All Entries in the "Trading Tips" Category

Pressing the Big Button

December 7, 2006 at 9:20 am

Every now and then, that ideal trade comes along and you just can’t shake the urge to go big.

Now most of the time, I size my positions pretty consistently, only varying them when either (1) the market necessitates it, or (2) my recent performance necessitates it. But occasionally, I will see a culmination of several factors which leave me with that urge to “press the big button.”

Usually for me, this is an index-based trade done via ETF’s (like QQQQ, SPY, or IWM). That is by design, because I don’t want to jump out there with too much exposure to one particular name. Laying down the big trade in an ETF will greatly reduce and limit my gap risk, which is something that’s critical to do in order to manage risk.

Of course, there are times when going big is

3 Ways to Improve Your Holiday Trading

November 21, 2006 at 11:55 pm

Ahh, the holidays…..for me they evoke thoughts of family time, big meals, and lots of naps during football games on TV! The holidays mean different things to different people, but no matter which ones you celebrate, you’ll be wise to take into account the fact that holiday trading sessions may require some adjustments on your part if you want to pull some money out of the market.

(I’ll keep this short and sweet because you and I both probably have some in-laws waiting on us!)

Holiday markets can be strange. The volume is lighter and the moves are just different. There’s fewer participants (reflected by lighter volume), and that means the market will often move differently than usual.

Let’s look at 3 ways to quickly adjust your trading approach for success during the holidays:

1) Shorten your timeframes. Light-volume markets are prone to reversals, so don’t be afraid to take quick profits into an initial move……those profits might disappear before you know it!

2) Go where the action is. Lately it’s been China-related stocks. But whatever the theme du jour is, locate the high-volume movers which are showing a change of character. Momentum traders will flock to the handful of stocks which are moving well during range-bound markets, so your best bet is to find those stocks and focus on trading them.

3) Don’t trade at all! (We often forget that this is an option!) Take a break from the market and come back when everyone else does. Spend some time with family. Scratch some items off that to-do list (did someone say “rake leaves?”). Rest up and recharge so that when you do return, you’ve got a clear head. Getting away from the screens is never a bad idea, and the chances are that you’ll come back better than you were when you left.

Whatever changes you make during these times, I wish you the best! Happy holidays from TheStockBandit.com!

Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com

3 Keys to Buying Dips

November 8, 2006 at 12:29 pm

The nature of the current market environment is unique in that we have an interesting dynamic at play. Like trick-or-treaters on Halloween night, the dip buyers are out in full force! We’re not seeing very many rests within this powerful uptrend, and that means there are a LOT of temporary dips out there which are being viewed as buying opportunities.

Does that mean that you can just step up and buy any lower prices on any stock you see which is heading south on the charts? No way. For one reason, we’re most of the way through earnings season but we still have plenty of companies which have yet to report. That means potential land mines, which is one reason you can’t just buy any weakness. Another reason is that some stocks have indeed topped out and their runs are over. They’re going into hibernation and may not return to the light of day until next spring (or later!).

So what is a trader to do?

Here are 3 keys to consider when buying dips right now:

1) Look for support. This could be in the form of actual price support on the chart when a stock pulls back to a prior trading range or previous low, or it might mean a pullback to a key moving average within an uptrend. If higher lows are in place or you see an area of recent support, that means the buyers are lurking and that should help to keep the stock afloat.

2) Enter and exit in pieces. Make a partial buy as a stock returns to a support zone. You don’t have to go “all in” on the dip, and in fact it is often better to initiate a ‘pilot’ position to establish a trade in order to gauge the stock’s health on the front end of the trade. If the pullback continues, it will hurt a lot less! And of course if the stock finds some buying interest, you can quickly add to your position to capture continued strength. As your trade begins to work and you find yourself with “company” in the trade (others have bought the dip and the stock bounces), take a little bit off. Sell a chunk into the strength and get out in pieces on the way back up.

3) Have a plan. There’s no substitute for having a specific trading plan for every stock you enter. Be patient as you seek out new opportunities and take the trades which will offer you several times profit what you’re planning to risk. And finally, know exactly at which point you’ll sell your shares if the dip turns into a downturn. If the time comes when that level is reached, don’t delay and exit your entire position right away.

I’m adjusting my trading right now to incorporate more dip-buying techniques, so if you’d like to learn more about how I’m trading this market right now, drop by and start your free trial today!

Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com

Trading Multiple Positions

October 31, 2006 at 10:28 am

Brand new traders are best served by sticking to one trade at a time, but as a trader gains experience, there are certainly some advantages to trading multiple positions.

One of the biggest benefits of swing trading multiple positions is that it diminishes the importance of any one trade. No longer will that one trade define your success (or lack thereof) in the short term. This is a big psychological edge which can set you free mentally as you aren’t required to watch and react to every single tick on your pet stock. You can set your conditional orders and let the trade develop on its own without micromanaging it, and in the meantime you’re able to scan for new stocks you may soon want to trade.

If you’re a beginning trader, you’re probably better off taking one trade at a time so that you don’t get overwhelmed. Trading the market takes some getting used to, and that learning curve shouldn’t be rushed. Take your time and go at a pace which you’re comfortable with as you learn to improve your execution methods and develop a routine for monitoring the market.

Once you’re past the beginning stages as a trader and comfortable with your executions, I would encourage you to learn to trade multiple stocks even if you have a relatively small account. While focusing your funds in one stock will mean an opportunity to accelerate account growth, spreading your capital too thin can doom you to underperformance. Find a middle ground which will give you the best of both worlds. And when the time comes that you can’t find trades which fit your risk/reward profile, simply step aside and remember that cash is a position!

