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One Way to Review Your Trades
If you’re at all like me, every now and then certain aspects of your trading will stand out as having changed. Sometimes that’s for the better, other times for the worse.
While it’s fun to see improvement over time, one key to trading success is the ability to modify one’s approach periodically in order to stay on track.
I think of it like that statistic you’ve heard about how much of the time an airplane is just a little off course when in flight, with the pilot constantly putting it back on line toward its destination.
As traders, we have the same responsibility. We maintain our direction by reviewing (mentally or physically) how we’re doing, and then by making the necessary adjustments.
Well, last night I recognized that one particular strategy which I happen to trade has been off a little lately.
So what did I do?
I got up early this morning (that’s part of preparation) and spent some time going over some of my historical trades when this strategy was really on, and I compared what I found there to how I’ve been trading this strategy lately. It was an eye-opening exercise, and so far, a profitable one.
This same clip is posted over on the Trading Videos site and perhaps you’ve seen it there, but in case you didn’t, I wanted to put it here on the blog.
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]
Halftime Honesty
The year is halfway over, and I hope you’re exceeding your expectations for 2009 thus far.
With an extended holiday weekend approaching, it’s the perfect time to pause and reflect on not only your performance, but also your process.
So let’s head to the proverbial locker room and examine how the first half has played out. Doing so will enable us to properly prepare for the 2nd half and finish strong the way every winner should.
First 6: Something for Everyone
2009 has been an interesting year already. January began with some real promise as the market sprinted higher for a whopping 3 days before turning south and stomping on the gas. We headed lower into mid-March, when a meaningful upside reversal brought about significant gains – and virtually in a straight line for some 9 weeks before pausing. Since then, we’ve climbed incrementally higher, and currently stand somewhat range-bound with traders waiting for momentum to return.
That means that to date, we’ve had several kinds of price action with the market throwing the kitchen sink at traders. Downtrends, reversals, rip-roaring rallies, and even a few trading ranges have been seen.
The way I see it, that’s a little something for everyone. Including you. So if I were to ask you how you’d grade your performance during your favorite stretch, what would you say?
And more importantly, where do you see room for improvement?
Right now’s the time when brutal honesty can bring big benefits – if you’re brave enough to bear it. Sure it’s more fun to reminisce about the best trades we’ve made, but the failed trades and the missed opportunities hold within them perhaps the greatest promise – the chance to learn and apply, and with it, the chance to rise above our previous best.
I don’t know about you, but that fires me up.
I’m always looking to gain an edge, and I love working toward continual improvement. Growth and sharpened skills do much more than pay the bills – they motivate and reward me. The thought of getting better gives me some momentum, particularly in my mindset. Trading is such a mind game that having an edge there means more to the bottom line – which is nice, because I do not like to lose.
New Year’s is Coming
Here in Texas right now, we’re seeing triple digit temps daily and it’s quickly becoming the Great Yard Bake of 2009 with the heat wave we’re in. Summer is in full swing, but you know what? Winter will come.
When you stop to think about December 31st, it probably seems forever away. But put yourself there mentally for a moment, and think about how you want your 2009 to finish.
Will the halftime checkup prove to be a turning point for you, or will you have squandered an opportunity to grow in the 2nd half?
My hope is that the former will be true for you. Right now, you might be fed up with the current trading ranges and lack of momentum. You might hate the summer doldrums and just want a break from it all. And truthfully, now’s not a bad time for that if so (I just spent 10 days in the Caribbean).
But if you’re driven to grow and improve and make this the year you actually make some real strides – both in your account and in your mindset, then right now is the perfect opportunity to pause and pay attention to your process.
Spend some time crunching the numbers. Put in a few hours to review – truly review – your trades from the first half, and be honest and see what you learn. Some of them you nailed…congrats! But others you knew you should have taken and didn’t. Find out why. Some of them you bailed out of too quickly, micromanaging them by undermining your original plan. Figure out what happened. And yes, a few of them you got blindsided by. It happens, but really do your best to determine whether the fault was your own and something you can avoid in the future.
The Moment of Truth
Here’s the thing… the future arrives daily, and either you’re prepared for it or you aren’t. Either you want success bad enough to find it, or you’re satisfied enough with mediocrity to keep enduring it.
Get honest with yourself, and before you head out for the 2nd half, decide how you want to feel the next time you walk off the field. The first half is over, and only you can determine what happens in the 2nd half. Get clear on what you want.
I want to win.
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]
Trading Education
The timeline for success for almost anything looks something like this:
It’s a pretty simple process, although certainly not always an easy one.
Steps 2 & 3 are pretty self-explanatory, so let’s explore the first step in the process a little further. Hopefully you’ll gain some insights or gather some resources for ways to increase your learning and progress as a trader.
A Common Question
Rather frequently, I’m asked by traders how to build their trading knowledge. Many are familiar on some level with various aspects of trading, but feel there are still some missing links before they get to Step 2 (practicing).
