Author Archive for Jeff White

World Series Series, Part 2 – Have a Backup

October 23, 2008 at 8:45 pm

This is Part 2 of a series and a follow-up post to Part 1. New posts will be made during game days of the World Series.

When Plan A Requires a Plan B

Every game in the World Series is headlined by the starting pitchers as they come up in the rotation. Even throughout the season, when you get tickets to a game, one of the first things to ask is “who’s on the mound?”

Whether you’re a fan or a manager, your hope is that the starter is going to have his best stuff on game night. That’s the first line of defense needed to win games, but just in case, there’s always a backup. A reliever. Someone waiting in the wings who is the Plan B just in case the starter isn’t at his best.

In trading, we always want to have a stop loss in place for our trades. That’s the defense required to limit losses so that we can profit in the long haul with the winning trades we’ll have.

What If…

There’s nothing like being able to limit your losses, so make every effort to do so. Determine where you need to be out of a position, and stick with it. But don’t be afraid to have a disaster plan in place just in case. If your position gaps through your stop, what will you do?

Determining a ‘what if’ scenario at any given time in your trading is a good practice to be in. It’s also a great reminder to size your trades accordingly, because you don’t want everything riding on any one trade – ever. The idea of doing that might be exciting if you were to be right, but that’s a 2-way street and you absolutely must limit your downside if you’re going to stay in this game and survive.

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]

World Series Series, Part 1 – Think Like A Batter

October 22, 2008 at 9:01 pm

Trading has so many similarities to sports that I can’t help but occasionally mention it. A few years ago I did a series on Trading and Golf, which drew a number of parallels between the two endeavors. It was well-received by you as readers, so to mix things up a little for a few days I’m going to do a mini-series here on baseball and trading analogies to overlap with the World Series, which of course starts tonight.

I don’t know how many games we’ll see this Series go, but I’ll have new posts on game days right here so check back often. Now let’s get right to it with Part 1…

Think Like A Batter

Every batter in the World Series has a skill which has been acquired over time – he anticipates what pitch is coming. He’s played the game long enough, studied each pitcher extensively, and has been coached on the habits of the guy on the mound. So he knows to watch for that slider or change-up.

Now, it’s important to note that there’s a big difference between anticipating and predicting, because remember, predictions don’t do anything for us. However, anticipating makes us sharper. It forces us to watch for some specific clues, which can in turn accelerate the speed at which we’re processing information.

Wait For Your Pitch

As traders, whether we’re monitoring the overall market or a specific stock, it benefits us to anticipate what we might see next. That doesn’t mean we take action before it’s time, because like the batter, he’ll still wait for the pitch before he decides whether or not to act. What it does mean is that we are always attentive to the conditions and on the lookout for certain reactions in the market. That way, when we see them, we’re more prepared to act quickly – and speed is everything in trading (just as it is when swinging at a 90mph fastball).

So think like a batter and start to anticipate what may happen next. Then wait for your pitch before you take action. It will speed up your response when your anticipations are confirmed, but at the very least it will sharpen your attention.

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 October 19, 2008

October 19, 2008 at 12:12 pm

Last week we saw the market finally tack on some gains, although the volatility continues to run quite high with frequent reversals and very wide trading ranges. Are the indexes attempting to carve out some support to rebound from, or are they simply taking a breather before another decline? That’s the trillion-dollar question at the moment, but my hunch is that we’ll start to find out soon enough.

With Bernanke on deck this week, a slew of earnings reports yet to come, and of course the price action of late, it’s sure to be another interesting week of trading – so show up prepared!

Before you even push a single button in your trading platform this week, be sure to check out the Market View video over at the main site for a closer look at the overall market as you build your game 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]

4 Trading Goals You Can Set Right Now

October 14, 2008 at 9:20 am

The power of goals is undeniable, just as Phelps said after going 8-for-8: "That was my goal."

Goals are huge. They motivate you to get to another level, providing both incentive along the way and some satisfaction once achieved. I’ve spoken of them a few times here on the blog, but felt that a little more elaboration might be in order.

So today I want to cover 4 specific trading goals you can set that you might not already have. My purpose isn’t to tell you how high you should aim – only you can determine that, but rather to point you toward a few more concepts which could aid your trading process. Here we go…

1. Make ‘X’ Intuitive Trades Per Month.

Not everyone is systematic enough in their approach that they can automate their trading, and that’s perfectly alright. From time to time, any experienced trader (those using automation included) should allow gut feel to play a role in the decision-making process. Those of us who are purely discretionary traders aren’t strangers to acting on intuition, even if we go about it in a very methodical way.

Have you ever sensed an opportunity right in front of you, only to talk yourself out of it, thereby shutting down that gut feel which you’ve acquired through years of trading?

Well, what if you decided to make a handful of trades each month, in very small size, allowing yourself to capture a select few of those opportunities? As long as your risk remains defined, it just might help you to think outside the box a little and add some trades to your repertoire. Sticking with your game plan is a good thing, and I’m not suggesting frequent deviation from it. However, allowing a handful of ‘intuitive’ trades can add to your bottom line and enable some of that gut feel to assist in your overall profitability.

Consider making a defined number of “feel” trades next month – you might find yourself catching a few trades you may have otherwise missed out on. It’ll put your feel to the test, and provide you with yet another way to satisfy your craving for risk.

2. Set Your Max Loss Per Trade Weekly.

This is something every trader should be in the habit of doing on a regular basis. As account equity changes over time, so should the amounts that you’re risking per trade. Although you might select a constant value like R, it will still translate into different dollar amounts as your account levels change.

