Don’t Be a Monkey
November 17, 2011 at 10:20 am
Ever seen those monkey traps where they put some bait in a trap, a monkey comes along, sticks its hand through the hole to get the bait, but when making a fist, can’t remove its hand from the trap?
They have to drop the bait in order to escape the trap, but their greed and ignorance prevents them from letting go?
I’ve made some trades in that same manner, and I’m guessing you have too. The ones where I just refused to let go in time because I wanted it to work so badly, and ultimately they proved extra costly.
Dropping the “bait” in those cases would have freed me to go in search of many other, better opportunities, but my short-sightedness prevented it.
Monkey Brained
And while every single one of us has been there at some point in our trading, what’s curious is that it originates not with the setup or a poor strategy or a flawed technique for entering or exiting. It starts with not having a properly prepared mind.
It’s a flaw with our pattern of thinking.
At times it’s based on a fear of scarcity, whereby we stay with a mediocre or poor trade because there’s nothing else on the radar. In effect, we’re bored, in which case we shouldn’t be trading anyway. Listen to the charts!
Other times it’s that our pride is too much on the line and we’re more interested in defending that than our capital. That prevents us from moving on to a truly worthwhile trade, thus keeping us trapped.
Remember the Goal
I’ve talked at length previously about trading as a numbers game, but it’s such a fundamental viewpoint to have as a trader – something we just can’t lose sight of.
Over time, we want lots of at-bats to let our edge play out. When sifting through setups we select actual trades based on probabilities. That’s the aim.
And on any given trade, if we’re keeping that in mind, we’re willing to let go when the feedback we’re getting doesn’t support our original expectation for the play. The price action is weak, a key level fails to hold, or a reversal of direction has begun and the charts are telling you to shut it down – yet you aren’t listening.
Stay on track. Keep the bigger picture in mind. Be willing to lose in this one trade if you need to, so that over the next dozen or hundred or thousand trades you can be profitable.
… In other words, Trade Like A Bandit – not a monkey!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Detecting Subtle Changes of Character
November 15, 2011 at 12:06 pm
As traders, it’s imperative that we take note of any nuance or variation from character when reviewing charts. Doing so can give us occasional false or contradicting signals, but it can also alert us to imminent moves or potential pattern failures.
Take for example those imminent move alerts. A sudden perk in volume as a stock turns to challenge a key level can sometimes be an indication that a breach of that zone is about to take place. Someone’s accumulating shares ahead of the break, and technical traders will take note of the volume expansion ahead of a possible break, placing that stock on the radar of many.
Deteriorating Demeanor
Potential pattern failures can also come to light sooner by taking note of variations in how the stock is moving. With that in mind, let’s examine a stock which may be giving off some of these subtle suggestions like I’ve been discussing.
ARUN has a multi-month uptrend line (higher lows) which has provided support on numerous occasions, letting dip-buyers use it as support to play short-term bounces. It’s still intact, but something else is of concern.
Specifically, the stock had been establishing higher highs along the way up, with each bounce attaining new recovery highs – until recently. Over the past couple of weeks, we’ve seen bounces carry to lower levels, and one could even consider drawing a rounded top around the peaks of the past month. This suggests waning strength in the stock, so I’d avoid a support-based buy at this point. ARUN may rally again from this area, but I’m not betting on it.
A New Plan
My inclination would be to give this one a bit more time and see if another descending trend line can be drawn at some point from the 10/27 peak along the recent highs and wait for an upside break. This stock has a history of clearing such trend lines (including the 3 drawn below), so that’s likely a better approach for getting long than a support buy after the establishment of lower highs.
Here’s a closer look at the chart:
Again, detecting these subtle variations in the price action is not a guarantee for better entries and exits. What it does is alert us to potential changes of character so we can make better decisions based on probabilities – and trading is all about probabilities.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Video Review of the Indexes 11-13-2011
November 13, 2011 at 3:55 pm
Last week we saw the major averages test important short-term areas to further validate the recent trading ranges, and the tests were passed. Now it’s up to the bulls to produce a breakout, but from a technical standpoint they’ve got some real positives going for them.
