostly just remember to take what the market offers. Don’t increase your size or take sub-standard plays for the sake of finishing big and trying to go out on a high note.

I’m a positive thinker and I love to trade. I like to set lofty goals and work my tail off to reach them. But these next couple of weeks aren’t the time to go big or make unusual plays. Cruise into the New Year with your objectivity intact, and focus not on what you need between now and December 31st, but instead on what you’ll want to aim for once January 2nd arrives.

Just don’t let December’s whirlwind of cross-currents throw you off balance.

Happy Holidays!

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]

Bulls Breathing New Life?

December 9, 2007 at 10:45 pm

Last week, the bulls bought a dip for the first time since October, and the major averages reached new recovery highs. The August closing lows for now appear to have been successfully tested, opening the door for some additional rebuilding if the bulls can stay in gear. Of course, the lacking element last week was volume, which is a necessity for lasting upside if we are to see it. To see it light in front of this week’s FOMC meeting on interest rates (Tuesday @ 2:15pm ET) isn’t surprising, so the key will be if we can see some follow through this week on improving volume levels.

Be sure to check out this week’s Market View page over at TheStockBandit.com before you start your trading week for a closer look at the indexes and some chart comments which were posted tonight (and every Sunday).

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]

Consider Risk First, Then Reward

November 29, 2007 at 8:31 am

Anytime I am eyeing a trade to make, the first thing I consider is what is my risk in case I’m stopped out. Theoretically I might not be able to foresee all that could happen to a stock, but barring a major news event or gap in the stock, I want to first determine at which point I’ll need to exit the position. Only after this step do I take a look at the positive potential for the trade and then move towards a decision for an entry.

A major difference between amateur traders and professionals is the fact that amateurs consider the potential reward first and then may look at their risk, while professionals consider their risk first and then look at the potential reward. This is a big deal!

Keep Your Head On Straight

The market carries a lot of allure and it can entice you into making larger or bolder trades when all you look at is the reward side if it pans out. However, surviving the trading game and sticking around long enough to make a living at it will require that your risk be quantified before anything else. Even with those home-run types of plays you might feel very strongly about, you still need to determine at which point you’ll bail out of the trade and cut your loss in the event that you’re wrong.

Consider the earnings play by the amateur trader trying to make a quick, easy buck on a favorable gap from the announcement. This play is attempted all the time, but the truth of the matter is that while the odds are high that a gap will come, the direction and size of it simply cannot be determined. This leaves the trader hoping to hit it big but very uncertain as to their exit plan if the stock moves against them.

Trading Like A Pro

Professional traders operate in a completely different manner. What appears to be a good trading opportunity is examined before the entry is made. This closer look may not take a long time, but it will reveal to the professional key information that will make up his mind on whether or not to take the trade. Determining an adverse exit level will allow him to define his risk, size his position accordingly, and then decide if a favorable move will pay him a multiple amount of what he’s putting at risk.

This principle is at the heart of profitable trading, because we are going to have our losing trades, sometimes frequently. Ensuring that those losses are contained will make them very easy to overcome with winners that we will find, but a methodical approach which begins with a look at the risk is where it all begins.

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]

A Head-Shaker’s Market

November 27, 2007 at 11:55 am

This column was originally published today at 11:09am EST on my Market Commentary thread of the trading forum over at TheStockBandit.com. It’s being republished here as a bonus for TheStockBandit.net readers.

The bulls are putting together another nice rebound this morning with much of yesterday’s downside being erased with today’s buying. This has quickly become the typical day-to-day routine for the market, as it sells off in apparent desperation one day, only to bounce big the following day. We have seen this happen now for 4 straight sessions and at other times this month, which is making active traders dizzy and causing those of us with high cash levels to simply shake our heads at the indecision out there.

While this price action is out of the ordinary and difficult to trade, it is what it is and we have to deal with it. As traders, we cannot control what the market does, but we can always control how we respond to it. In a very tricky environment like what we’re in, the best plan is to either become very short-term with trades, flipping them for quick gains and keeping losses very small, or we get very selective and limit our activity altogether.

I’m sticking with the latter, but am really looking forward to the time when things smooth out a little bit and offer us some better opportunities for swing trades, as that is my preferred timeframe. It will get here eventually, but this market is running high on emotion right now and both bulls and bears have been quick to press their bets only to throw in the towel on the following day.

Stay patient out there, if there’s anything worse than an indecisive and reversal-prone market, it’s overtrading it and losing money! Hang onto that trading capital of yours and once the clouds break up we’ll be in a far better position to grow it. Right now it’s all about capital preservation.

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]