Here’s an example of one trader’s inquiry:
I have read several books that you have recommended, have gone to several seminars ( some good, some a way to spend 10k) have gone to local investor group meetings etc…..I guess my question is, when did you feel as a trader that you were getting some quality trading education?
My response is usually along these lines:
Every one of us should be in continual-learning mode. I have been at it for a decade now and still am learning lessons…some are new, others are “refresher courses.” All kidding aside though, I truly think the market evolves over time and it naturally requires that we adapt to it – hence the continual learning.
Looking Outward
Quality trading education comes in many forms. It can come from interacting with other traders (in places like Twitter). Reading good books and visualizing ways to implement the lessons into your own trading is an excellent way to grow.
Taking a stock trading course for some training, or watching trading videos or even attending a seminar here or there definitely will speed up the process. And of course there is no substitute for experience, so our daily trading activities certainly contribute a lot to our learning as traders.
Those are the external ways to learn, all of which are valid and I highly recommend them. But don’t neglect the internal ways to learn.
Looking Inward
I’ve always felt that if I’m objective about my own trading strengths and weaknesses, then I know exactly which parts of my trading need improvement. If you are able to determine that, congratulations and you are on your way to finding what you’re missing.
Many traders won’t be honest enough with themselves to see what they need to “fix” or adjust, so they keep on searching for something. Some of us need discipline on cutting losses, some need help holding onto good trades longer (ME!), some need to find a method for locating trade ideas, etc. The list of potential missing links is long, but you only need find 1 or 2 to see a huge difference in your results.
Evaluating it All
Once you are aware of what you need to work on, you can evaluate every piece of info (other traders, seminars, books, etc.) and know quickly if it addresses your specific need.
So if you get some piece of info which helps you to accomplish your goal of improvement in that key area, then you’re getting quality trading education.
Maybe it’s expensive, maybe it’s free, but the deciding factor is whether it’s useful.
I do my best to offer quality free education here on the blog and the trading videos site, but the spectrum of traders here is wide when it comes to experience level. Some have been at it for a long time, while others are seeking more basic information as they build their trading plans from the ground up.
In the premium nightly newsletter over at TheStockBandit.com, the education provided there fits a narrower audience of traders who want a few trade setups to evaluate and some understanding behind those plays. They’re still learning, but on a more experienced level.
Whatever route you choose to build your trading knowledge, be certain that you’re comparing the info to your own situation and constantly figuring out how it applies to you. That will bring more value whether you’re getting free or premium info.
And of course, let me encourage you to keep learning regardless of your experience level. There’s always room to improve.
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]
Clues to Observe for a Market Correction
Is this market due for a correction?
That’s the million-dollar question right now for many, so why don’t we examine a few clues to watch for just in case. After all, there could be some hints provided by the market before the heavy selling hits – that is, if it’s coming.
Here are 3 technical considerations I’m going to be on the lookout for…
- Weak closes. These tend to signal that some distribution is taking place. We’re all familiar with the phrase “amateurs open the market and pro’s close it,” but I think there really is something to the way in which the market closes. If it’s limping across the finish line with any regularity, it’s usually a sign of at least some short-term fatigue and therefore ripe for some selling.
- Watch key support and resistance levels. If key resistance is turning the averages away or if support levels are breaking, that’s ample proof of some underlying selling. (I highlight these weekly in the Market View videos over at TheStockBandit.TV.)
- Watch for potential lower highs and/or lower lows to be created. While these may take some time to actually confirm, keeping tabs on stalling rallies and areas where bounces look to be failing is a telltale sign that the buyers aren’t in charge.
There are probably several more, but those are the ways I tend to gauge the underlying market strength and weakness. Some traders prefer to watch indicators or sentiment readings, but monitoring the price action and the character of market moves tends to provide enough clues for me.
One other thought… I do flip through several hundred individual stock charts nightly, and that also helps me gauge whether more stocks are acting strong, weak, or are just lethargic. It also helps me determine when to curb my buying. So if you don’t currently use a charting program that enables you to keep watch lists, make notes, and draw trend lines, then get one!
And you know, even if this market does end up correcting a bit, what would be so bad about that?
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]
We Now Interrupt Your Normal Programming
Perhaps the automatic buy button got disconnected somehow, but Wednesday’s decline marked the 3rd consecutive decline in as many days – something we’ve not seen since early March when this market caught fire for 9 very green weeks.
And although a 3-day losing streak is far from the worst thing this market could see, it begs the question of whether or not it’s the beginning of, um… a change of character.
A short-term turnaround.
Ok, a reversal, to put it bluntly.
After all, a pullback is going to happen eventually which lasts for a few weeks – not just a few days, and now might be just as good a time as any for that to happen.
No Crystal Ball
Now, I’m not one to make big bold predictions, but some of you might recall that on the day of the low in March – yes, 9 weeks ago – I showed you right here the “technical threat of a short-term reversal.” I wasn’t going out on a limb, just calling it as I saw it.
It turned out pretty well.
So here I am again, simply pointing out what I see.
