All Entries Tagged With: "Swing Trading"
Have a Unique Trading Routine
May 2, 2012 at 8:50 am
I heard from a trader this week with whom I’ve worked for 1 year this month. He’s a class act and quite likeable, making him even easier to correspond with. 🙂
During that time, he’s completed both the Basic Trading Course and the Advanced Trading Course, and he’s been a subscriber of the nightly stock pick service. He has truly put in the work, and he’s utilized me and my experience along the way as well (as he should).
One of the things which has made him successful is that he has truly modified everything I’ve given him to fit his own unique needs. I’ve mentioned this to many in the courses and nightly newsletter, but some do it better than others. This guy has done it exceptionally well, so I wanted to share with you what it looks like.
It’s different than mine, and it should be different than yours. But by seeing it, you’ll notice things which spark ideas for your own routine. You’ll identify ways where he has adjusted and you have not, and it may expose a weakness you haven’t previously considered. I’ll tell you the same thing I have told him, which is to take what’s useful to you and then make it your own.
Here’s his routine:
If the indexes have a big gap, I know most of the movement has been sucked out before things have started (unless it is a panic dive out of stocks). I won’t start trading until after 9:30 to avoid the amateurs and HFC causing strange movements and pullbacks, though I sometimes make exceptions, but want to plan them. For instance a sustained pullback on a troubled stock will sometimes be an exception. (Though more often than not I end up regretting it.)
I have personal things I have to watch. My (physical condition) affects how sharp I feel and how confidently I respond to situations, so I take that in consideration on how much or even if I should be trading.
I look at which way I think the market will continue to go (coming back later to see if I was right) opening, and whether it has been going up, down, or randomly/sideways. I honestly look at which direction I am confident in trading. There is no point starting a trade you do not trust – you’ll just pull out too early with a loss.
I decide on my loss level. If there is little juice left in the market I may only let a trade come back a support level or so. I need a strong runner to make it worthwhile in that case.
I look at how long I can trade. I have limits depending on how my arthritis is on how long I can sit, I also may have personal commitments, but decide to see if I can get a good runner that I can leave with a trailing stop when I run out of time. Of course on a weak day where I would use support levels that is out of the question.
Afterwards I come back and look at how much I lost/made.
Great stuff from a guy who has put in the work. He has a routine that suits him – he isn’t trying to mimic someone else. Can the same be said about you?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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What Do You Do When You Hit Your Loss Limit?
April 26, 2012 at 8:15 am
Over the past 10 days, there have been two occasions where I hit my daily loss limit. Sounds like a tough stretch, but on a net basis it’s actually been positive thanks to some other good days.
Mind you, I’m generally a disciplined trader, and in a dozen years of full-time trading I have broken my discipline countless times but have never truly gone on tilt where it’s account life or death.
That said, I do not have a broker-set cutoff. That’s where you specify a dollar amount, which when hit will lock you out of making more trades. It’s still your account and you could call in and override that I suppose, but it’s at the very least a break in the action for you, and a very good thing for some people – namely, developing traders.
Back to my point and the title of this post, what happens when you hit your daily loss limit?
For me, it’s a general dollar amount where I start to understand that barring some really great trades, and with the amount of risk I am willing to take, I’m unlikely to recover. It’s a matter of recognizing that I’m likely to do more harm than good – either to my account or my confidence.
At times, I’ll hit that level and I just need to admit defeat, shut it down, and come back another day. I might leave my platform open and monitor the market or open positions, but I know I don’t need to press any more buttons. Adhering to that has on many occasions prevented deeper wounds to my account.
Knowing when to walk is found in two things: one internal, one external. Internally, you must understand yourself and your tendencies. Externally, you must be able to recognize current conditions and determine if there’s good reason to continue or not.
Over the past week, however, I had two different outcomes when I chose to trade beyond that mental cutoff.
Exhibit ‘A’
The first was a day where my limit had been reached, but I allowed my emotions to interfere. This was the internal element, and I was in no shape to continue. (That, by the way, also prompted this week’s video.)
I didn’t go on tilt, but I lowered my standards in what was ultimately a mild version of revenge trading. That never pays off, and in this case it cost me a little more. As it should have. I hit my loss limit plus another 1/4, which isn’t a ton but it is too much.
The mistake was that I continued to trade because of my P&L. Catch that? Because of it, not in spite of it.
Exhibit ‘B’
The second occasion was similar in that I reached my mental cutoff, but it was different because it was a day where my emotions were settled.
I continued to trade not out of anger or frustration or ego to prove I was right, but because there were multiple stocks in play which warranted my participation. Conditions were very favorable for making good trades, so I continued.
I was accepting risk beyond a normal cutoff amount, but it was with a level head and with some real potential to turn the day around. And I did. It was rewarding, not in the sense of “I told you so” but simply because I kept taking good trades when they surfaced, added it up in the end, and came out slightly ahead.
It’s nice to dig out a bad day, even if it means you barely do better than break even.
On some days, those are wins.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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Gap Strategy on Swing Trades
April 19, 2012 at 9:01 am
A Bandit subscriber recently asked me about dealing with gaps on swing trades. This was a great question, so I wanted to be sure to share this exchange with you in hopes of you adding your thoughts on this as well.