Making sure to update your thresholds either on the weekend or on Monday morning is the best way to stay on top of it. Doing so will ensure that you protect the downside during a tough stretch (as the R dollar-equivalent is reduced), while also maximizing profitability during good stretches of trading (as the R dollar-equivalent increases). The point is to trade smaller when doing poorly, and trade larger when doing well.

3. Consider Your ‘Options.’

Maybe you really prefer to trade stocks, which I certainly relate to, and that doesn’t have to change. In fact, owning (or short selling) the actual shares offers the most liquidity for getting into and out of trades as you seek to capture moves. But every now and then there comes along that trade which seems to offer a lot of potential, and yet inherently brings with it a lot more risk than you’re willing to take.

Whenever that’s the case, look at the options. Defining your risk through the purchase of calls or puts can limit your overall exposure, and yet still offer a ton of upside if you nail the trade. And since the options will never move to the exact same extent as the underlying shares, you’ll likely be far more able to endure some dips and rips along the way which may have otherwise spooked you out of the shares had you been holding them.

Even better, options offer a ton of flexibility when it comes to how you can use them and profit. Being long or short the shares offers you 2 directional choices, but there are many option strategies which really open the doors of possibility.

4. Trade More ETF’s.

With the explosion of ETF’s in recent years, there are now a ton of ways to participate in index-related or sector-based moves. You might be eyeing a particular group of stocks (such as Energy) and believe that a move is coming, but not be able to select 1 or 2 specific plays to make. In that case, turning to the XLE or a similar ETF would enable you to put on a single trade and participate in the movement of the overall group or sector.

Or perhaps you find yourself not long enough as a market rally begins to develop. It’s an awful feeling to feel under-exposed and not have that shopping list handy with some swing trades on it! Whenever that’s the case, consider turning to a product like index-related ETF’s. There are a ton to choose from which mimic the movement of the underlying index (such as NAZ 100, DJIA, SP 500, RUT, etc.).

Even better, there are now quite a few ‘leveraged’ ETF’s which provide you with more bang for the buck and yet require less exposure on your part, such as QLD which moves 2x the pace of the NAZ 100. Hitting the offer for some shares of these will get you quickly positioned for a continued move, knowing that you’ll participate in lock-step (or 2x lock-step!) with the index you most want exposure to.

So whatever goals you’re striving to achieve through your trading, be sure to set the bar high for yourself and work as hard as possible to reach them. Just like Phelps, you’ll be glad you did!

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 October 12, 2008

October 12, 2008 at 11:14 am

Lately we’ve been seeing an ongoing crash in the market as the major indexes continue to fall day after day. The streak of declines has been notable, but far more impressive (or ‘frightening’ if you’ve gotten caught on the long/wrong side of it) is the sheer distance this market has traveled to the downside. Staggering point losses have brought about swaggering bears as the waterfall decline brings about new multi-year lows.

There’s no shortage of movement out there, and it’s unlikely that the high volatility we’ve seen will disappear overnight. Given those circumstances, the week ahead is sure likely to be another lively one.

So before you even push a single button in your trading platform this week, be sure to check out the Market View video over at the main site for a closer look at the overall market as you begin to formulate your game 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]

First Can Hurt!

October 6, 2008 at 10:43 am

Sometimes you just know someone’s gonna get it. Between now and Halloween, it’s the last person of the group walking through a haunted house. During a scary movie, it’s usually the first one to go looking for trouble in an effort to prove their bravery, and it just doesn’t ever seem to end well for them.

In the market, it’s not much different – especially right now. The indexes have been correcting sharply, and there’s certainly some fear and panic in the air. Traders attempting to call the lows are becoming casualties on a regular basis, and it’s just too bad they lack the self control which could help them avoid that suffering.

When conditions get extremely volatile like they are at the moment, attempting to be first in line (buying in hopes of a turn) can be a very costly endeavor. Consider the perpetual bottom-callers within downtrends such as this. Or those who continually try to short sell the highs within uptrends, just dying to be a hero (yes, pun intended).

And it isn’t much different for those who simply allow themselves to get caught in the fray, unwilling to exit and take their medicine from a broken trade. The hope which initially grips them quickly turns to fear, paralyzing their decision-making as they watch their P&L get worse and worse.

Ouch!

Trying to call market turns can leave you strung up by your ankles like a jungle-walker caught in a booby trap. Keep your feet planted so you can keep moving, because if you get caught in a trap you can’t navigate the terrain… and that’ll mean some very bad news for your trading.

Most traders will agree that waiting for confirmation of a trend shift offers a higher-odds directional play, but there are still so many who want to time that turn and be the first one to place a trade in the new direction. Perhaps they want recognition or to feed their pride. Either way, it’s clear that profits aren’t what is driving their decision-making. And isn’t that why we trade?

So the next time you’re tempted to call a top or bottom, remember just how easy it is to encounter serious pain if your timing is off. Avoid getting strung up by an ankle! Have the maturity and the patience to wait for some confirmation of a higher low or a follow-through rally after a relief bounce. Doing so will allow you to continue walking through this jungle called the market in search of profits. Because truthfully, first in line just isn’t all it’s cracked up to be.

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 October 5, 2008

October 5, 2008 at 11:47 am

The bulls continue to suffer in this tape right now, and the major averages are struggling to show signs of stability, much less attempt to make some meaningful headway. Last week we saw new 52-week lows being reached, making it a good time to turn to the charts and see what’s going on.

Volatility continues to run very high, as emotions are heightened and uncertainties cause concern. The week ahead may prove to be yet another memorable one, requiring our full focus if we plan to participate.

So before you even push a single button in your trading platform this week, be sure to check out the Market View video over at the main site for a close look at the overall market and some things to consider in the week ahead.

(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]