All Entries Tagged With: "Trader Development"
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
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
The Zurich Axioms
January 25, 2012 at 12:08 pm
I first learned about The Zurich Axioms by Max Gunther in the daily Worden Report when Don mentioned it among his favorite trading books a few years ago. Soon after, I picked up a copy and found it was indeed packed with some great insights – enough to be a must-have trading book.
There are 12 major axioms highlighted in the book, with a chapter devoted to each, as well as 16 minor axioms. It’s a relatively short book at only about 123 pages, but the “Rules of Risk and Reward Used by Generations of Swiss Bankers” offers no shortage of wisdom and insights for any trader or speculator.
Without disclosing all of the Axioms, I’ll summarize two of my favorites.
Always Play for Meaningful Stakes.
This minor axiom highlights the importance of trading with enough size for it to matter. This goes beyond the learning stages in which a developing trader needs to hone his skills and not fixate on the money. Rather, playing for meaningful stakes is about getting over the fear of getting hurt in such a way that when a play works, it’s well worth the risk taken.
A story is told in the book about the oil tycoon J. Paul Getty, who grew up rich, but once he became an adult he was sent out on his own. Wanting to enter the oil business, he shunned various opportunities to invest $50 in the early 1900’s in favor of betting nearly his entire savings of $500 on an oil lease he felt was more promising. After paydirt was hit, he sold his holdings for $12,000 just a short time later.
Getty mentioned that if he had not struck oil, the $500 would have hurt, but that he could have found a way to save that amount back up again. He was quoted as saying “it seemed to me I had a lot more to win than to lose.” That’s playing for meaningful stakes.
As a trader, it’s not about walking a tightrope where bankruptcy is the result if you slip. It means you don’t nickel-and-dime your way throughout the entire year if you want to get somewhere interesting.
Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.
What an excellent reminder for traders! Gunther makes the point that without some level of optimism, one cannot trade to begin with. However, there is general optimism and there is specific optimism. According to Gunther, it’s the venture-specific optimism which can become dangerous if you allow it.
The latter mention of what true confidence is just cannot be ignored here. Do you know how you will handle the worst? If you do, then you’ve got arguably the most difficult element of a trading plan already in place – the adverse exit. The ability to fail gracefully in trading – over and over – is what will ultimately define how long you can stay in the game. Your success may eventually be tremendous, but if you’re unable to handle losing the right way, you’ll be taken out long before the big wins can ever come along.
My advice? Pick up a copy of The Zurich Axioms and get a pen ready to mark up the margins and underline key points. It’s a quick read and one you’ll return to often.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
What it Means to ‘Trade Like A Bandit’
January 11, 2012 at 11:02 am
I cap off every post and free video with the phrase ‘Trade Like A Bandit!‘ Some get that, others don’t. This post is for the latter group!
While teaching in Dallas recently, an attendee casually said to me prior to my presentation, “TheStockBandit…huh…just like Wall Street?“ No. I explained that he couldn’t be more wrong to compare my style or what our trader education business is about to the crooked suits who aim to dupe investors Madoff-style into handing over their money.
The guy had no clue what’s in the name TheStockBandit, so I explained to him that day what it meant. In case some of you don’t get it either, I felt it was appropriate to clarify here as well so that there are no misconceptions of what the name is all about.
Here goes…
Think of the great heist movies…Ocean’s 11, The Italian Job, etc. In them, we see that the best bandits plan the hit extensively. They mock up the situation, review scenarios which may unfold, and determine how they’ll handle them.
Then they execute that plan with total precision, even if it means making some adjustments along the way.
In turn, they get away safely and move on to the next job.
That’s exactly how I like to trade.
I want to plan for what might happen in the trade, and do my homework to locate the best setups (targets) in which to allocate capital. Then I need to have the discipline to execute that plan, stay objective throughout, and make any logical adjustments along the way in order to protect myself and my profits as the trade progresses. That allows me to get away (exit the trade) and then shift my attention to the next opportunity.
It’s a blend of survival and protection. I’m ensuring that when a trade goes wrong, I don’t have to surrender any more than is absolutely necessary…I simply abort (stop out). It allows me to survive, to stay flexible, and to maneuver again when an opportunity arises. And when I’m right, I’m capturing those gains and then shifting to the next play.
