Search Results for 'traders'
Bulls Taking A Breather
The bulls posted another gain last week, but overall they’re allowing the major averages to put in some needed rest. Last Thursday’s intraday reversal to the downside caught many traders offguard, but it’s action like that which will ultimately allow the charts of individual stocks to begin building new bases and not get too extended to the upside.
This week should be interesting as we wait to see how much more rest the market can get while the focus begins to shift slightly from such an economy-sensitive environment to the action in individual stocks. We have earnings season really starting to get underway, so be sure to keep an eye on the earnings calendar so that you can avoid any surprises in stocks you might hold.
Also, be sure to check out this week’s Market View page over at TheStockBandit.com before you start your trading week for a closer look at the indexes and some chart comments which were posted this evening. This info is provided every night for members at TheStockBandit.com along with individual stock plays, but the market commentary is posted on Sundays as a free resource for those of you who may be interested.
Trade well this week and stay patient 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]
Per-Share Commission Pricing
Having founded a subscription-based trading website, I get the chance to interact with quite a few traders each day. Whether by email or through the community forum on the site, it’s always nice to visit with other traders about a variety of topics. Some of them have lots of experience and have been in the game much longer than me. Others are new and fresh and inquisitive. I enjoy dealing with each of them, but the newer traders often ask questions which I ought to cover here more often. One in particular deals with commissions.
Pardon the pun, but as an active trader, I do pay my share of commissions each year :-D. Some years I pay more than others, and it just boils down to how much of my trading volume that year comes from swing trading vs. day trading. When holding stocks for a few days at a time, or swing trading, obviously the share turnover is much lighter than when scalping for a few cents at a time with a day trading approach. Each style can be lucrative, but the higher your activity level is, the more it can benefit your broker if you aren’t careful.
The majority of part-time traders I run across are on a per-trade (or per-ticket) commission structure, which means they pay a flat rate whether they’re buying 100 or 2000 shares. This can get costly fast. Partial sales will add to the commission bill quickly. The smaller trader begins to see his precious capital erode faster if he’s very active at all, and unfortunately this can soon lead to him passing up good trades out of the simple fear of it costing too much to enter and exit the trade. That’s too bad, especially considering that trading is a numbers game.
Enter per-share pricing. Rather than a flat rate per order, you simply pay a flat rate per share, which means you pay for what you trade and nothing more. In dealing with many newer traders, not enough of them are aware of the per-share commission structures which many brokers offer. And although each broker is different, often times it’s as simple as requesting that your commission setup be changed to a per-share structure.
My broker offers per-share pricing, and I’ve had my commissions structured that way for several years now. Their standard per-trade rate is $9.99 per trade, but very active day traders can even negotiate lower rates based on high volume levels.
Commissions are truly a cost of doing business in the stock market, particularly if you want access to a sophisticated trading platform, but you can still reduce those costs if you go about it the right way. Regardless of which broker you trade through, find out if they offer a per-share pricing structure. Making the switch should save you a little money in the short term and a lot of money over the course of the year.
Trade well today!
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 With Indicators
I’m often asked why I don’t always apply stochastics or MACD or moving averages to my charts. To that question, there’s a simple and a complicated answer. The simple answer is that I prefer to focus on price and volume. My charts are cleaner and I can focus on the real buying and selling forces that are at work in a market without confusion or obscuring the most important indicator – price. The complicated answer requires a closer look at indicators.
Knowledge is Power
Indicators can be useful, but the trader must know when to apply them in order to get something useful from them. Applying the wrong indicator will only cause confusion, and trading is hard enough without adding more doubt to the picture! I have witnessed a number of traders frustrated with getting stopped out of trades when trying to buy moving average crossovers during a choppy, range-bound market. Taking trading signals from indicators must be done with the proper market conditions for which those indicators were created.
For example, a stock may be about to penetrate a key moving average, but if the stock isn’t trending then most likely you’re taking a false signal, as moving averages are rarely helpful in a non-trending environment. By definition, a moving average measures something on the move. Therefore, they are best used in a trending market. On the contrary, a stock with momentum may have an overbought reading according to oscillators, but oscillators are rarely helpful in a trending market, as they can stay overbought or oversold for long periods of time. Oscillators are subsequently best used for range-bound stocks and markets.
