Succeed by Not Failing
January 13, 2011 at 12:53 pm
Too many traders think a winning trade is a good trade, and a losing trade is a bad trade…a failure. I disagree.
The result of a trade is either a profit or a loss, but not a success or a failure. Good trades can end up being losses, and poor trades can sometimes result in a profit. For example, jumping in front of a big move on a whim in hopes of getting lucky timing a reversal is a poor trade, but it may still make you money. Good luck repeating that over time.
So, rather than focus on losing trades as the definition for ‘failure’ in trading, let’s take a look at 3 common ways traders fail:
To fail in trading is to not have a plan. Failing to plan is planning to fail, according to John Wooden, and he knew a thing or two about success. Great traders know what they’re doing when they go to execute an order. They have an expectation for the trade, a reason behind it, and an exit strategy which they will absolutely follow. Even beyond a per-trade basis, you should have a plan in place for your style, your goals, and when you’ll be cautious. Plan for dull phases in the market, plan for volatility, and plan which strategies you’ll employ and when.
To fail in trading is to abort your plan for something beyond your current ability. I’ve made this mistake many times, and I’ve witnessed it in others. It usually happens something like this… Consistent money has been made, confidence has grown, but greed sets in. Rather than increasing your size incrementally, you double it overnight and start adding new plays to your repertoire. Not a good combination. You lose money, you lose confidence, and now you’re unsure of what to do next. Stick with what you know. If your buddy makes a certain play look easy but you struggle with it, learn it slowly – don’t try to make your week with it on the first shot. Keep growing, but don’t rush your development.
To fail in trading is to have an inconsistent process. A good golf swing is one which repeats (doesn’t matter what it looks like — ex: Jim Furyk). If you aren’t repeating your process over time, how do you know if it really works? Suppose you focus on news today, charts tomorrow, and your favorite chat room the next day…where will your consistency come from? This also happens when you show up on Monday morning with a revised strategy, give it a day to prove itself, then move on to whatever method you think you should try next on Tuesday. It’s throwing the proverbial spaghetti against the wall to see what sticks, and that’s no way to grow as a trader. Start simple, add a little to your work load as you get more efficient, but be consistent with what you do day in and day out – at least until you can single out certain areas which need adjustment.
Avoid failure as a trader by taking action only when you have a game plan, and only when you realize the risk you’re putting on. Avoid failure as a trader by abiding by your stops, which pertains to each trade as well as your daily, weekly, or monthly loss limits. Walk away when you’re wrong, and place your ego aside. Those who fail to submit to the market are only here for a little while.
Choose to stick around…only those who stay in the game will be ready to capitalize on the best periods of opportunity when they arrive.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
When Goals Impede Progress
December 30, 2010 at 11:10 am
Like it or not, it’s that time of year where goals enter the picture again. This is of course a time for family, gifts and bowl games, but it’s also a time when each of us are compelled to take a look back and a look forward.
Reaching the finish line at the end of the year leads us to consider how things went, and most all of us know whether we exceeded or fell short of the goals we set a year ago. In turn, we evaluate where we are and take a good hard look at where we want to be a year from now.
Goals have some excellent qualities and they serve a real purpose when used correctly. They can make us think bigger and cause us to grow. They can drive us to consistently work toward an objective, helping to bring purpose to our daily activities. And goals can boost our confidence when we achieve them, helping us to realize that we’re capable of striving for higher levels. Goals are great, and I’m a goal-setter. I’ve discussed goals here numerous times over the years, but there’s one take on goals I’ve never before mentioned…
Goals aren’t always good, and they can actually hold us back when they’re set in the wrong manner or approached in the wrong way.
What Bad ‘Goals’ Look Like
As an example, years ago I would periodically update the wallpaper on my PC’s desktop with a new dream car that I’d want to go after with my trading profits. Inevitably, my trading would go almost instantly in the toilet! The new ‘goal’ was a distraction to me from what I should have had my focus on, which was the market action…not something I wanted to buy with my trading profits. (Realizing this, I’ve since kept pictures of my family as my desktop wallpaper!) My goals now involve processes I need to go through for good trading, rather than cars or destinations (duh). First things first!
3 Ways Goals Can Stunt Growth:
1. If goals are too high, we sometimes force trades in an effort to reach them. Lofty goals are good, but they can’t lead you to take on outsized risks or overstep your bounds in terms of risk. Set goals that will require growth on your part and get you outside your comfort zone, but which are still attainable for your style of trading, account size, and risk tolerance.
2. If goals aren’t practical, we may prematurely dismiss hope for achieving them. I’m not referring to quitting, I’m talking about not pushing oneself the right way. Suppose you have a profit goal for the month and you’re down to the final week and miles away from your goal. It’s easy to dismiss that goal and wait for the next month to come around, yet there’s opportunity you’d be missing out on now if you did that. Grow your account every chance possible, even if you’re lagging on a goal.