The word ‘Bandit’ has a negative connotation to some, but that isn’t the case here. I’m not ‘the stock magician’ fooling people with smoke and mirrors, or ‘the stock thief’ pulling the wool over people’s eyes in order to take advantage of anyone. I’m not out to con anyone – I just want to make great trades. Like a Bandit – because it works. Come trade with us and see what I mean.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
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.â€
So, this being a trading blog, it begs the question:Â 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
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
A Look Through the Goal Posts
January 1, 2012 at 3:31 pm
It’s that time again…time to reflect on the previous year, see what you can learn from it, and then determine how to apply it in the year ahead.
I’ve talked quite a bit about goals here, so rather than reinvent the wheel, I’m going to review goals posts from the past. Get your clicker ready and hit the links at will!
Trading shouldn’t be everything, so have some off-the-screen goals to go alongside your account-related objectives.
If you go about it the wrong way, goals can actually impede progress, but done correctly they can provide big incentive and some satisfaction.
Your dedication and preparation in the year ahead can deliver impressive results, but keep in mind that making big progress in trading requires patience. It’s a process, so it’s all about making good trades and trusting that the results you want will be there.
Stay in the game and believe that the opportunities will be there if you’re around to identify them. You’ll need to take these 5 steps to reach your goals, but a year from now just imagine the difference it could mean to your trading.
Know where you’ve come from, yes, but also where you’re going. So say what you will about goals, but I think they are a must.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Always Look to the Left
December 28, 2011 at 2:46 pm
A friend of mine recently mentioned that the area to the right of price is the only place on a chart where you make money. He’s absolutely right. But I’d add that by also looking to the left, you can save money as well.
Take for instance CXO. Right now the stock is sitting in a short-term bearish formation. The stock recently declined for a couple of weeks, then has attempted to bounce – without success. That has created a small rising channel, or bear flag, which is quite likely to be resolved to the downside when taken at face value.
So am I going aggressively short here? No, and here’s why:
Short-term, this looks like it wants lower. But by looking to the left, I see more than just the selloff and feeble bounce attempt. I see that just about $3 lower is a major level which has served as both support and resistance in recent months. That could again provide buyers with a spot to take a stand, and it poses a threat to this setup as a bearish play – a roadblock for the trade.
Here’s a closer look at the chart:
Always take the short-term pattern you’re seeing in context. With that in mind, this bear flag isn’t a high-probability trade given support isn’t far below. Furthermore, the overall trend in recent months hasn’t changed, as this is really just a range-bound stock heading back toward key support. It might not hold, but trading is about probabilities, and they aren’t real favorable in this case for a move of more than about 3%.
In other words, always look to the left.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
I Don’t Care How Fresh Your Fundies Are
December 20, 2011 at 1:28 pm
I’m a trader, so what I care about is catching short-term moves in price. I’m not an investor who’s looking for long-haul appreciation or locating the next ORCL. For that reason, the health of a business doesn’t matter to me. It’s unlikely to change during the course of a trade that lasts anywhere from a few hours up to a couple of weeks (barring scheduled earnings reports or conference calls).
Some traders fixate on fundamentals. They might use the fundies as a starting point for trade ideas, which is alright, but is not necessary for short-term positions. They might use the fundamentals as a logic crutch to defend their losing trade, telling themselves “it’ll come back” because of the business. We know how that usually ends for them when opinions are allowed to interfere.
If you haven’t already done so, make this all-important distinction: there are good companies and there are good stocks, and they do not necessarily overlap. Sorry if that bursts your bubble, but many great businesses have a stock that’s going nowhere. Some stocks are making excellent, clean moves even though their business may not endure the test of time. The correlation between good company and trade-worthy stock is not at all guaranteed.
Here’s the point in case you’ve missed it so far… If you are a trader, focus on the price action and place importance on it alone. Trading is about compounding money by turning capital over frequently. It’s not committing to a long-term relationship with a stock…that’s investing and it’s an entirely different topic (not found here).
So if you are a trader, and if your timeframe is less than a few weeks, consider the likelihood that the health (or lack thereof) of the company behind the ticker symbol you’re trading just isn’t going to change that quickly. Business growth or attrition takes time. With that in mind, all you’re left with is the price action – right where we began.
Simple and straightforward.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
