Search Results for 'traders'
Video Review of the Indexes 8-2-2009
We’ve seen some nice moves in the past few weeks, with many stocks awakening from their slumber to sprint to higher levels. The indexes have done the same thing over the same stretch.
Although we’ve seen some incremental gains in recent days, overall the pace has definitely slowed. And that’s actually a good thing.
Rest is needed after a huge surge higher. Traders re-evaluate their positions, those with cash wonder if they might be chasing, and the shorts get concerned that perhaps a pullback won’t arrive in the timeframe they desire. So things get quieter, and some consolidation is seen. That’s exactly where we are right now.
But following this rest phase, momentum may well return, and we’ll need to have some clues to watch for in case that starts to happen. So, let’s examine some important levels in the indexes to keep an eye on in the days ahead.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Stop Loss Placement, Part 1
It is the most common question I’m asked: “How do you determine where to place a stop loss order?”
And it’s a great question. Newer traders need to know it. Experienced traders will often study it and refine it. It’s arguably as important as any other aspect of a trade.
So here I am setting out to create this mini-series as a resource. There will be several parts, so check back often for the segments to come.
There are several aspects to stops which I feel should be addressed, so I’m going to cover them in pieces. Small, bite-sized, easy-to-digest pieces.
Hopefully they’ll be helpful to your trading approach and enable you to specify some ways to protect the downside. After all, a stop loss can be your safety net.
Timeframes & Personalities
Deciding on the placement of an initial stop loss will boil down to a few things, not the least of which are (1) your trading timeframe, and (2) the personality of the stock being traded.
I’ll elaborate on each of these in the video, but essentially they’re my starting point:
Longer timeframes necessitate wider stops, and shortened trading timeframes warrant tighter stops.
Similarly, a lively stock deserves a wider stop, while a stock which tends to move very methodically will justify a tighter stop.
Watch this clip and let me explain more thoroughly, along with some examples. It is also posted over at the Trading Videos site, but I’ve embedded it here for your convenience. And if you have questions pertaining to stops, add them to the comments section or contact me directly and I’ll try to work those into the next few segments.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Update: Check out Part 2, Part 3 and Part 4 of this series!
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Psychology of Overbought, Oversold, and Market Extremes
Ever seen something get just a little overdone?
Perhaps it was that weekend barbecue, or the tattoo collection on that dude you saw the other day.
No doubt, we all run across the occasional extremes, and they’re usually worth a story or two.
It happens in the market too. Bounces get a bit stretched and before you know it, you’re staring at overbought conditions. And sometimes selloffs spark a little more damage than usual, creating oversold conditions.
We don’t see ‘overbought’ and ‘oversold’ every week, but it happens regularly. Emotions are a primary driver of the price action, so it’s no surprise that at times they challenge the boundaries of ‘normal’ and produce market moves with an unsustainable pace.
Every now and then, we’ll see true extremes in the market. Sometimes it’s when the upside momentum runs so hot that it produces a parabolic uptrend. Some of the fastest money on the long side can be made during such times, but high risks are there right along with those rewards. It’s somewhat of a party atmosphere though. Feels like it might not ever end.
And of course at times we do see selloffs become all-out panics, when capitulation prompts everyone and their dog to sell. When it happens, it can be rather spooky to see. Feels like it might not ever end.
What’s the Difference?
There are definitely various degrees of strength and weakness in the market, so let’s take a little deeper look and see what we can pick up and apply going forward.
The fact of the matter is that whether we’re discussing overbought or oversold conditions, or parabolic uptrends or all-out capitulation, the moves in price are happening at an unsustainable pace.
That means it might continue for a little longer, but not forever. Eventually, some kind of recoil or pullback or reversal is going to arrive, ending the move. Another might follow in the same direction, but the point here is that price doesn’t move in a straight line forever.
With that said, the biggest factor in determining exactly which condition we’re seeing is going to be the timeframe being referenced.