Selecting Your Settings
When in doubt, I will on occasion look at a trending stock and apply a moving average. However, a quick look through any trading magazine will show you that there are very few moving average periods with a wide following. For this reason, I place little weight in arbitrary numbers like 25 or 40 period moving averages which a great many number of traders supposedly follow. A stroll through any trading floor will show you the wide variety of time periods being sampled for moving averages, all of which produce different values. The 50-day and the 200-day moving averages are probably the most widely watched, but they trail price so far that most of the time a stock is some distance from either of these two moving averages, diminishing the usefulness of either for a short-term trade on most occasions. When I want to see a moving average, I prefer to apply a faster one of 10-20 days(2-4 weeks), which will often give me a better glimpse of where a stock may find recent support or resistance.
A range-bound stock will generally ignore moving averages though, which is the time to apply an oscillator such as stochastics. Oscillators help identify reversal opportunities, and are therefore better applied to stocks or markets which are stuck in trading ranges for a fade play. Anticipating reversals within trading ranges or channels is a trading style which can benefit from overbought or oversold levels as measured by oscillators, so consider these tools the next time you are contemplating an entry in such a trade.
Keep The Main Thing The Main Thing
At the end of the day, price is the most important element in any trade, and no indicator is the magic bullet that your trading has been lacking. Price is the sole indicator which is telling you right now whether you are right (profitable) or wrong (losing), and it doesn’t get any simpler than that. When you need a little extra help determining entries or exits, be sure to consider which indicator best fits the price action in question before you apply all that are available to a chart. Only then will you find value rather than confusion in the additional information that indicators can provide.
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]
Make More Than Your Broker!
It’s common for active traders to discuss trading volume and the commission rates they pay their brokers. The hyper-active traders can end up paying a whole lot of money by the end of the year if they’re not careful, but that doesn’t have to describe you. Sure, state-of-the-art trading platforms are great, but of course you always want to be making a lot more money than your broker does from your trading! Here are a few ways to accomplish that.
Be Patient
Waiting for the ideal trading times can be difficult to do. With hotkeys at your fingertips ready to blast orders to the market, buying power to spare, and a market full of stocks which are in perpetual motion, exercising patience and not trading at certain times is about like having the keys to a 911 turbo in your pocket while you just stare at the car and intentionally postpone driving it. Sounds crazy, right? However, as with waiting for the open road to dry out from the rain before you push that sportscar to the limit, it’s always a good idea to wait for the right conditions to surface before initiating trades. Eventually you’ll have the green light, and then you can put the pedal to the metal. Having the patience to wait for your favorite chart patterns to develop will mean less churning of your account in the meantime, so that you ultimately profit with minimal commissions to your broker.
Know When to Stay Away
At times, you’re going to be better off just not trading at all. For some, it’s the first few minutes of the trading day or the very end of the session. For others it’s when you have personal distractions, such as during the holidays when family is in town, or when a life-changing event comes along. Some traders just can’t stand to trade during the light-volume summer months. Whenever your least-favorite trading time happens to be, it’s up to you to identify it and avoid it. Shutting down the PC during that stretch will keep your mind clear as you avoid any confusion which would result from your trading activity then. You’ll be preserving your trading capital (Goal #1) instead of adding to your broker’s bottom line while your account stagnates. Take a trip. Go tee it up or scratch some things off your to-do list. Just find a way to take a break so that you don’t trade when you know it isn’t your ideal time to locate profits.
Keep Your Wins Bigger Than Your Losses
Every trader in every single market will have losses – they are just part of the game. We can’t (and won’t) be right all the time. Accepting that and reminding yourself every day will put you be miles ahead of other aspiring traders. Knowing this, it naturally stands to reason that losses should be kept small. If you’ve read this blog for any length of time, you’ll know I’m big on taking that approach. However, this is an important part of making more money than your broker! Taking small losses when you’re wrong makes it easier to turn a profit with fewer winning trades required, so long as they are larger than the losing trades. The result is your net profitability, which of course means you’re making more than your broker is.
