All Entries in the "Trading Tips" Category
Watch Trades for Clues
February 6, 2006 at 8:50 am
Some trades are profitable while still offering us clues as to just how well they are working. While our primary objective is to turn a profit with our trades, it is certainly important to monitor the behavior of our trades to do our best to determine what we should expect going forward.
I highlighted SNDK in my stock newsletter on Wednesday night with lower highs in place and a bear flag pattern which had subsequently formed. The short selling entry point was a downside break of $66.00 at the lower line.
The following day, SNDK triggered and showed us $0.98 in profits. On Friday, it dropped another $0.97 for us, showing us a total profit per share of $1.95 from our short entry.
While I do like the fact that this short sale trade is working, I am a bit concerned by HOW it is working. Although beggars can’t be choosers, I would much prefer to have seen volume kick in with higher levels on Thursday or Friday to indicate intense selling in SNDK as it confirmed the bear flag. So far, we’ve gotten profits but it looks a bit iffy to me. As a result, I’ll plan to take partial profits to lighten up on shares in case this stock bounces. Doing so will prevent me from giving back full profits, while at the same time allowing me to stay in the trade if a larger move develops. Perhaps soon SNDK can find greater downside volume, but it’s important to operate with the facts we are given as traders, so I’m turning slightly cautious on this trade which is working but not technically sound.
Jeff White
President, The Stock Bandit, Inc.
thestockbandit@thestockbandit.com
What A Breakout Looks Like
January 24, 2006 at 5:14 pm
Last night in my stock newsletter, I highlighted ICE for a swing trading candidate on the long side if it could make new highs at $48.50. Here’s the chart I showed in last night’s newsletter:
I particularly liked the recent volatility following this stock’s uptrend, along with the fact that this stock was testing the recent highs. Throw into the mix that ICE has been making higher lows in the past couple of weeks, and the ingredients of a good setup were complete. A break above the horizontal line was the entry point I showed to my subscribers, and today ICE raced higher all day long, adding more than 10% to show us a gain of more than $4.00 per share!
Here’s a look at the ICE chart after today, with the breakout very easily seen:
Don’t be afraid of trading the new issues like ICE. Just because a stock has less trading history than many others out there doesn’t mean that you can’t catch a great move out of quality chart patterns!
To catch moves like this with me instead of hearing about them from me, sign up for your 2-week free trial to my stock pick service!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Simplify Your Trading Layout
January 20, 2006 at 10:00 am
Trading platforms have come a long way in just a short time. Now you can set up your trading layout just the way you want it, reflecting all kinds of information back at you to enhance your decision-making process. It’s easier than ever to monitor positions, set a quick stop-loss order, and watch multiple timeframes with several charts. But that doesn’t necessarily mean that more is better!
Information overload is a widely-used term but it certainly applies to trading. I’ve known more than a few traders who suffer from paralysis by analysis. It’s easy to get so into the information that you fail to remember what it’s all there for – trading to make money! If you’re overcomplicating things and getting too wrapped up in making sure all the stars are aligned before you can pull the trigger on a good trade, then maybe it’s time to streamline your process.
Take a good look at the information your trading layout displays for you. Do you need it all? Are those indicators doing anything for you other than just adding color to the charts? Is there conflicting information which is regularly keeping you from capturing good moves in this market?
Start with the bare essentials for trading: a level 2 window, an open positions window, a chart of the futures, a chart for your stocks, and a ticker. Add only what you need to this list, and soon you’ll be able to monitor positions and market momentum without getting lost in the shuffle. Simplify your layout and spend your time and energy focusing on the tape this year rather than suffering from information overload!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Silence is Golden
January 11, 2006 at 8:32 am
I used to commute to a day trading office until about 2 years ago. It was good for a while but my needs changed. While I did enjoy interacting with other traders on a daily basis, it was harder at times to concentrate on the market with the sounds of a busy office. The occasional sounds coming from upset traders banging on their desks or yelling was plenty annoying. Others seemed to do more visiting than they seemed to trade. Making the move to a home office saved me some time and gas money, but it really made me a better trader.
Learning to rely on yourself as a trader is an important and ongoing lesson. While I would encourage a beginning trader to surround himself with more experienced traders, there are a number of advantages to flying solo once the learning curve passes.
I turn on CNBC some mornings just to catch up on some headlines while I am getting set up for the trading day, but once the bell rings, I rarely leave the TV on. I find the endless opinions (valuation schmaluation) to be distracting and not useful for my style of trading. Plus, their idea of “breaking news” is often too late. Instant messenger is another line of communication I typically cut off for the trading day. In the past, I’ve spent trading days chatting with other traders, but in the end I’ve found it more distracting than helpful. At times a good call was made that I might have missed, but having one more window to focus on seemed detrimental to my tape reading and trading results. Now my typical day is extremely quiet with nothing but a snoring dog and an occasional phone call which can easily be dismissed. Much better!