Background on the Situation:
This question came in reference to a swing trade I had listed Sunday night inside our member area. MGA had fallen below an ascending triangle pattern the previous week and bounced back up to test the breakdown area only to stall out. This appeared to be a potential short-term lower high (and failing bounce), so I listed it as a short sale heading into Monday’s session if it broke the rising trend line at $45.20 (see chart).
This was to be a swing trade, which is an overnight position – at least until target or stop levels had been hit. My swing trading strategy allows for some gapping beyond my intended entries, but then I scale back my size the further a stock gaps. This helps offset the added risk with a wider discrepancy between my actual entry and my initial stop loss.
In the case of MGA, it gapped 2.8%, warranting only a partial position of 1/4 size. The gap was filled quickly, and I ultimately stopped out Tuesday as the bounce continued, taking a loss on this very small position. Nonetheless, that’s the setting here under which this trader asks the following questions.
Question:
Jeff, most of the time when I set up my bracket orders for swing trades my initial trigger to open a position is a stop limit order. I use the limit order portion when I am working during the day and cannot actively adjust for gaps, as this way I don’t by default enter the trade in less than ideal conditions. In the case of MGA which had the immediate pullback, I was in moments after the opening. So my question is in general trades like MGA that return back to the original trigger levels should I let the trade continue or would I be better off passing on the trade?
Thanks
Answer:
Great question. I take it from your question you have mobile access or some way to get in and make an adjustment to the trade once you’re in. Some brokers offer several levels of sophistication with regard to managing orders like this, but if you are not inclined to complicate things then I’d say on trades like this just pass on it. The best trades for me tend to not come back to the trigger or go against me right off the bat. That is more characteristic of the losing trades I make.
I’d say to keep things simple, if the stock gaps beyond a certain amount you specify, then just skip it, or next-best scenario would be to just close out the position as soon as you notice you were filled. Either you got a price you didn’t like or you have more shares at that price than you want, but the point is you recognize it’s not the trade you had intended to take. Closing these out may mean a small gain or loss, but I suspect those will wash out over time and overall you’re sticking with an overall gap strategy which is suitable for your unique needs.
How do you manage gaps on entries when you’re away from your screens?
What would you tell this trader?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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Be Present – When The Bell Rings 3
April 18, 2012 at 8:48 am
Today, I bring you Episode 3 of When The Bell Rings.
In this episode, we’re talking about a common mistake among traders which seems so obvious – yet so few make it a point to avoid.
I hope you get a lot out of this installment. Keep coming back for more in the days ahead, and of course if you find these helpful, then let me know!
Run time is 4:07.
(Direct video link is here for those interested in embedding it elsewhere to share).
By the way, here are links to Episode 1 and Episode 2 in case you missed them.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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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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Wait for the Trend Line Break!
April 11, 2012 at 6:36 am
As a pattern-based trader, I use a lot of trend lines on my charts. When you look at my charts, the only indicator you’ll see is the 21-period MA of volume, which is the running 1-month volume average. Beyond that, it’s just price, volume, and trend lines around the patterns I see in price.
I keep it simple.
Confirmation of those patterns is what I require before taking entries on 99% of my trades, which means price crossing through a trend line. The way I view it, until that line in the sand is crossed, nothing has changed. The rest phase or pullback must not be done until then. I may detect price perking up or volume percolating, but until the trend line breaks, the setup cannot be fully embraced as a positive change of character.
Right now there’s an excellent example in the chart of AMGN of why waiting for that trend line break can mean preserving both capital and clarity. The stock is bullish, no doubt about it, as the intermediate uptrend remains intact since it began last August. Since then, we have a series of higher highs and higher lows.
In recent weeks, the stock has been pulling back quietly with some minor profit-taking leaving price drifting lower since the early-February peak. The prior breakout was around $65 (January) so it could be the stock is in for a test of that zone, who is to say otherwise? And until a break occurs to suggest the stock is back on the move, who cares?
Currently, the stock is floundering around beneath a very valid trend line, but no less a trend line which has yet to be crossed.
XOM is another example here as just recently the widely-anticipated push through the $88 level as recently as last week never happened. The stock has since fallen out of its channel to the downside. Waiting was the best option.
F is one more on the list with $13.05 resistance never being crossed, despite approaching it multiple times of late. Those who bought early in hopes of getting in “cheaper” ahead of the breakout actually paid up. The stock has exited its trading range to the downside, leaving premature buyers in what I’d call the “hurtin for certain” department.
Traders by and large love to predict what’s coming, and often will take anticipatory trades as such. Doing so can be an expensive way to get caught in a stagnant name.
Carefully consider whether a stock is truly getting on the move before committing capital to entries. Could be that waiting a little longer provides you with not only better prices, but better defined exits as well.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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Yard Crew Traders – When The Bell Rings 2
April 10, 2012 at 7:35 am
Today, I bring you Episode 2 of When The Bell Rings.
Hopefully you caught Episode 1 last week which lays the groundwork for where this series gets its name. If not, check it out first!
In this episode, we’re talking about something which many traders fall into the habit of doing, but fail to recognize it until it’s too late. Once that happens, they tend to just accept it even though it leaves them at a huge disadvantage.
I hope you get a lot out of this second installment. Keep coming back for more in the days ahead, and of course if you find these helpful, then let me know!
(Direct video link is here for those interested in embedding it elsewhere to share).
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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Follow @TheStockBandit
