Search Results for 'traders'
Has the Easy Money Been Made?
It’s a question all good traders find themselves asking on a regular basis…
“Has the easy money been made?”
Sometimes it’s in regards to an open position which has stalled out or losing momentum. Other times it’s tied to a look at the overall market, trying to determine whether or not the current move still has some fuel in the tank.
Indeed, few questions in trading are as important as this one.
As you evaluate your own trades, this is the question which will most often be your deciding factor in what to do. Perhaps you’re eyeing a nice setup for an entry… is the risk/reward structure as it should be? Or maybe you’ve been in a position which is warranting a second look right now… do you stay in, jump ship, or tighten stops due to a lack of trust?
How Do You Know?
Watching the rhythm of a stock’s (or market index’s) movement over time, and particularly the recent action, can provide you with some excellent clues as to what’s really taking place. Every stock has a personality, and your ability to decipher it will ultimately prove whether it’s trade-worthy.
Suppose we’re eyeing a rally which is underway and we’re trying to decide if it’s likely to continue. Gauging the upside volume compared to the downside volume can offer us some important clues. We can also glean a lot of useful info with a close look at the pace of the advance – is it sustainable? Measuring the depth of the dips, the quality of the rest phases, and of course the upside acceleration as strength resumes is going to complete the picture and leave us with some crucial elements to consider. Weighing each of these is what will ultimately bring us to action (or inaction).
A Fork in the Road
Whether it’s the current market move off the July lows, or any single position you are evaluating, always seek to determine if the easy money has been made.
If your conclusion is yes and you’re concerned the current wave might be closer to the end than the beginning, then be extremely cautious and keep any new trades on a very short leash. You might just be in the midst of one of those times when discipline and patience is needed while some new bases form in the charts.
However if your conclusion is no, then keep working your watch list in search of swing trading candidates which can leave you properly positioned should the move continue.
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Train Well to Trade Well
While watching the Olympics, it never ceases to amaze me the dedication of these athletes and the preparation they go through in order to be at their very best. These people are what some might call ate up with it! They’re consumed with improvement, they’re completely focused on peak performance, and their commitment level is unparalleled.
I’m sure you see where I’m going with this.
If you want to be a good trader and turn real profits from your efforts over time, you can’t just treat it like it’s a short-term hobby. It can’t be something you work to improve at only on occasion or whenever you feel like it. That isn’t to say that it should dominate your life – because it shouldn’t. But I am saying that you’ll get out of it what you put into it. Good habits pay off.
Like a world-class athlete, you absolutely must train well to trade well. It’s a continual thing, regardless of your time availability. If you can only put 30 minutes per day toward your trading, then by all means do it – day in and day out. If it’s 8 hours, so be it – you’ll come to expect even more from yourself.
Make an effort to consistently improve, and you’re going to see the results. Think of it this way… hopping on the treadmill 5 days every week would have you in better shape a month from now, right?
Trading isn’t any different. It’s a honed skill that requires consistent action on your part. That doesn’t mean you continually press buttons, but it does mean that you set some attainable process-related goals to strive for each month.
Designate some tasks you know you need to perform regularly in order to keep improving, and get after it. Whether that’s your nightly homework, a month-end review of your trades, or something else, those frequent milestones will keep you on the right track. It’s all part of trading responsibly, which is what this is all about.
Now let me be clear… I’m sure not saying that your life should revolve around trading. I don’t believe that, and a balanced life has far more important aspects to it than trading. But when it does come to your trading, if you want to be truly good at it, then examine your level of dedication and adjust accordingly.
Remember – trading is a marathon, not a sprint. Treat your daily activities that way, and you’ll see that over time you are building up to much better skills than you currently possess. Keep aiming for patient progress, and the steady account growth you get as a result will reiterate to you that you’re on the right path.
But it takes practice, building each day on the previous day, just like an athlete training for something bigger.
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Blending Trading Plans & Flexibility
In my previous post, I discussed the biggest enemy of traders. Among other things, I mentioned “formulating a flexible but well-defined trading plan.” Let’s unpack the ‘flexible’ portion of that comment today.
Sidestep Risk & Stupidity
If I plan to stop out of a long position in XYZ below $25, and the stock falls through that level and I hang on in hopes of a recovery, I’m not being flexible – I’m being stupid.
However, let’s say news surfaces from XYZ that they’ve modified their earnings announcement date to tomorrow afternoon as opposed to a week from now as had been planned. For me to be flexible means I roll with the punches and modify an exit strategy accordingly so that I’m not holding the stock when that major news is announced (as per my Trading Rules).
See the difference? Flexibility is crucial in today’s environment, but it must be implemented with some discretion.
‘Outline’ Your Plan
How about another comparison? What if we thought of a trading plan in the way a public speaker uses an outline. The speaker knows what he needs to say and when to say it, but just in case he gets distracted he’s got an outline right in front of him to bring him back on course at a glance without missing a beat.
Similarly, a good trading plan lets us know at any point in time what move we need to be making – whether entering a position, standing pat on an existing trade, or closing out a position at an appropriate level. At times we’ll be distracted by the price action, so the trading plan prevents us from becoming panic-prone.
The ability to pair flexibility with that trading plan comes with experience, but it does come. Just as a polished speaker can read his audience and recognize when certain topics may need additional time and attention based on the response (or lack of) of his listeners, an experienced trader can read his position and gather some feedback from it in order to determine when stop or target levels may need to be modified. But just as a first-time public speaker should stick with his outline, new traders should stick with their game plan.
