All Entries Tagged With: "Cash"
How Traders Get a Raise
June 22, 2011 at 11:56 am
Every business has overhead (some more than others), and although you may not have a brick-and-mortar storefront, you certainly have overhead as a trader.
It’s business 101 that to make more money, you either bring in more revenue or you fatten your profit margin by cutting costs. Plenty of posts on this blog discuss ways to accomplish the former, but today, we’ll talk about the fastest way to achieve the latter.
The Elephant in the Room
Traders rarely stop to consider the biggest expense they face, which is usually commission costs. The fees we pay to enter and exit trades are no doubt a cost of doing business, but once you’ve hit a certain experience level with your trading, it’s likely that your attention has diverted to strategy and execution (which is fine). By default, however, you’ve ignored one expense which can easily run into the mid 5 figures over the course of the year if you’re an active trader.
Even if that’s not the case with you, it’s still worth taking note of just how much you’re paying on commissions. Newbie traders recognize this when they come to the market with small accounts, and they soon realize that they’ll need a sizeable move in the stock just to overcome their costs.
Regardless of your situation, take heart! There is a solution…
NEGOTIATE YOUR COMMISSIONS!
Aside from why you should do this, here are a few reasons why you can do this…
Apples to Apples. Transaction costs have come down tremendously in recent years for everyone. Technology has greatly improved, which isn’t cheap, but the fact is that when it comes to the standard trading platform features, virtually everyone has similar technology. Occasionally you’ll find something very unique, but you can most likely accomplish your trading on a variety of platforms, which means you aren’t tied down to any single brokerage. They know this.
Move the Line. Every brokerage has the capability to lower your commissions. So, get creative if you need to. Work the numbers and find out if there’s a threshold you need to meet in terms of monthly trading volume in order to get an improved rate. Find out if they’ll waive your platform fee (if you pay one) at a certain level, or switch from a per-trade to a per-share commission structure.
The Advertised Rate is a Starting Point. The displayed homepage commission price which brokerages show is a number most people will gladly pay, but it doesn’t have to be “the” number. And the more active you are as a trader, the more you should view it as simply a starting point for negotiations. Every brokerage knows their margins, and they know the rock-bottom price which they can offer. I can guarantee you that’s not their advertised rate. They have room to move, and often all it takes is simply knowing you can ask for something a little lower. And while these are certainly not used-car salesmen, the same principle applies…if they let you walk away, then they really can’t deliver the price you’re asking for.
Competition Abounds. Brokers are highly competitive and motivated to get your account, and they know there’s lots of turnover in the industry. That means they can lure you away from your current firm, but it also means if they don’t retain your business you’ll go elsewhere. So if you’re looking for a new platform to trade on and you’re hunting brokers, ask for a reduced rate. Odds are, if you find it offered elsewhere, you can get that rate matched. And even if you’ve been with your current brokerage for quite a while, there’s no harm in asking for a lower commission rate. Remember, if they don’t keep you, someone else will earn your business, and they don’t want to lose you.
You don’t have to be a smooth talker to pull this off. Call up your broker and ask what they can offer you. Worst case, they tell you no and you’re exactly where you are now. But in many cases, you’ll be able to cut down your transaction costs, which can lead to a big pile of money by the end of the year. How is that not worth asking for?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
4 Reasons to Be in Cash This Weekend
February 24, 2011 at 6:04 pm
Last week, I closed out a few swing trades and shifted to cash. I’m glad. I’ve day traded and it’s been a good week, and I didn’t need to roll the dice overnight in order to turn a profit.
Heading into Friday, I think there are 4 good reasons to remain in cash over the weekend:
1. Busted Patterns. Simply put, right now for most stocks it’s too late to short (for the initial selloff anyway), and it’s too early to go long. For me, the smaller the pattern, the shorter the timeframe for the trade I’ll take from that pattern. With this week’s sudden shift of direction and the intensity of this initial pullback, whatever had been looking bullish (sans energy) now isn’t, and whatever had been looking bearish has cracked like the Liberty bell. Most patterns out there are 3-bar setups, which means I’ll day trade them if they confirm but otherwise will allow them to mature further (read: sit on your hands and wait).
2. Added Uncertainty. Heading into a 3-night, 2-day stay in the heart of Uncertaintyville isn’t great for capital preservation. Holding overnight always involves uncertainty, but when we’re in an environment which is so sensitive to geopolitical events in the Middle East, it has more of an earnings announcement feel to it. One of my trading rules dictates that I avoid holding positions into earnings since I have no edge, and because it makes risk management so difficult impossible. Right now, gap risk is running higher, so when the setups aren’t there (see #1 above), why hold overnight?