For example, on an intraday 5-minute chart, a parabolic uptrend can occur. That same move may leave the daily chart of the same stock hardly even overbought. So looking under the microscope won’t often correspond to the big picture view.
Faces in the Crowd
As we examine these conditions, it’s crucial that we take notice of all parties involved: the buyers, the sellers, and those who are short. Knowing who’s involved and being able to continually evaluate their likely motivations can give us a big edge as traders. It means we’ll be better prepared for knowing if the move might persist, or if instead we need to be on watch for a sudden shift. Let’s look at a few situations and the roles which matter most…
First though, a brief description of how I’m using these terms:
Buyer – a bull with cash on hand who wants in.
Seller – a bull with inventory (shares) on hand who wants out.
Short Seller – a bear wanting to get in and profit from a decline.
Overbought:
Buyers – they’ll be greedy and eager to buy the first dip. In an overbought market, the bulls are correct and anxious to add to their positions. They view it like they’re defending turf, so give them some respect until they show signs of tiring out.
Short Sellers – they’re using strength to initiate reversal plays, but walking the tightrope. Understanding that they’re putting on short sales at the near-term highs means they’ll likely be quick to cover if more strength arrives.
Oversold:
Sellers – they’ve quasi-panicked and dumped when they shouldn’t have, adding some fuel to the fire. Once they see a bounce or some stability, they’ll likely get long again. If the bounce fails, they’ve just compounded their mistake, perpetuating the cycle.
Buyers – they’re trying to ‘buy low’ but struggling, because with each new low in price they get spooked and jump ship again. If a little more pain can be inflicted, they’ll give up. At that point, they’re vulnerable to getting caught very off guard.
Parabolic Uptrend:
Buyers -this is all-out greed. They’re making money hand over fist, and see no end in sight. The upside pace has increased, as has their desire for more, and they have no idea that the edge of the cliff is fast approaching. Once it arrives, they’re in for a shock and they’ll rush for a chair as the music stops.
Short Sellers – early = wrong. They’ve recognized the unsustainable pace of the advance, and they know they stand to benefit big if they can simply time their entry well. Unfortunately, their confidence is battered at this point, as is their account. They’re wounded but staying attentive for an opportunity which will quickly increase their boldness.
Capitulation:
Sellers -regrets, regrets, regrets. Repetitive questions of “why didn’t I sell back at $__” plague this crowd, and they’re absolutely sick of getting beaten up. They’re throwing in the towel, and planning to buy a small used boat with what’s leftover. It’s been a long road for them, but the pain isn’t over because as the low gets established and price rebounds without them, their ego takes one last significant hit.
Buyers – what began as a bold get-in-front-of-the-freight-train move has chipped quickly away at their equity as time after time new lows stop them out. But with some dry powder still available, they sense a chance to pick up some bargains with potential. If they can only endure the foul smell of a sick market and go completely against the crowd, it’ll pay off big so they hang around and keep trying until their ship comes in.
The Biggest Question
Are you in the habit of evaluating not only the conditions you’re trading in, but also the participants at any given point in time? Understanding what the flip side is thinking will help keep you grounded and more aware of whether it’s time to hold ’em or fold ’em!
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Protect Capital Even in a Bull Market
This market sure has been strong – we have yet to see a pullback which has lasted longer than a few minutes!
Instead, we’ve merely seen brief pauses of sideways price action, which is quite nice…if you’re long.
A powerful market like this does have a downside though, which is fewer quality setups for new long side entries. And shorting? Well, let’s just say some feelings have been hurt for the bears!
We’ve come a long way since the July 8th lows, and right here, it’s very easy to chase stocks if you want to get long. It feels like it almost can’t go down (famous last words), and thus confidence is really high. But that doesn’t make buying here a good decision. In fact, sometimes it’s best to actually let the market come to us after such a move.
Protecting capital is the top priority of all successful traders. Making money is secondary.