Cut the noise and simplify your approach with just a few nightly swing trading stock picks. Sign up for your 2-week free trial and find out which stocks I’m focusing on today!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
When to Trade Aggressively
January 10, 2006 at 9:11 am
As important as it is to be able to manage your trades properly, it is equally important to have a money management system for your trading. This includes knowing when to trade small and be picky, as well as when to trade big and be aggressive.
When conditions are right, trade aggressively with good money management.
For me, there are 3 occasions when I trade aggressively:
Trade aggressively when you’re ahead. Losing streaks in trading call for trading less frequently and cutting down position sizes. It only makes sense, therefore, that profitable times are the best times to press and get bigger. Profits come as a result of being correct in your trades, so capitalize on being in sync with the market by increasing your size. When you’re seeing things clearly and gauging momentum correctly, take every signal you get. Trading bigger and more often when you’re ahead will allow you to make much more money when you’re right than the times when you’re wrong.
Trade aggressively in the midst of a clear trend. The market doesn’t trend all the time, making it important to be able to recognize an uptrend or a downtrending stock.
Trade aggressively when good setups are plentiful. When there’s a lot of good chart patterns showing up in your stock screens, it’s usually because the market is giving a stronger indication of an impending move. When a sector or the market in general is on the verge of a breakout, it can be tough to determine which stocks will be leaders in the next move. This makes it important to enter more positions than usual as good chart patterns confirm. You may wish to trade on margin to accommodate the additional positions during such times.
Find out when I get aggressive and when I lighten up with a free trial to my stock newsletter and learn to add some money management principles to your trading!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Starting Over
January 5, 2006 at 8:50 am
NO, no...I said get 'in sync' with the market!
It’s a brand new trading year. In some ways that’s a good thing, in others maybe not. The slate has been wiped clean, and regardless of whether you did well or poorly in 2005, it matters no more. A fresh month and a fresh year means starting at square one for me.
I like to start the year out by doing my best to hit singles for a while. Making incremental gains is part of my style anyway, as I trade for a living. However, booking regular gains early in the year helps me to build my confidence and get back into the groove of trading after taking some time off over the holidays. This way, I can grow my account and my confidence. It also lets me build a pad of profits and get in sync with the market before pressing it. Once my confidence is where I want it and things fall into place, then I can get bigger and trade more aggressively.
Hit singles while the year is young. It’s a long year, so get synchronized with the market before stepping out boldly. There’s no reason to start the year off behind!
Start your year off right with a free trial to my stock newsletter – it could be the best trading decision you make in 2006!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Trading on Margin
January 3, 2006 at 5:07 pm
The Apprentice finale ended recently, and I was reminded that Donald Trump’s wealth was amassed through the use of leverage in real estate. Borrowing money to make money isn’t just done in real estate, however. Day traders have additional buying power on hand every day in the form of margin, and using it properly can mean significant gains.
Possibly more impressive than Trump's ability to leverage is his ability to balance a dead animal on his head.
Margin is the ability to borrow against cash and/or securities in your trading account in order to purchase more. Day trading margin accounts allow for 4-to-1 leverage intraday, and 2-to-1 leverage overnight against the cash held in the account. This gives the active trader access to the double-edged sword of leverage, generating profits and losses at a much faster pace. Although swing trading stocks and holding overnight on borrowed funds costs interest, day trading on margin doesn’t cost a thing.
Margin trading isn’t for the faint-of-heart. Knowing that you can lose money up to 4 times as fast as a cash account can be scary to a trader, but it’s important to note that it shouldn’t be used at all times. While a designated day trading account inherently comes with the increased leverage, the trader is the one making a decision on just how much of that buying power is to be used.
Consider these 3 ideas when it comes to margin trading:
Margin is for experienced traders only. Beginning traders can be more susceptible to emotional swings that come with trading. The urge to “make it back†after a loss can easily be compounded into a major error when trading on margin. Consider trading on a cash account for a while until you feel comfortable with the added leverage that a margin account can provide you.
Margin doesn’t have to be used every day. On a day trading basis, I use margin more frequently than I do when I’m holding overnight positions. Market conditions and the stocks you’re trading will determine whether you need or should be using margin regularly. If you’re day trading several thousand shares of QQQQ and SPY simultaneously, you may need the additional buying power that a margin account can offer you. A liquid issue like QQQQ or SPY which are index-based will move far less than a headline-driven stock like RIMM, making them prime candidates for trading on margin.
Margin demands your respect. Any veteran trader would agree that only on occasions will market conditions be ripe for going “all in.†Putting the pedal to the metal with regularity will at times no doubt leave you leveraged in choppy markets, digging a hole which will take you some time to get out of. Don’t let the scary stories of margin trading spook you away from using it as an instrument to your trading, just be sure you respect what it can do – both for you and to you!
Trading on margin can offer tremendous benefits to the trader who knows what he’s doing. If the market has momentum and you’re in sync with it, you can make much more money when you’re right and boost your returns significantly.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