And if this does prove to be the early portion of the first meaningful pullback we’ve seen since early March, it’s important to first recognize that it would be a healthy event. The strongest markets do have pullbacks along the way, and that actually can help to perpetuate a trend.
Think of it like a rest – nobody can run nonstop forever, and the market is the same way. Some time on the bench can be a good thing.
Winds of Short-Term Change
This question of whether conditions are shifting or not is at the forefront of the discussion right now. Most individual stocks will take their cues from “the market,” which is developing a bit of a rolled-over appearance on the daily charts here, I might add. Stated otherwise, it might play out to be more than merely a 3-day dip, with a pretty big if. (See the caption on the chart below.)
StockFinder Chart courtesy of Worden
3 Positives of a Pullback
And so it may very well be that a decent correction is finally starting here, which if it does, could serve to do a number of things – all of which are good. Assuming we don’t go straight back to the March low, that is. Here they are:
1. The widespread overbought conditions we’ve seen for the past several weeks can finally go away. That means when a bullish setup appears, it’s less likely to need a “stay away” sign in front of it for those of us who prefer to manage our risk accordingly.
2. Stocks should (once a good pullback is completed) be able to set up some new bases, patterns, and support zones for trading. While this might take more than just a few days, it’s ultimately great news – especially if your preferred timeframe is swing trading. The stocks which have produced nothing but steady climbs without rest can finally pull back and establish some new support – like a higher low. Combined with the higher highs we’ve already seen in recent weeks, that would keep the uptrend intact.
3. A meaningful pullback is going to help separate the men from the boys. During this run from the March lows, few stocks have failed to participate. It’s almost like everybody’s doing it. It seems virtually everything has joined in the rally, making it difficult to determine which stocks are merely being squeezed higher and which ones are developing into true, lasting leaders. Separating the also-rans from real leadership should help to narrow our focus as traders, and give us higher quality plays on both sides of the tape. That’s something we all stand to benefit from, whether bull or bear.
So in closing, let me just say I’m no perma-bear. But don’t hate me if I’m rooting for a little more of a correction here. It sure doesn’t have to last forever, and I think it’ll lead to much better things for those of us trading this market.
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]
Testing 1-2-3
I’ve written before about my opinion of backtesting, but let’s go a different direction here and talk about just plain-Jane testing.
If you were told that a diet pill would have you in that beach body by June, you’d probably be skeptical. But given enough evidence, you just might try it. Tentatively.
We’re no different in our trading. Those of us who trade daily, who observe the price action and who are truly students of the market will on a regular basis run across something of interest. Maybe it’s a routine in the overall market (such as early strength or late-day weakness) that seems to provide an opportunity. Or perhaps it’s a setup that’s been producing some phenomenal moves.
Whatever ‘it’ happens to be, the odds are that you’re initially intrigued by it but yet reluctant to really go for it and trust it.
Why that is, I don’t know. Human nature I suppose. But regardless, when we do identify that anomoly which could quickly prove profitable for us as traders, we have to find out if it’s legit.
Enter: the test.
Let’s suppose your standard trade size is, oh, 1000 shares. Or maybe it’s $20,000 per position. However you define your standard position size, throw that out the window when it comes to testing a brand new trade idea.
Because the first time you do it, even the 5th time you do it, it’s not about making money. It’s all about gaining some insights into how that idea plays out. It’s about getting a feel for how it acts. It’s about building a little confidence in that setup before you go for it for realz.
So cut that size down by, oh…90%. I’m saying take 10% of your standard size and give that trade a shot.
Trade it so small that you won’t feel it – win or lose. Because remember, the point is to start getting a feel for how it might go. Removing the risk we all feel which is tied to performance is crucial in the testing phase, so that’s a necessity. Trade tiny and see what happens.
As you start to gather a little data and see some ways you might improve on entry, exit, or timing, then you’re getting closer. And again, you most likely haven’t made or lost much at all during this test process – because that isn’t the point. Just feel it out, evaluate the info which comes back to you, and adjust.
Then, once you’ve got it down and have developed a more sound methodology for putting on and taking off that trade, only then is it time to step up the size. And then have at it, because that’s the point at which it’s about making money.
Anything prior to that is merely a test.
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]
Trader Interview With Jeff White
First of all, welcome to those of you who have arrived from TraderInterviews.com! There are literally hundreds of trading articles here published over the years to sort through, so spend as much time here as you’d like and come back often.
To those of you who are regulars here, I am honored to have been asked for another interview from Tim Bourquin from Trader Interviews. That’s a site I’ve frequently visited over the years to tune in for excellent podcast-style audio interviews with top traders. I’ve learned quite a bit there, and it’s one very useful place to study not only the methods but also the mindsets of traders who are finding success in today’s markets.
They do an excellent job of locating traders across various markets with a wide range of styles, which provides a great resource for any trader who wants to stay sharp & continue learning.
Here’s the direct link to my interview, which runs 40 minutes. You can listen on the site or download the MP3 and put it on your iPod if you want it on the go.
Enjoy the interview & I hope your trading week is a great one!
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]