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.
(Direct video link is here for those interested in sharing).
Be sure to view in HD (720P) and full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Video Review of the Indexes 11-6-2011
November 6, 2011 at 1:48 pm
A sharp pullback to start last week left the indexes testing some important levels and filling some gaps, both of which proved to be technically beneficial for the market. Dip-buyers emerged to stem the losses though, erasing a fair chunk of the deficit from last Monday and Tuesday.
More progress will need to be made for the bulls to regain their October momentum, but overall the price action is constructive and this pullback – if kept shallow – could still result in a higher low on the daily charts of the indexes.
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.
Update: direct video link is here as the YouTube embed code is hit/miss.
Be sure to view in HD (720P) and full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
4 Traits of the Perfect Trader
November 3, 2011 at 9:48 am
Maybe ‘perfect’ isn’t the right word. We can strive for it, but we’ll all fall short of it given enough time. Greatness, though…that’s attainable. But what does it take to become a great trader?
Well, I’m still working toward it myself, and maybe you are too, but we can agree it’s a combination of things. It’s having the ability to walk the line between two sometimes contradicting attitudes or beliefs. Here are a few of those, and I’d love to hear your thoughts on it if you have others to add to the list.
Great traders blend:
A ‘Just Go With It’ Attitude with a ‘Question Everything’ Mindset. What do I mean by that? Well, traders can be a skeptical bunch, but the best traders still act on what they see. A market move might be difficult to trust, but it’s underway and it’s happening with or without you. Traders know they can exit right away if it doesn’t work out, because after all, isn’t that why we trade rather than invest? I recently saw a comment regarding a “real bull market” by a self-proclaimed trader. I find it silly that a trader actually cares. Real traders don’t mind if the moves last or not, they just go with it and adapt along the way.
Flexibility with Structure. Great traders have a game plan in place, which gives them structure or a framework of rules to guide them in the right direction and help them avoid trouble. But they’re also very flexible in how they implement their game plan. They may not deviate from their discipline, but they can shift gears quickly when conditions call for a momentum-based tape or some fade trades when prices are range-bound.
Confidence with Respect for the Market. This is a tough one and in my experience, never completely mastered. Great traders understand risk, and they know the market can take their hard-won capital quickly if they don’t defer to the price action when their timing is off. However, they aren’t afraid to participate, so when they see what they like, they execute with confidence. This might be among the hardest things to get a grip on for a developing trader.
Science with Art. Trading is definitely a science to some (quants, that’s you!), and it’s an art form to others (tape readers, holla!). Some traders develop their own discretionary system whereby they know exactly what they’re looking for but weigh a number of factors before executing. That might mean taking into consideration if the market’s fast or slow, or if there’s a trend or indecision, or how a run ahead of scheduled news might prompt a reversal. Great traders develop a feel (art) through their experience, helping them identify better when to implement the proper strategy (science).
Where do you fit into the mix? Are you out of balance in one or more of these areas? What can you start improving on today?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Chasing Trades Isn’t Paying
November 1, 2011 at 7:27 pm
Current conditions and the overall complexion of the market is always subject to change, but it’s still always worth taking note of. The market seems to be continually morphing into another phase, whether it’s range-bound, trending, highly volatile, or really tame.
Right now, we’re in short-term pullback mode after seeing some upside continuation. The past couple of sessions have been characterized by hefty downside gaps accompanied by limited intraday follow-through. So with that in mind, I wanted to discuss the idea of chasing trades in an environment like this.
In this video, I’ll show you what I mean based on the last couple of sessions.
Be sure to view in HD (720P) and full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Video Review of the Indexes 10-30-2011
October 30, 2011 at 1:07 pm
The indexes ran higher last week, bolstered by a European debt deal which had been anticipated for quite a while now. With stocks rallying ahead of the news in recent weeks, the actual event actually prompted additional buying rather than a sell-the-news response. As a result, new recovery highs were established across the board.
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 HD (720P) and full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