Even strong bull markets like what we’re seeing right now require that we protect capital. It’s easy right now to think making money on the long side must be easy when the market rallies almost daily.
But trading out of fear that the market will run off and leave you behind is a recipe for forcing trades, which will usually cost you more money than it’ll make you!
Stay Focused
Our job as traders is to take only the best setups with the highest reward and lowest risk associated with them.
Keep that in mind here, as the market remains quite extended on a short-term basis. Manage your open positions the best way possible, and be willing to patiently let the market come to you. Once it does, then set up new trades.
There will be plenty of good setups in the next few days and weeks, but it isn’t wise to lower your standards and buy stocks that are technically extended just to get long.
A lasting bull move will offer plenty of chances to buy, and that’s best done on pullbacks or after resting phases. If this breakout sticks, we should see many opportunities in the weeks to come.
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 7-26-2009
Moving out of a multi-month trading range has been a very welcomed sight for many traders in the past week. It has meant an expansion in volatility, greater momentum than we’ve seen in a while, and new recovery highs for the market from the March low.
However, the way in which it has happened obviously caught quite a few people off guard. The emotions have combined for a panic buying atmosphere, ripping bears in the process while sparking fears among bulls with cash that prices may never again retreat.
That’s not a logical view of course, but anytime there’s a big move taking place it’s common to see emotions behind the action.
Nonetheless, the indexes are getting back on the move. And although a rest or pullback from here would be welcomed and healthy, we’re still waiting on it to arrive. While we wait, it’s a great time to examine some important levels for the indexes to keep an eye on in the days ahead.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 7-19-2009
What a move last week, huh? A 7% spike across the board in the indexes is certainly one way to get the attention of traders.
Especially those caught short after the creation of lower highs and lower lows in recent weeks.
We’ve got a new week fast approaching, and anything goes. That means it could be a dull, quiet week with no momentum. Or it could be another rip-roaring surge to new multi-month highs. Or something else.
That’s a big part of why I’m a trader – there’ll be opportunity to profit no matter what happens. As long as you show up!
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
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]
Are You Developing Your Trading Strategy?
One huge benefit I have of running the premium site over at TheStockBandit.com is the opportunity to interact with many traders on an ongoing basis.
As a trader, I’m thankful for the chance to keep the dialogue going with others, discussing trading strategies and current conditions with traders all over the world. No two of us are exactly alike, but we have plenty of common ground to stand on as traders.
I usually have quite a few email conversations going with members of the site, and one from this week was worth revisiting.
There are a few elements from it that I’d like to share, so I’ll break it down into a couple of pieces.
This particular trader (named Lisa) described herself this way:
“I am still in my development phase of trying to find my niche, as to where I fit in this big world of trading.”
She’s right – there are many ways to skin the market cat, and many developing traders never quite are able to determine which one is right for them.
I think a big key here is to be decisive. Rather than staying on the fence between numerous styles of trading, it can be very rewarding to select one which is appropriate for your situation starting out. Seek out some possibilities, pick one, and start to develop it.
After describing a couple of specific strategies she’s trading right now, she went on to make the following comments:
I am becoming a much more diciplined trader. I think I am coming along with my own style and my own thinking, and it is truly a process. I know enough to keep myself above water, but I am fine tuning my technique.
Awesome! Discipline is always a good thing, and learning to think for yourself is an absolute must. I have no problem assisting traders however possible, but the aim is to get them to the point to where they do not need to rely on me.
It’s very satisfying to become self-sufficient as a trader. If you aren’t aiming for that, what’s holding you back?
Also, it’s important to remember that our development as traders is indeed a process. That means some patience will be required, and we’ll need to make some adjustments along the way as we move down the road to success.
Lisa’s doing a great job of developing her trading strategy. She’s identifying her ideal opportunities, and staying away from those which have not proven fruitful for her. Are you doing the same?
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
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]