We trade multiple positions on a regular basis over at TheStockBandit.com. If you’d like to learn more about how we manage them, come check out the free trial and watch us for 2 weeks. We’re confident you’ll like what you see.

Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com

Multiple Timeframe Charting

October 23, 2006 at 8:15 am

I often run across a stock with a tradable pattern, but a second look will often change my mind.

This week I ran across SVU, a stock which has been rallying steadily since August. More recently, it had a breakaway gap to the upside and has since consolidated to create a very nice bull flag pattern. Here’s the chart:

(Click for full size.) Chart Courtesy of TeleChart.

Ordinarily, I would be a buyer of a stock like this upon an upside breakout from this tight pattern at $33.25. However, zooming out to a longer timeframe reveals quite a bit of resistance from the past 2 years in the $34-35 range which could make a breakout somewhat short-lived as the stock encounters overhead. Here’s a longer-range chart:

(Click for full size). Chart Courtesy of TeleChart.

Previous highs mark places where sellers are lurking, and staying aware of such zones can often help you select better trades to take.

There are a lot of stocks out there to trade, so there’s no need to be married to any particular one of them. At TheStockBandit.com, we do the heavy lifting for you by reviewing hundreds & hundreds of stocks every night to cherry-pick the best setups. If you want to save some time locating the highest-quality chart patterns, come trade with us!

Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com

By the way, subscribing to this RSS feed will mean you won’t ever miss a post!

5 IPO’s and How to Trade Them

October 18, 2006 at 12:53 pm

Earlier this week in the Free Newsletter (sign up in the sidebar at TheStockBandit.com) we discussed trading IPO’s, but let’s go a little deeper.

IPO’s are making a comeback these days in the market. With the indexes climbing steadily higher, new issues are garnering attention as sexy trading vehicles once again. Back in the day, trading IPO’s was a wild ride which everyone wanted in on. The trading world was fully aware of what was due to begin trading on a given day, and you were sure to find some heavy action in those stocks once they opened and for the first few days of trading.

Times have changed, and so have the ways which IPO’s are being traded. It’s a given that today’s IPO’s are a far cry from those of 1999 and early 2000, so naturally that means they require different trading methods.

I’m a big proponent of monitoring the “personality” of stocks before I trade them. How else can you set your expectations for how a stock will move, where to place your stops, and how aggressively to trade them?

There are still some great moves out there taking place in IPO’s, but generally I’m finding the best moves are secondary rather than the primary (or initial) move.

The way we trade IPO’s at TheStockBandit.com is to let them make their initial moves, settle down a bit, and get set up for a secondary move. I like to see IPO’s trade for a few days so that I can get a feel for how they’re moving and what kind of volume they have (what is the overall interest in this stock?) and then take them for a trade on a secondary move.

Many IPO’s will have some initial excitement and then begin to consolidate. Volume falls off and the stock moves horizontally, creating a base from which a secondary move can launch. The majority of the time these bases come in the form of a bull flag pattern, a cup and handle pattern or a bullish ascending triangle, and that makes it very clear what the pivot point should be for getting long. Let’s look at a few examples of IPO’s which fit the description.

CVLT (Click image for full size.)

RVBD (Click image for full size.)

HBI (Click image for full size.)

DIVX (Click image for full size.)

BARE (Click image for full size.)

There are a ton of ways to profit in the market, and swing trading IPO’s as they emerge from traditional chart patterns is one of them. We trade some of these at TheStockBandit.com, and even if you’re on the free trial I’ll show you what I’m seeing in the charts and outline my trade parameters along the way. If they fail, my bail out will be close by thanks to the pattern, so it’s no big deal. And if they work, well it’s blue sky above and there’s no telling how far they might run!

Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com

By the way, subscribing to this RSS feed will mean you won’t ever miss a post!

Cash IS a Position!

October 16, 2006 at 9:30 am

In a day and age of nearly instant executions and dirt-cheap commissions, it’s extremely easy to overtrade. Throw into the mix the number of days when we get narrow trading ranges and pending news (like major afternoon earnings announcements or Fed days), and boredom becomes a huge factor to contend with as a trader.

With so many great trading tools at our disposal, we can easily start feeling an obligation to put them to use and just be active. I know there have been plenty of times when I have not seen the high-quality setups I prefer to trade, yet I stayed at the PC because there wasn’t anywhere else I needed to be. Next thing I knew, I was pushing buttons left and right to create some activity and interest for myself. The result? It’s not hard to guess – the majority of those times I paid for it and wondered why I felt such an obligation to “be positioned.”

After some thought, I finally realized that CASH IS A POSITION! Moving to cash when I didn’t see the optimal trading conditions for my style was in fact taking a position. My position was safety when my certainty level was below what it needed to be in order to trade.

Let me encourage you to do the same thing! You don’t always have to be trading something (even if you’re a scalper). The current market environment may be a perfect example for you. If you’re feeling like the market is too extended in the near term to place new buys, yet you are not willing to start short selling, then remember that cash is an alternative and just step aside. You can still keep an eye on the market, but it may also be a perfect time to tend to other matters so that once your trading activity picks up you are fully focused on the task at hand.

There are times when either the market is giving signals of uncertainty or you may just feel out of sync with things, and during those times it’s best to just move to cash and wait for some clarity. Be bold enough to take a position in cash when your signals are telling you that the sidelines are the place to go!

By the way, subscribing to this RSS feed will mean you won’t ever miss a post!

Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com

[tags]Stock Trading, Day Trading, Swing Trading, Position Trading, Stock Market[/tags]