Author Archive for Jeff White
Jeff White is the founder of www.TheStockBandit.com, a nightly newsletter for active traders. He has been trading his own account for over a decade and currently trades full time in Texas.
Trading Up from Mediocre to Great
November 8, 2010 at 12:28 pm
Can you imagine working hard for insignificant results? Or setting your standards so low that you need not put forth effort in order to attain your goals? Never, right?
A competitive drive pushes many traders from the inside, causing them to take on risks others wouldn’t accept. They shun the security of a regular job, opting instead to speculate in an arena filled with financial danger but unlimited upside potential. Long hours are often recorded in an attempt to gain an edge. Tedious tasks like sifting through hundreds of charts nightly, religiously reviewing results, or poring over statistics of trades past are done with the sole purpose of improvement by traders who are hungry for success.
In other words, they want it.
Those kinds of things are what it takes to get better in trading, and many are willing to pay the price. Yet far too often – unfortunately – some traders settle for less.
I’ve encountered many of them. They say things like “I’m not really trading right now because I’m waiting for XYZ to bounce back and let me out of a pretty big paper loss I’m facing.”
What’s interesting is that the ‘paper loss’ they’re referring to is quite real. Even more noteworthy is what they fail to see, which is that other trades could put them back on the right track and actually get them turning a profit again – if they’d free up their account to allow themselves to actually take those trades. Sadly, they’re just unwilling to turn loose of a mistake, so they cling to hope and wait for a miracle.
Are you one of them?
Trading Up
Often times on the road, I’m looking for an opening in the left lane to get around that slow lady ahead of me who is too busy talking on the phone to go (at least) the speed limit. In the mall, I’m amazed at how many people walk aimlessly, without a clue, as if there’s no purpose or destination to move towards. Yes, I am a bit impatient, but the point I’m making here is that it’s a habit I’m in of continually looking for ways to improve my situation.
That’s particularly true in my trading. I don’t mind putting on risk, and I realize plenty of trades will fail. What’s most important to me is to monitor how those trades move and how the stocks are behaving.
Let me be clear… It’s unrealistic to think I can foresee the moves before they happen, but it’s not difficult to recognize price action that’s outside the recent norm. And that is the key.
Studying the price action closely allows you to identify when outlier moves begin to occur, and subsequently when an exit needs to be made.
Always Think In Terms of Gain
We just sold our house. The real estate market is still soft, and for about two months we had a lot of showings but no sale. The price was too high, and we had to come off the price a bit in order to sell the house. But we’re upsizing, so what we had to concede on the last house we more than made up in the new house.
Once I thought of a price reduction in those terms, it became a no-brainer. It was less personal. Understanding that giving up $1 here might mean I save $1.50 on the next home (because it’s larger and higher-priced), logic dictated that I think in terms of what I’d gain on the other side, not solely what I’d be giving up.
Why doesn’t everyone trade this way? Why not dump an average name for a better one – one that shows more promise, more potential? Why not put in the work to get to the next level and leave mediocre results in your rearview mirror?
Make it a habit to think this way, especially if you’re gunning for improvement. OR…be complacent and stagnate, because that’s the only other option.
What has helped you learn to dump losing trades in favor of new names with better potential? Share your thoughts in the comments…
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Something Special in GSM
October 29, 2010 at 11:38 am
Globe Specialty Metals has shown some special characteristics in the past 2 months (pardon the pun), and it may not be done yet.
Yahoo! Finance is showing an earnings reporting date of November 8, and that event could certainly prove meaningful – one way or the other. However, as a technical trader, I’m only interested in avoiding the stock on that date given the impact which such major fundamental news can have on a stock. This may not be a long-haul type of stock anyway, but with the price action of the past several weeks it deserves to be on the radar for a possible trade.
Watching for Movement
GSM is acting quite well from a technical standpoint. First, the stock has rallied big over the past two months, adding more than 50% to its value during that stretch. Second, and perhaps more importantly, it has put in some well-deserved and needed rest over the past two weeks, pulling back quietly and churning to digest its recent run.
That dip has allowed weak holders to dump shares while others have stepped in with bids to offer support. Shallow pullbacks and coiling price action also prevents the stock from becoming too extended to the upside. Momentum is good until it gets out of hand, at which point pullbacks tend to become all-out reversals. Healthy trends need rest, and this one is doing just that.
I’m looking at this one for a trade on the long side if it’s able to break out through the trend line at $15.50, and would expect a quick push up to new highs. I’ll of course look to be out of it ahead of the earnings report, as holding anything into such news is merely a gamble. On a technical basis, support has been found in the $14.50 area, and we could see momentum return if the trend line gets cleared.
Here’s a closer look at the chart of GSM for you:
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Narrow Your Scope With Basic Stock Filters
October 27, 2010 at 11:09 am
Each night I work through literally hundreds of charts, aiming to find those setups with an edge. They’re the ones which allow me to not only clearly define my risks, but also offer potential profits which greatly outweigh those initial risks.
I’m asked quite frequently by traders how I narrow down the universe of stocks to a more manageable list. The short answer is to start with price and volume filters in order to eliminate the low-dollar stocks, as well as those with poor liquidity. That alone will give you stocks to consider which aren’t as highly-speculative as penny stocks, as well as stocks which are liquid enough that there should be a buyer when you go to sell and a seller when you go to buy.
Beyond those basic filters though, you may still wish to narrow the list. In the charting program I use, dozens and dozens of additional filters are available. Among them are things such as Beta, Trade Range, Average True Range, Expanding Trade Range, Contracting Trade Range, and a lot more.
Just that brief list is enough to help locate stocks which move faster than the broad market, or to eliminate names which simply don’t move enough.
