All Entries in the "Day Trading" Category
Day Trading Community Loses Pioneer Harvey Houtkin
July 31, 2008 at 11:40 am
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
Trading Video – Relative Volume and Day Trading
June 30, 2008 at 9:11 pm
Here’s another video of a trading lesson to keep in mind this holiday-shortened week.
Shortened trading timeframes might mean tighter stops and a better ability to manage risk, but there are still some important factors to consider, such as relative volume. Today’s video discuses exactly that.
Feel free to share it if you’re a fellow blogger, the embed code is on the YouTube page.
Without further delay, here’s today’s video. Enjoy the show!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Swing Trading, Trading Video, Investing[/tags]
More on Learning from Trading Disasters
June 26, 2008 at 12:22 pm
The best way to stop a losing streak is to STOP!….Stopping lets your emotions calm down and lets you reestablish your momentum with your intellect.
– Marty Schwartz, Pit Bull
A couple of weeks ago, I received a pretty sad email. The trader who sent it had been losing money over the course of 6 years to the tune of $150k (yes, you read that correctly). He couldn’t stop. On this particular day the trader lost his last $16k gambling on an earnings release (the same gamble I caution against in my trading rules), sealing the fate of his account.
Another trader I know has really struggled to accept losses. Whenever she finds herself on the wrong side of a trade, instead of taking her medicine and stopping out, she often adds to the position and hopes her double-down is well-timed. In the past it has meant going through periods of inactivity while she waits for her stocks to come back, choosing to become a stuckholder rather than a trader. That hasn’t always worked either. Currently she’s stuck in losing trades with her capital tied up, unable to keep her money compounding due to her refusal to accept a loss and move on in expectation of making up for it elsewhere in another trade. She’s now hoping that the market will rebound to bail her out, babysitting those bad trades in the meantime.
Losing Control
Now, I don’t want to be Debbie Downer here 😀 , but the fact of the matter is that it happens all the time. Traders lose their heads, then they lose their way, and then they lose their shirt.
I continue to find reasons to harp on this lesson, and I suppose there will always be examples of the pain, frustration, and opportunity costs associated with letting losses get out of hand (my biggest trading fear). But to those of us who intend to survive, persist and succeed in the trading game, it’s worth occasionally stopping to examine the other side of the coin. After all, the mistakes of others serve as excellent reminders to us of what to avoid.
Get A Grip!
You might be struggling in this market right now, and if so, remember that there are a couple of things you can do. First, stop trading. Close out your losing positions and clear your head for a little while. It’ll be well worth it, both monetarily and mentally. Second, regain your focus. Remind yourself what you’re aiming to do with your trading, what your style consists of, and what you need to see before taking new trades. If you don’t see it, don’t push any buttons! And finally, don’t try to “get it back” quickly. That is the fastest way to compound your problem and double or triple the size of the hole you find yourself in.
It’s been said before that the market will expose your every weakness, and that’s certainly true right now, particularly if you’re biased to trading the long side. This is the kind of market environment that can bring the pain if you aren’t careful or in control of your trading. Fighting the current downtrend we’re in can make for a very tough road to travel.
As this market corrects, if you aren’t short, then cash is the next-best alternative until the technicals improve. So be very careful out there, don’t be a hero, and make sure you’ve got your game face on before getting active!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Good Trades vs. Good Results
April 22, 2008 at 6:24 am
What constitutes a “good trade?” Is it a profitable trade? Is it one that works quickly and provides you with a gain? Those are certainly nice!
But I’m not so sure that we can define our trades solely by our results. In fact, I’ll go ahead and say that a truly “good trade” can be declared regardless of your results – so long as certain conditions apply.
I recently had this discussion with a member over at TheStockBandit.com. A trader had commented that he was concerned about a day trade he had just made. Although he closed the position for a profit, he said “(his) only concern was (his) stop loss was greater than his profit…the risk reward wasn’t there when the trade was all over.” He followed with the question, “was it still a good trade?”
Interesting topic, to say the least! Here’s the reply I offered:
“I’d say that if before the trade you saw a risk/reward which fit your preference, that it was still a good trade. We have to roll with the punches after we are in (a trade), and sometimes we make a gain which is less than what we originally planned for. I think the measure of a good trade is whether the risk/reward was there from the beginning.”
We’ve all faced this issue as traders. We enter a trade with a certain game plan, do our best to follow it along the way, but when conditions change and we adjust, sometimes we’re left with a smaller gain than what originally would have offset the risk we took in the very beginning.
Seeing every twist and turn before they happen isn’t a requirement for good trading (fortunately!), so we don’t have to attempt to. What we have to do is evaluate the situation as it unfolds, and make the necessary adjustments to our stop loss levels or price targets, managing the trade to the best of our ability.