Cater to Your Account, Not Your Feelings
Many traders think of a trading plan as something which is too rigid to allow for modifications which might be warranted, but that simply isn’t the case. A trading plan should be implemented to benefit you. Only allow it to hinder your poor habits. If you find yourself in a situation where it isn’t accomplishing that, or if the landscape has changed in a way that your original plan did not account for, then don’t think twice about making an adjustment.
The key is that you don’t want to go about making changes in order to accommodate your feelings. Because remember, great traders control emotion by trading without it. So get a grip and utilize your trading plan purely for functional reasons.
As you begin to gather the experience which builds ‘gut feel,’ you’ll come to recognize situations which warrant a modification to your trading plan. But until that comes along, don’t rush it! Stick with your plan like a speaker watching his outline, knowing that it will keep you focused and on the right track.
Trade well out there!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
P.S. Have you signed up for the Free Video Newsletter yet? It’s a new feature with regularly-updated video posts which are brief but beneficial. Check it out!
Market View Video 8-3-2008
The major averages have been bound by short-term trading ranges recently, but fortunately for us as traders, that won’t always be the case! With all eyes on the FOMC this week, a potential catalyst lurks on the horizon for this market. We’re also in the midst of earnings season, so it’s certainly a time to stay sharp while waiting to see which way we go next.
Before you go pushing buttons this week, make sure to check out this week’s Market View video over at the main site for a closer look at the averages and some things to consider if you’re trading.
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]
Day Trading Community Loses Pioneer Harvey Houtkin
Harvey Houtkin, a.k.a., “the father of day trading” has died at 59. The original SOES Bandit was a controversial figure on the Street, but like him or not, it is undeniable that the man paved some early roads for early day traders which ultimately brought us to where we are today.
Some may argue that Wall Street was years ago destined to become more self-directed with the internet gaining popularity and online brokerages coming available, but Houtkin is credited with discovering some of the earliest methods which scalpers used to turn quick profits in the markets via the NASDAQ’s Small Order Execution System (SOES).
Harvey Houtkin was one who helped make the term ‘direct access’ an everyday phrase for those involved in the markets. He also undoubtedly helped start the shift in the commission structure which Wall Street used to utilize. Can you imagine having to phone your broker today to jump in and out of some biotechs, and pay $1 per share in commissions? Ouch – no thanks!
He was a pioneer who started a revolution, and as a Bandit myself I am sure glad he shared his methods with the world and got people thinking in a different way about trading the markets.
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Discipline is a Habit
Discipline means being willing to wait. Wait for your setup. Wait for choppy conditions to pass. Wait to increase your trade size until your recent results warrant it. Trading requires that ability from us, and if we don’t have it… well, the market will teach it to us!
As traders, we have to let conditions emerge which are most favorable for our trading. Our failure to do that can result in numerous outcomes, none of which are good!
Discipline means we close out a trade when our line in the sand is crossed, but it also means we stick with a winning trade while waiting for the move to develop. It means we don’t get bored out of trades – we stick with our game plan and avoid micro-managing positions.
But there’s one thing about discipline which few stop to recognize: it’s a habit.
Decisions, Decisions
That word, habit, has several connotations. There are good habits, such as trading responsibly or brushing your teeth before bedtime 😉 . And there are also bad habits, like losing control of your trading or biting your nails. So while “good” and “bad” might be relative phrases, it’s important to note that both of them are cultivated over time to become second-nature.
If given the choice, who would take bad habits over good when it comes to your trading? Nobody, right? Well here’s the thing: you do have a choice. You’re reinforcing some kind of habits every day – but which kind?
Look Both Ways Before Crossing ‘The Street’
This market has been a little wild lately, and while some traders love the chaos, others may not find it ideal. Whichever group you fall into, be honest about it with yourself. If you fall into the latter category (not lovin’ it), this is for you!
Many of us want to push buttons all the time and live up to our “active trader” reputation, but that’s not always good. If you’re struggling to find your way in this tape, be willing to take a wait-and-see approach…there’s nothing wrong with that. It’s far better than just making trades to see what happens, that is for sure.
The Road to Recovery
Making discipline a habit means a willingness to do the hard thing when you need to because you know it’s right. In your personal life that may mean diet, exercise, and just taking care of things which need doing even though they are no fun!
And while those kinds of things may be purely personal (not trading), you’d better believe they will carry over into other areas of your life – like trading. Remember, discipline is a habit. So start making it a habit in all that you do.
Begin with a little discipline and keep building on it. There’s momentum there. As habits start to take hold, you’ll find that your discipline improves in your trading, allowing you to better follow your intended game plan without having that internal struggle as often as you used to.
Staying disciplined might not ever become easy, but that just reiterates the fact that it’s worthwhile. Making the choice to be disciplined in every aspect of our lives will definitely carry over into trading, making you a better protector of your capital when you’re wrong and a more profitable trader when you’re right.
Now that’s one habit with some appeal!
Trade well today,
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Earnings Expectations vs. Trader Expectations
Around earnings time, the word “expectation” brings a dual meaning. There’s the Street’s “expectation” for EPS and other estimates on what the fundamental news will be when companies report, but there’s also the expectation of traders.
I put together a video for Free Newsletter subscribers over at TheStockBandit.com discussing this very topic (which will go out mid-day Tuesday), and in it I take a look at an excellent example of how those 2 kinds of expectations can collide – and which one typically wins out.
If you aren’t on the free newsletter mailing list, sign up here and you’ll have access to these kinds of videos whenever they are produced. But you gotta be on the list to get ’em!
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]