Base Filters on Broad Market Movement
When dealing with ‘trade range’ types of filters, you can accomplish a lot. For example, you might generally use Average True Range to knock out stocks which don’t fluctuate much, helping you to eliminate the ultra-quiet stocks. When the market is starting to break out, look for Expanding Trade Range to help you locate stocks which are likely participating in the move or gaining momentum. When the market has made a big move already and is beginning to rest, use Contracting Trade Range to locate more stocks which are basing and may be starting to create patterns.
Don’t seek a one-size-fits-all filter, because it doesn’t exist. Keep an open mind, and put some thought into what it is you’re wanting to find. Stay flexible in your approach, and you’ll continually be able to avoid wasting time sifting through stocks which aren’t worth a second look.
The key to effective filtering is to learn over time how and when to vary the filter you’re using based on general market conditions. As you develop that skill, you’ll get really efficient at narrowing down the universe of stocks to a more manageable, appropriate list, depending upon whatever conditions you find yourself trading in.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Video Review of the Indexes 10-17-2010
October 15, 2010 at 5:07 pm
The bulls posted another solid performance last week as more cash was exchanged for shares. That took the indexes to new recovery highs, but also brought some important resistance areas into play.
The big question on the minds of traders at this point is whether the pace will slow now that resistance from the spring has been reached. We’ll find out soon enough, but there’s still no signs of emerging weakness at this point.
As we head into a brand new week of trading, let’s examine some important levels to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
Be sure to view in full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Video Review of the Indexes 10-10-2010
October 10, 2010 at 8:53 am
The market finished on a strong note last week, reaching new recovery highs after putting in some needed rest. This keeps the uptrends intact, and although resistance zones are quickly approaching, the bulls are showing no signs of concern at this point.
The week ahead is likely to bring a resolution to this short-term indecision, so it’s time once again to check out the big picture for clues of where momentum might return in either direction.
As we head into a brand new week of trading, let’s examine some important levels to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
Be sure to view in full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Trading vs Investing
October 7, 2010 at 11:42 am
A recent email exchange with a new subscriber brought forth some important concepts I want to share here on the blog. Among this guy’s comments were the following:
“I’ve decided to take more control of my money and future after investing for several years with a financial advisor. I’m sitting on a lot of cash..in setting up my portfolio should I scale in and out of some core positions in a separate account? Currently I feel as though I’m under invested, and it sucks to watch undisciplined investors make so much money. I guess the real question is, should I trade my entire account or should I trade some and invest some?”
During any nonstop rally like we’ve seen from the August lows, this is a natural reaction from a trader who has exercised good discipline. Sometimes it seems like it would pay better to just be ignorant and chase extended market moves like this one! Unfortunately though, that’s not an option for anyone who understands the two-sided coin known as risk.
Taking the ‘ignorance is bliss’ mentality may be great on the way up, as every gap higher and afternoon recovery adds to the bottom line. However, when the tide shifts and the tape gets painted red, it’s a recipe for feeling helpless and stupid for not exiting when the opportunity was there.
The Best of Both Worlds
I’m all for people taking control, because many financial advisors simply want to ‘outperform’ the market rather than make money – the only reason to have money in the market to begin with.
Here’s what I personally do with my money in order to benefit from both the short-term fluctuations and the longer-term trends which occasionally emerge…
I like to diversify my timeframes. I don’t trade Bandit setups with all my money, but I do direct all my money. By that I mean nobody else manages it for me. What I do is devote a chunk of it to my short-term trading. I want enough of it available there that no buying power issues arise, and so that I’ll have plenty of cash available to put on any trades I like.
I also take a chunk of money to devote to intermediate-term ideas, so these are plays which I like for the next few months but not short-term or long-term. I’m riding these out with smaller positions, wider stops, and I’ll often exit by way of shorting options against my common.
Finally, I leave money in long-term accounts (retirement accounts) where all I do is trade ETF’s for durations of 6-18 months. Those long-term plays are simply to have market exposure when I feel a big-picture trend is present which I want to be on board for, but do not want to react to every tick. For example, earlier this summer I was buying ETF’s for a bounce, and more recently I’ve been reducing exposure there (by selling to raise cash) and getting called out of those trades after selling calls against those positions.
So for me, dividing funds into different timeframes is really helpful. Also, I maintain separate accounts for these differing timeframes. That means I don’t login to my day trading account and each time see a 6-18month ETF play I’ve been in for 9 months and get tempted to exit after a 30-minute selloff. It is a little more to keep up with, but helps me avoid feeling like I have a lot of cash going unused.
Think of day trading with a stopwatch, swing trading with a clock, and position trading with a calendar. Each can be an effective way to watch the time, and they can all be used simultaneously.
If lately you’re feeling underinvested after this market run, you certainly aren’t alone. It’s a frustrating feeling, but there will be other trends to participate in, and one of these days you’ll be very glad to have cash on hand to put to work.
Any other thoughts?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Leadership Has Left the Building
October 6, 2010 at 8:08 pm
I’m not the first one to recognize a big shift in leadership stocks of late, as it seems the momentum train has hit a southbound fork – hard – for several of them.
Stocks which had been running relentlessly higher have turned suddenly. What used to be a buy-on-any-dip mentality associated with them has is now more like sell-all-bounces.
If these truly are ‘leaders,’ then they may be leading to the downside. I’m certainly not one to call for a market peak, as I know momentum can stay present far longer than many expect. However, I will say some other leadership best emerge quickly if the indexes (which are subsequently at big resistance areas) are to continue their relentless pursuit of higher levels.
Let me suggest going full-screen for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