It’s like a pilot after takeoff, he keeps navigating toward the goal but a safe landing is of utmost importance. If that means he chooses an alternate spot to set it down, so be it. Exiting a trade at a spot not originally planned is sometimes necessary, but that doesn’t mean our choice was flawed to take the trade initially.
It’s important to remember that if the risk/reward profile of the setup was appealing from the outset, then taking the trade was the right thing to do. That means regardless of if you get stopped out for a loss or if you realize a huge gain. Taking high-quality setups with proper risk-reward profiles is at the core of how we manage our risk as traders. If you’re doing that, then you’re making good trades regardless of the results.
When it comes to results, we all want good ones and it’s important to review them from time to time and make sure we’re on track (as I’ve discussed before), so I’m certainly not diminishing the importance of that aspect.
However, making good decisions with not only which trades we choose to enter, but also taking logical steps along the way to manage each trade accordingly is what keeps us trading with a level head. So long as that’s the case, you’re protecting your objectivity and therefore able to keep making good decisions.
Trade well out there!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Should You Be Trading BSC?
March 24, 2008 at 8:18 am
First BSC got a $2 bid from JPM and yet it continued to trade above that level.
Now JPM has raised its bid to $10/share and BSC is currently trading far from that level.
What is going on?
Because there are some great resources out there that can explain the details of the evolving deal far better than I, let’s focus on what it means for you as a trader. Observing the deal is one thing, but wanting in on the wild price action in the stock is a completely different matter.
You can find the complicated answer elsewhere, so I’ll give you the simple one here: if you don’t understand it, don’t hold it overnight.
The stock is ignoring any technical action on the daily chart, which is the timeframe you need to be watching if you’re swing trading. However, on an intraday chart, a pure day trader with a shortened timeframe can still find some plays in the stock. Given that the majority of news comes outside of market hours, the risk of overnight gap is omitted by day trading it. Furthermore, a day trader is simply responding to price action over the course of seconds, minutes or hours. That’s the only way to trade such a news-driven stock like BSC is right now.
If you’re a part-time trader or someone who prefers a little longer timeframe, stay away from BSC. It’s a nice side show, but it offers you far more risk than potential.
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]
Formulating Your Market Opinion
February 27, 2008 at 2:38 pm
The Market Wizards books by Jack Schwager are in my opinion among the best trading books out there, as the interviews with top traders simply offer so much insight. I make it a habit to re-read these books semi-regularly because of the insights they offer, and it seems every time I read them I either pick up something new or am reminded of an important lesson.
One interview with Tom Baldwin contained a comment which I found interesting, especially given the clear lack of enthusiasm in Baldwin’s answers. Although Baldwin seemed to come across as stiff, arrogant, and basically anything but friendly to Schwager, he still offered some food for thought.
When asked how he learned to trade, Baldwin replied with this answer:
…All day long I stood there and developed an opinion. As I came to see that my opinion was right, I was reinforced, even if I didn’t make the trade. Then when I traded, I knew from standing there six hours a day, every day, that most of the time I was right. I would see scenarios develop over and over again.”
Baldwin’s comment is probably an oft-overlooked statement, and yet it carries some real value. “All day long I stood there and developed an opinion.” That answer isn’t anything flashy, but yet it’s so accurate. Your market opinion, your feel for the tape, your instinct….it all comes from those countless hours in front of the screens. Whether you’ve got 0 or 10 positions on at any given time, you are still soaking in the data and gathering important info which you’ll call upon sometime later.
Trading the market can be very exciting, don’t get me wrong. Pulling some fast money out of a stock and nailing a trade is a real thrill, and those of us who get to trade daily know that. However, newbie traders are often surprised at how boring the market can be at times and how much waiting is involved. Trading doesn’t mean constant motion and pure adrenaline from opening to closing bell. A lot of times it’s monotonous and dull, and yet it’s still wise to observe.
That trade you’ve been stalking might finally come around and trigger an entry, in which case you’re back on the wagon. And on the other hand, you might have days where you sit for hours on end without ever pressing a button. The best traders know this and are willing to wait when conditions warrant.
Observing the markets, watching stocks, gauging order flow and sticking close to the tape in general will help you tremendously. You’ll learn more about how particular stocks move. You’ll see where mistakes are made by others who bought or sold at the wrong times, and of course you’ll learn a lot about the role which volume plays in the action.
If you want to be a good trader, commit to putting in your hours each and every day. If you get tempted to overtrade and push buttons when you know you shouldn’t, then step away from the screen. Otherwise, formulate your market opinion by constantly staying close to the action. You won’t regret having a free ticket to the show.
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
October 4, 2007 at 7:21 am
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]