3. Change of Character. Every dip has been bought…until this week, which is to say the landscape has shifted a bit. That’s not bad, and it doesn’t mean the bull market is over. What it means is that the multi-hour pullback has been stretched into at least 1 multi-day pullback. We’re getting more back-and-forth, which is more commonly associated with a trading range than a trend. The market’s taking a much-deserved breather here at the very least, and we need to respect that.
4. Better potential ahead. There are a few setups I’m watching for Friday’s session, but the truth is that I expect much better opportunity to surface next week when it comes to swing trading. A couple of bars go a long way when patterns are developing, and right now that’s just what many stocks need. I expect we’ll see that take place next week, so I’d rather have the peace of mind and lack of risk than to fret over the weekend about what a potentially hurtful gap would mean.
Once the dust settles ‘over there,’ we’ll have some better patterns and spots to pick and choose from. And the good news is that volatility is increasing, which means more movement anyway – always a great thing for short-term traders like you and me. So enjoy your weekend and rest up, next week is sure to be another interesting one and we’re going to need to show up ready!
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Bearish Engulfing Bars Warrant Caution
October 21, 2009 at 9:35 pm
Following gains of more than 7% in just a dozen days, today we saw the market averages tag new recovery highs and then reverse sharply to finish in the red. The bearish engulfing bars which resulted on the daily charts aren’t pretty, especially given the elevated volume which accompanied them.
It hints that this market is finally showing us a little fatigue, and that perhaps more than a few buyers morphed into sellers – at least for today.
If we did see a pullback begin to develop here, it wouldn’t at all be an unhealthy thing. Several dips have occurred since the March lows were set, with each of them being bought. Now, at some point that is going to change – it’s imperative to understand that – but we don’t yet have enough technical evidence to jump to conclusions at this point for anything but the next few days. And on that note, caution is warranted after today’s action.
Just a little while ago over on the trading videos site, I posted the following video. In it, I discuss what took place today, and offer up a few levels on the downside we could see tested if Wednesday’s selling pressure sees follow through.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Freedom in Cash
November 25, 2008 at 8:18 am
Having cash on hand as a trader offers tremendous freedom, there is no doubt about it. For quite some time now (many weeks), I’ve been in cash on an overnight basis while this market corrects. I’m thankful that has been the case, allowing me to enjoy that freedom of picking and choosing my spots for when I want to be involved in this tape and when I want to be sidelined. As a result, I’ve been focused on day trading so that I can manage my risk effectively and avoid getting caught on the wrong side of one of the many giant overnight gaps which have come along.
The downtrend has been absolutely brutal to those who are invested, trapping them at higher levels and removing their ability to act quickly when they see trade-worthy opportunities. Those who have refused to take small losses or who have attempted to buy at levels they felt would be turning points have instead found themselves handcuffed by their positions. I know because I’ve heard from them lately, and because there were times in the past when I’ve been there too. The market-wide frustration of late which has been caused by that is enormous, and we’ve seen the effects of it by way of huge volatility and heavy selling even after a major decline. Nobody would choose to sell after such a big slide, so those who are doing it clearly have to.
If this selloff caught you by surprise and you’ve become a stock-, er, stuckholder because of it, there are some lessons you’ll no doubt learn from this process. Let’s take a look at a few in particular…
- Anytime you need the market to make a move in order to bail you out, you’ve gotten yourself into a tough spot. That’s not a fun place to be, and is very much a situation worth making a continual effort to avoid. If you’re a trader, stay a trader. Use stops, eat losses when necessary, but don’t get stuck where you’re unable to move.
- Greed is a major root of frustration. The greed of not taking a loss is always a major issue with those caught on the wrong side of the market. The mentality which requires getting back to breakeven leaves so many would-be traders sitting in bad positions just wanting to not be wrong. If instead they would focus on what could happen next, they’d be more proactive on bailing out when they know they should.
- Impatience is another source of frustration. Those who jumped in on the long side in hopes that the market was oversold enough for a good bounce were clearly very early – repeatedly – over the past couple of months. The desire to just get in rather than wait patiently before putting cash to work has left the capital of many would-be traders all tied up. What began as impatience now leaves them facing greed (see previous point).
Remember, there’s tremendous freedom for those holding cash – especially right now. Far too many traders don’t have that luxury at the moment, so if you do, congratulations. If you don’t, then you’re going to have added incentive to move to the sidelines the next time you see a market correction starting. When that occurs, if you’re able to stay flexible and keep trading (move to cash when necessary), you’ll recognize that there are two kinds of good markets. The best kind of course doesn’t require higher prices for you to be able to make money.
Returning to cash offers opportunities like nothing else. Not only does it clear your head and leave you fully objective when viewing the price action, but you can sit on your hands until your favorite setups come along. You’re able to watch the price action and move quickly when you see the need. And most of all, you can preserve capital.
Trade well this week,
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
<a href=”https://www.thestockbandit.com/?utm_source=blog&utm_medium=linked_text”>www.TheStockBandit.com</a>
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