Churning shares simply for the sake of activity means more commissions, which isn’t the point of active trading. I really like my broker, but I sure don’t want them making more money than I do from my trading! Trade with a broker who treats you right and offers you the best deal on the trading tools you need the most, and then put these principles into practice so that you can come out on top.
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]
Questions and Answers
Here are a few questions I’ve been asked in recent days by other traders which I thought some of you might find to be helpful. I’ve included the questions in bold below, along with my answers….
How would you describe your trading style, other than swing trading?
I am more of a quick-hit (Bandit) type of trader, so I don’t mind booking quick double-digit percentage gains in only a few days. For example, on Monday over at TheStockBandit.com we closed out a nice 15.5% winner in LDK, a stock we held just 4 days after buying it last Wednesday when it broke out at $61.00 from its ascending triangle pattern. The fast gains are my favorite kind, and I’m much more prone to be in and out of trades in a few days than to linger for weeks on end hoping my idea will eventually pan out. I stick with the charts, and I want to be in when there’s momentum and out when there isn’t. In addition to swing trading, I also like to catch some day trades for faster, smaller gains of a couple percent. These plays also come from the charts but typically in stocks which look poised for a temporary move where I can grab an initial breakout (or breakdown if shorting).
I’ve read about the Turtles, do you often catch major turns with your trading?
Quick money is fine with me, in fact I like it better than slow money! It adds up more rapidly and I don’t usually have the patience of a Turtle to stay long or short a stock (or index) for more than 2-3 weeks. I want my money turning over more rapidly, compounding faster.
How do you deal with closing out a solid gain, only to see the stock keep going without you?
It can be tough but that is sometimes just part of trading. I’ve found that when strong trends are present, multiple entries can set up along the way, letting me trade the same stock a few times profitably even if I don’t catch the entire move. I like catching a piece of it but I feel no obligation to participate in a long-term trend. I want to get in, get paid, and get out. That’s what my Bandit style is based on.
I have trouble leaving a nice winner on the table, how do you decide when it’s time to cash out? Any help would be appreciated.
For most of my trades I will set up my entry, stop, and usually 2 targets. Setting two profit targets allows me to book some gains along the way to ring the register while waiting for a potentially larger move to develop. That helps me offset the urge to take a good trade off the table, so partial sales are definitely helpful for allowing you to stay with the stock if even with a smaller position late in the trade. Most traders think they need to be IN or OUT of a trade, but few of them consider the idea of partial sales in order to scale out of a good trade carefully.
Trade well out there today!
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]
Don’t Wear Out Your Welcome
We’ve all been in trades which were treating us well, moving along in the anticipated direction as we giggled to ourselves about what we might spend the profits on….only to get slapped in the face when we get too greedy and stay too long after the move exhausts itself. It’s called wearing out your welcome, and it’s very tough on us as traders. It can easily lead to a loss of confidence, causing you to become timid with subsequent trades which you should be aggressive with. The fear of giving back gains again causes micro-management of trades, as a lack of trust begins to replace that winning swagger you once had.
Profits are the aim of our trading efforts, so it’s vital to recognize when the time comes to ring the register and pay ourselves.
Wearing out your welcome applies to a lot of arenas, so making a habit not to do it in other areas of your life can help to establish some better trading habits. For example, I was a professional golfer for a few years right out of college. A local country club allowed me access to their facility as a courtesy as long as I didn’t overstay my welcome. If they were hosting a tournament or it was a busy day with lots of members around, I slipped away and found another place to practice. Had I stayed too long, they likely would have asked me to leave, which would have been costly to me. As a result of my respect for them, we had a great relationship and they were happy to extend their facilities to me, knowing that I would not impose on the freedom of their members. All I had to do was stay aware of the conditions without getting consumed in my own activities.
Similarly, successful trading should be the same way. When you make a profitable trade and a stock meets your criteria for exit, don’t overstay your welcome! Knowing when it’s time to cash out and find another place for your trading capital is crucial to developing yourself as a profitable trader. Manage your trades well and you will end up happy. Staying too long and trying to squeeze that last drop of profit out of the trade will likely prove costly, not only in the current trade but perhaps also in your confidence going forward, depending on how much of your open profits you give back.
