All Entries Tagged With: "Adaptation"

Strategic Adjustments that Pay Off Big

April 12, 2012 at 7:40 am

Like sports and business, trading requires the ability and the willingness to adapt. This involves continually learning and growing so that you’re never stagnant with a single approach.

Recently I sat down with Tim Bourquin for a MoneyShow Interview, and we discussed this topic of how Strategic Adjustments can Pay Off Big. The clip is 3 minutes and can be viewed here.

In the segment, we discuss trading biases, contingency plans, backing down when you’re uncertain, and the importance of focusing on a single market while still allowing yourself some ways to diversify within it.

(Other 3-minute videos from this same interview discuss The Trade Plan that Works For Me, as well as Win More by Risking Less, which you may also enjoy.)

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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The Self-Education of a Speculator

March 20, 2012 at 10:28 am

As a full-time trader, I don’t have a typical job.  I have a 5-second commute to my home office.  I wear t-shirts to work!  There is no boss standing over my shoulder, and the actual trading hours require a relatively brief daily commitment (6.5 hours) as compared to other occupations.  And I’m thankful for all of it.

The market closes at 3pm for me, offering lots of time to tend to other things – if I so desire.  However, my desire is to succeed at trading for the long haul, which means I have lofty goals.  In turn, I’m not the type to walk away when the closing bell rings.  I work at it every day to improve and educate myself on an ongoing basis.  I have to stay sharp.

That means I’m reading books, blogs, spending considerable time working the charts in search of what’s working best right now, and of course reviewing my own trades in order to continue learning.

Because successful trading is so much about finding a style that fits your own personality, it is only fitting to investigate what styles exist.  An energetic and impatient person may want to become a scalper, looking to day trade quick moves within a short timeframe.  A laid-back trader may prefer a less-intense style like swing trading, taking positions to hold for days or weeks.  There are many approaches to the market, and finding your own style can come as a result of identifying with the style of another trader.

Raising Your Awareness

The road to expertise isn’t a short one, particularly in trading.  I’ve been at this long enough to be considered an expert, yet there are still plenty of days where I’m reminded that I sure don’t know it all!  Trading will humble you like that, but that’s part of it.  Regardless, here are some ways for you to get educated as you further not only your knowledge but your trading career in the process.

Books.

I’ve read a couple hundred of them on trading, and while there’s plenty of worthless paper out there, you can still find some great ones with timeless lessons.  I think it’s important to continually seek out information, whether it’s new and applicable now or just a lesson to be reminded of (before the market does it for me!).  Your self-motivation will help you improve, so dig through the classics for starters.  Mark up the margins, underline the parts which resonate with you, and return to them often.

I particularly like the Market Wizards books by Jack Schwager.  He profiles traders in all kinds of markets (bonds, equities, options, futures, mutual funds) and of all timeframes.  Yet despite their differences, all are highly successful.  The interview format he utilizes gets you in the minds of these great traders, offering countless lessons.  (I regularly visit TraderInterviews for the exact same reason).  Every good trader trades in accordance with their personality, as we all should.

The newest book I would highly suggest is One Good Trade, which is the best trading book I’ve read in a long time.  Bella covers it all and overlays his lessons with a variety of trading characters (based on real people), which helps drive the lessons home that trading is all about performance, adaptation, learning, and having the right mentality.  Once I started it, I couldn’t set it down, and I’ve re-read it since.

Blogs.

Reading posts like this one can’t help but to expand your knowledge and open your mind up to some new possibilities.  There are countless blogs on trading, but there are some good ones.  Hunt for those which offer whatever it is you’re lacking….encouragement, psychological lessons, trade reviews, sector snapshots, news on industry developments, interviews, trading videos, etc.

If you’re willing to get honest with yourself and figure out what you’re lacking, you can find some blogs to visit regularly as resources.  Just be sure they’re written by traders, honest, and not wasting your time, as there’s no shortage of distractions out there that won’t help you grow at all.

Results.

If you don’t track your own trades, start yesterday!  You can record your trading via screen-capture software, but even a journal or simply a grid outlining entries, exits, holding times, patterns, trade context and objectives will shed more light on your trading than you can imagine.  As you collect results, start to compile them.  I did this for the first few years of my trading, until I really understood what I was doing, and it helped me assess my strengths and weaknesses.  Monthly, I’d review my results and calculate statistics which gave me plenty to work on.