3. If goals are distracting, they don’t help us. Like the car example above, my ‘goal’ was merely an aspiration and therefore not something that directed the focus of my trading. Instead, it detracted from it, and took me farther from where I’d have been without it. Make your goals process-oriented, and the results will take care of themselves.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Video Review of the Indexes 12-19-2010
December 19, 2010 at 3:04 pm
It’s still a bull market, and last week we saw continued price action which was constructive to the current trend as the indexes tagged new highs and consolidated.
The buyers continue to provide support on even the smallest of dips, although we haven’t ramped higher since earlier this month. There’s still time for an end of the year rally, so with an underlying bid beneath this market, be careful not to rule that out.
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 12-12-2010
December 12, 2010 at 3:06 pm
The bulls reminded all last week of the fact they have the upper hand (hoof?) in this market by producing new multi-year highs and finishing off the week in a strong fashion.
At some point, we’ll see this market correct, but right now that’s apparently far from the minds of traders as they see the push into the end of the year. What’s perhaps aiding the cause of the bulls is simply the fact that we’ve seen some nice rotation between large-caps and small-caps as turns are taken for the leadership role from week to week.
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 Scene Still Great
December 8, 2010 at 12:30 pm
On Nov 1, I mentioned the scene was set to improve, and since then we’ve seen exactly that. I didn’t base that post on the notion of higher prices necessarily, because UP does not equal GOOD – just as DOWN does not equal BAD.
I’m a trader, so for me it’s all about the movement. It’s volatility that makes for a great trading environment, especially when the technicals are playing such a prominent role. We’ve seen a pick up in volatility of late, which simply delivers faster moves for us as traders.
Lately, we’ve seen exactly that. Individual stocks and the indexes alike have respected trend lines and important resistance and support levels, allowing for some excellent trading opportunities for the astute trader to capitalize on.
Taking it to the Charts
For example, the indexes have been textbook in their respect of key levels. The S&P 500 has been range-bound between 1173 support (with numerous tests of that level in recent weeks) and 1227 resistance (tagged a few times but no close above it yet). That’s perpetuating the short-term trading range, which could easily serve as a stepping stone for another advance if it’s resolved to the upside.
The DJIA also has been highly respectful of key levels. The mid-May post-flash-crash bounce carried the senior index up to the 10920 area, and since then that level has been revisited. Currently it’s serving as support over the past few weeks, while the early-November high at 11451 was tested and held on Tuesday.
Individual stocks have also made exceptional moves through important trend lines as well as out of well-defined patterns. Here’s a look at a few examples:
So the general trading scene continues to improve, which means there’ll likely be ample opportunity in the weeks ahead to capitalize on. But the market won’t give you money – you’ve got to know where to find it and how to extract it. If you’re preparing daily with several if/then scenarios, and you’re managing your risk appropriately, you’re positioning yourself for continued success.
Trade Like A Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Reminder: Webinar Tonight!
December 7, 2010 at 2:07 pm
Here’s a quick reminder about tonight’s free trading webinar, as I would love to see you there if possible.
Update: here’s a link to the webinar recording – enjoy!
Weighing Risk & Reward with TheStockBandit
I’m excited to run through a number of interesting chart setups, from both the bullish and bearish sides, in order to teach you some concepts and of course put some quality plays on your radar.
I also plan to share with you the most powerful pattern I’ve been trading in recent weeks.
The webinar is scheduled to run 45 minutes, with 15 of those minutes set aside at the end for Q&A and a look at your favorite charts.
Visit this link for registration to the 8pm ET webinar:
Weighing Risk & Reward with TheStockBandit
See you tonight!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Webinar Tuesday December 7
December 6, 2010 at 10:38 pm
I wanted to be sure to post a quick announcement here that I’ll be presenting a Free Webinar on Tuesday (December 7th) with the folks from Worden, and I hope you can join us!
Update: here’s a link to the webinar recording – enjoy!
Weighing Risk and Reward with TheStockBandit
It’s scheduled to be a 45 minute webinar, the first 30 minutes of which I’ll be going through my watch lists, pointing out to you what I’m seeing in the charts for both the overall market and individual stocks.
There will be 15 minutes of Q&A time at the end where you might want to bring forth your favorite stock and we can take a look at those too.
I certainly do not have all the answers, but it’s going to be a chance for me to convey what I’m seeing out there and hopefully not only teach you a few things, but also put many stocks on your radar which you may find of interest.
Oh, and the best part about it is that this event will be FREE, so be sure to register at this link for details (and access to the recorded version if you can’t attend live):
Chart Reading with TheStockBandit
Remember, free webinar this Tuesday night, 45 minutes of charting reading with you and me – I can’t wait!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