It’s been said that the last $0.25 can be the most expensive part of a trade, and I couldn’t agree more! So if you enter a stock for a trade, take most of your profits as a trade. Don’t say those 5 expensive words or let a trade become an investment. Always following your trading plan and resisting that urge to get greedy will let you come out ahead with both your profits and confidence intact.
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]
Satisfy Your Craving For Risk
Most traders at least occasionally have to deal with the urge….the temptation….the allure of taking on more risk. Sound familiar?
Risk’s Widespread Appeal
I’ve had the good fortune of spending time and trading with quite a few traders of all types. Some trade stocks, others trade futures or options. Some of them are day trading, others are swing trading. Some of them trade part time, others trade full time. But regardless of the characteristics which define their approach, every last one of them has at some point felt this urge of which I speak.
Oh there have been some great stories along the way of big wins and losses, but every single memorable story involves risk. Great days and even downright pathetic days will all boil down to how much risk is taken, and how well it is managed. If you stop to think about it, we’re all quite lucky to have the ability to make this choice every day. Those who become highly skilled in the balancing act of taking and managing risk effectively become successful traders. Those who do not will quickly become a mere statistic.
Gambles Must Be Small
I’ll venture to say that all great traders have a respect for risk in the markets they trade, and as a result they all have a certain level of discipline which goes along with it. I’ve commented to people before when asked if day trading is a high-risk endeavor that “it could be your own little Las Vegas every day of the week if you want it to be” but that taking that path almost guarantees a brief career as a trader. Personally, I don’t want a real job!
But what if you love to take occasional risks? Can you still be a great trader? What if you just have that urge to swing for the fence sometimes? Well, I’m here to tell you that it can hurt you, unless you do it the right way.
Taking high-risk trades doesn’t have to mean the kinds of gambles which get amateur traders into trouble. Stubbornness and speculation are not the same thing. The trader who blows out his account after adding repeatedly to a losing position is very different from the trader who puts on a small position as a hunch, risking a limited amount and never putting his trading livelihood on the line. Buying a lotto ticket isn’t the same as putting your car keys into a Friday night poker pot! Rolling the dice is alright on occasion, so long as the consequences aren’t significant enough to cause any real damage.
Some traders might want to buy a small amount of a high-flyer, trade some out-of-the-money options, or dabble in some illiquid little stock while waiting for an anticipated story to play out. Maybe you can’t fight the urge to take a few shares of a stock into earnings, or to try to game a Fed move after the announcement, both of which are a complete coin-toss. Perhaps you’re able to do this right alongside your normal positions and never let these little speculations interfere with your day-to-day operations, but if you’re like me, you find them somewhat distracting as your attention moves from what you should be watching to these little speculative trades like horses in a race.
The Solution for Speculators
Never fear, there is a solution: trade multiple accounts! I’ve found this to be the ideal way to separate different types of trades, allowing me to satisfy that occasional urge to take a risk while still keeping my attention where it needs to be – on my primary trading account.
Funding a speculative or secondary account with only a fraction of what your primary trading account is funded with will keep any profits or losses at a minimum, because remember, profits isn’t the point of a secondary spec account. This account exists solely to let you trade the high-risk plays in order to scratch that itch for an occasional home-run-or-strikeout type of play. The aim of this account is to let you act on those urges without the consequences if you’re wrong. After all, these are the kinds of plays which could really wreck your main account, so keeping them separate and tiny lets you focus on what matters most – pulling consistent gains out of the market in a more methodical way than going for the long ball.
These secondary accounts can also be used to hide longer-term plays from plain view, which will come in handy on occasion. What happens if you’re short-term bearish but have some long-sided positions socked away for the long term? It’s easy under the gun to lump everything together, but separating your timeframes across accounts can be an effective way to trade both timeframes according to your plan. Secondary or spec accounts also effectively hide the number while letting your higher-risk plays fully develop.
If you haven’t considered having a primary trading account and at least one smaller trading account to satisfy your urge for that occasional added risk you love to take, give it a shot and you’ll quickly see the benefits. Have the discipline to set one up. If anything, it’ll keep your pain to a minimum when you swing for the fence and miss, while keeping you focused on the types of trades which really pay the bills.
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]