You just can’t argue with data!  Getting mixed results? It may be time to make an adjustment.  Figure out how your wins and losses stack up against each other, as that’s a great starting point.  Over time as you endure periods of profits and pain, you have stats to compare against and you can more readily see when something is out of line.

Premium Services.

I’d be leaving a huge part of the mix out if I ignored premium services in the education process.  Early on, I subscribed to a number of sites while I figured out my own style.  Once I got to the point where I had my own opinion, I knew I had learned enough to need them no more.

Here at TheStockBandit, we offer a nightly stock pick service outlining my own trading plan for tomorrow, which some use to generate trade ideas and others use as a learning tool to see why I plan to take each trade (since each are explained).

We also offer stock trading courses in a video-on-demand format.  The trading courses explain everything I know about trading, making them an incredibly valuable resource to return to over and over (depending upon current conditions in the market), helping traders see a huge variety of trade types and which kinds of market conditions are well-suited to those plays.

And while I’m certainly proud of and stand behind what we offer, there are plenty of others to choose from which are produced by legit people with a lot to teach you.  If you want to accelerate your learning curve and truly build your skill set, let someone help you who has done it.

You Get What You Give

If trading is your job or a part-time endeavor you’re passionate about, recognize that your level of effort in the growth process is going to be reflected in the results you get.  Be willing to apply yourself regularly as you learn more about not only the market, but yourself.

Staying educated and keeping a learning mindset is going to eliminate mistakes as well as some big disadvantages you currently face if you’re halfway new at this.  As you make that a habit over time, it’s going to continue to pay off in a number of ways.  Become a complete trader and commit to educating yourself.  You won’t regret it.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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5 Takeaways from the NYC Traders Expo

February 23, 2012 at 11:35 am

Last night I returned from my trip to the NYC Traders Expo.  It was a great experience.  Visiting the city itself with some great February weather and seeing all the famous landmarks was nice, but I really enjoyed spending time with some Bandit subscribers and some other trading friends I’ve made over the years from different parts of the country.

In addition, I was fortunate to speak to groups of traders twice while there, which was both challenging and insightful as I prepared ahead of time then fielded some well-thought-out questions from attendees.  It was really fun!

There’s an energy when traders collect which is always motivating.  From the trading floor I first participated on back in 2000, to times in Chicago seeing everyone file into the CME ahead of the day’s session, there’s just something that happens when traders gather to compete or exchange ideas – I love the atmosphere.

A few thoughts on what I witnessed, in no particular order…

Hunt for the magic bullet.  There are a TON of traders who show up just wanting the latest lure to fish with.  They aren’t willing to put in the work, to learn to think for themselves, or to understand what it takes to become successful as a trader.  They want the overnight shortcut, and they exit the scene just as quickly as they arrive, disappointed and surprised that trading isn’t red and green infomercial-easy.

Trading is a process.  I’ve known this, but was reminded of it through my preparations for speaking and in conversations with other traders.  Trading requires adaptation, a willingness to lose regularly.  Imperfection is to be expected, and so it all becomes about good management of trades rather than finding the can’t-miss sure thing. What works now may not work in a few weeks, so you have to be willing, able, and prepared to shift your approach.  The market evolves, and so must you if you want to stay in the game and keep seeing opportunities.

Expectations.  Expect some losing trades (and learn to manage them wisely).  Expect periods of frustration and confusion, they’re going to happen.  Expect the market to surprise you – it’s just that way, so you’ll have to be ready to respond accordingly.  Times will come when you have no clue what’s next, but that’s OK.  When they arrive, you can accept them and sideline yourself until clarity comes.

Hard work is rewarded.  I saw Expo attendees show up early and stay late, attending multiple sessions, taking notes on the good things they heard, and leave tired but hopeful that some fresh perspectives will influence them to improvement in the days ahead.  I saw prop traders from SMB who started their day extremely early, made the commute to lower Manhattan, gave it their best all day (though some admitted it was a tough day), then stuck around after the close to listen to my thoughts.  Even after I was done presenting, they showed the discipline and desire to improve by asking questions, just absorbing knowledge even though they were tired and hungry and eager to call it a day.  Those who work hard – even when it isn’t comfortable – are the ones who will make it, keep improving, and eventually see the fruits of their labor.

Trading is a battle.  What’s interesting – and which few stop to recognize – is that only part of the battle is in the market.  The rest usually happens internally.  So be ready, you’ll need to bring your best if you want to compete in this game.  You need to prepare a plan, and think through the emotions you might face while implementing it.  Regardless of style, strategy, market, or timeframe, every great trader has his head on straight.  Those who don’t will have it beaten to a pulp by a ruthless market.

If you were there, or if these have resonated with you, feel free to share some thoughts of your own.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Competition

January 30, 2012 at 9:32 pm

One of the many harsh realities of trading is that it takes a lot of intentional effort.

That means you intentionally prepare (both mentally and with an actual game plan), you intentionally execute (have the discipline to stick with your method), and you intentionally improve (by reviewing results, keeping an open mind, working with other traders to expand your abilities, etc.).

The fact of the matter is that if your competition is outgunning you, the way to start having more success is by outworking them.

When I was in 8th grade, I decided to take up golf.  Being in a town with a huge presence of great players (including 8 PGA Tour pro’s), I had an uphill battle given that so many of my peers had already been pursuing the game for a few years.  They were better than me, and I knew I had to outwork them in order to catch up to them or surpass them.

The same mindset applies to your trading.  If your competition is getting the best of you, then you’ve gotta step up your game and work harder.  Don’t be afraid of it, nothing worth doing is ever easy.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Setting Stops: Fixed or Variable?

January 12, 2012 at 10:46 am

Dmitriy recently asked:

“Do you think that fixed stop-loss is better than a stop-loss which is based on market setup (stop below the low of the pullback or below support level)? If for instance, you trade ES or some stock every day, is it best to use a fixed stop-loss, say 3 points in any trade, or one which is based on the unique price pattern and hence requires a different size stop-loss every time (one trade may require 4 points, another 5 points)?”

This is a great question and one I’m glad he asked.  Traders of many markets and of differing timeframes wonder about this and come up with mixed signals.

On the one hand, maybe they’ve read O’Neil say in How to Make Money in Stocks to limit one’s loss to 7-8%, which is a fixed amount that doesn’t vary from one trade to another.  On the other hand, they realize that no two stocks are exactly alike (or futures or options or whatever instrument is in question).  That kind of thinking would necessitate different sized stops depending upon what’s being traded.

My personal preference is to go with the latter line of thinking.  I base my stops on current conditions and the pattern being traded. Some markets are faster than others, so they warrant a smaller position but wider stop. Others are slower and more steady, so they can be traded with larger size but a tighter stop.  Personalities of stocks can greatly vary, so it’s difficult to apply a one-size-fits-all stop to every trade you make.

The bottom line is this:  those who commit to learning the technicals by studying price action, learning patterns, and personalities of stocks can utilize custom-fit stops and gain a ton of flexibility.  By contrast, those who lack that commitment are stuck with using a set percentage which will be more than enough in some cases and not enough in others – very hit and miss.

Grow, learn, and improve – it’s the best investment you could possibly make in your trading.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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3 Ways to Grow from Trading Adversity

January 10, 2012 at 10:20 am

Dean Karnazes runs like a man possessed.  He’s an ultramarathoner, which means he goes beyond marathon distances – sometimes a lot farther.  He once ran 50 marathons in 50 states in 50 consecutive days.  Apparently, the dude loves pain.

In his book Confessions of an All-Night Runner, he makes the following statement:

“Struggling and suffering are the essence of a life worth living. If you’re not pushing yourself beyond the comfort zone, if you’re not demanding more from yourself – expanding and learning as you go – you’re choosing a numb existence. You’re denying yourself an extraordinary trip.”

So, this being a trading blog, it begs the question:  how well do you embrace the struggle of trading? At times it’s really smooth, and trading can provide extraordinary profits in incredibly brief amounts of time, but not always. Sometimes trading’s a real grind. You question everything you’re doing, your results offer you no condolences, and you’re just flat-out suffering.

If you’ve been through that before and you’re still a trader, congratulations! You have been able to overcome the pain and doubt and press on and work your way out of it. Others of you, however, might be facing that right now for the first time and you’re wondering if you have what it takes.

Here’s the thing…if you fall into the latter camp, this is where the rubber meets the road. You’re facing a choice of whether to persevere or to walk away. While moving forward might or might not deliver the success you so badly want, I can guarantee you that permanently walking away will never allow you to reach your trading goals.

Struggle, Suffering, and Success

Struggling and suffering in trading are common side effects of the job, they come with the territory.  As you well know, if it were easy then everyone would be doing it. Trading can be hard, it can be demanding, and boy can it be frustrating.

That same struggle can also propel you to new heights of success, but you have to respond the right way – and it’s not gonna be comfortable.

3 Ways to Grow from Trading Adversity:

1. Appreciate the ache.  It doesn’t mean you enjoy the frustration.  Appreciating it means you acknowledge it’s here, you recognize the fact that a change is needed, and you understand that if you don’t shift in some way it’ll be the end of your trading – at least for a while.

2. Expect to grow.  Why shouldn’t you?  What you’re doing isn’t working, as otherwise you wouldn’t be facing adversity to begin with.  Watch for new kinds of moves, implement some different techniques, and anticipate some different results.  If you survive, you’re going to be a better trader because of this time and how you respond to it.

3. Require more from yourself.  Maybe you got stagnant, and that’s what brought you to this point of frustration.  You’ve had some approaches which have worked, and you rested on them – perhaps a little too much.  As traders, we have to continually blend a loyalty to what’s working now with a willingness to employ some new methods. So push yourself more going forward, keep moving, never sit idle when it comes to growing as a trader.

And finally, for some of you this is a wake-up call.  You’re starting to become set in your ways, but you now recognize you’re in for a rude surprise if you continue to operate in that manner.  No more!  Seek out ways to improve, to grow, to add to your skill set.  Because according to Dean, getting stuck in your comfort zone means you’re denying yourself something extraordinary – maybe even that elusive next level.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Getting Over the Consistency Hump in Trading

December 15, 2011 at 9:03 am

I heard from a trader over the weekend who has gone through a number of changes in recent months, both personally and in their trading.  The result was a big lack of consistency in their trading.

This particular trader has endured a stretch of personal changes, including relationship stress, family changes, financial pressures tied to it, and a move.  That’s a lot to take!

In terms of their trading, they went from being a retail trader to a prop trader and found some distinct, challenging differences which impacted their results (and trading process) adversely.  It wasn’t that prop vs. retail was the issue, but rather this particular trader’s surprise and perhaps their lack of understanding of what those differences would be from the front end.

For example, this particular trader did not realize they would not be allowed to hold overnights at their firm.  They got caught up in the ECN rebate game and started focusing on minimizing transaction costs rather than getting into and out of trades in a timely fashion.  And there were several other issues they hadn’t fixated on previously (like platform fees).  These changes added considerable pressure to the trader.

It left them asking me, how do you gain consistency in trading?  They asked me specifically “what got you over the hump to consistent profits in your trading?”

Here was my response…

Sounds like you have been through a ton, and I’m sure you’re drained emotionally as a result. Once the dust settles for you though, your self-honesty will serve you quite well as you get back on a track that’s right for you.

In terms of what I did to achieve consistency, I had been making money part-time before going full-time.  When I made the switch from part-time to full-time, there was a period of about 2 months in between where I was assisting another experienced full-time trader by placing orders for him and helping manage his account. This was due to a very different style of trading (managing many positions simultaneously), and it was new software, so I needed to get accustomed to it. Once I was comfortable with it, I went live, and from my first day I was profitable.

A year or two later, I went through a tough stretch and got really frustrated. The way I responded actually led to my longest streak of consecutive profitable months, and it was all due to one single commitment: limit losses. By taking little paper cuts, I got out of bad trades with minor damage but kept finding winners along the way too (it’s a numbers game), and that just created a ton of consistency for me.

I think if you can simplify the effects of what’s taking place personally with you, then your trading will be calmer as well. Life goes on, and periodically it gets hectic in a way that’s not under our control, but if you detect that then just get more passive with your trading. When personal things are clear and you’re more focused on the market, you can get more aggressive with your trading.  Becoming consistently profitable goes hand-in-hand with taking a long-haul approach for consistency over time.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

Follow TheStockBandit on Twitter or get our free newsletter to keep up!