All Entries Tagged With: "Trader Development"
How to Think About a Loss
October 26, 2011 at 12:58 pm
We all lose here and there, it’s just part of trading. You can’t avoid it, but that isn’t the issue. Where many traders struggle is how to handle a loss gracefully.
Instead if equating a trading loss with personal failure, shift your mentality for what a loss means.
Does it mean you’re stupid? Not necessarily.
Does it mean you were wrong? Yes, in at least one way.
Does that mean you will never get it back? Absolutely not.
Losses are an event, yes, but it’s also a distribution from your account. Consider them a cost of doing business as a trader. Brick-and-mortar stores have overhead, but as a trader, the biggest portion of your overhead is the losses you take.
When businesses cut costs, they’re reducing their overhead as much as possible to fatten their profit margins. Do the same with your trading. Reduce your ‘loss overhead’ by accepting a loss quickly and moving on to the next trade.
It’s much more fun to always be adding to your account rather than seeing funds flow out, but as soon as you start viewing trading losses as something impersonal, it’s going to change your perspective in a very helpful way. Rather than fret over them and allow losses to cloud your thinking or alter your mood, viewing them through the proper lens will help you more quickly get them back and then some.
Like it or not, trading is a business…how are you managing yours?
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 Overcome Your Fear from Past Trades
October 18, 2011 at 9:44 am
Traders are a skittish bunch. We can make the same trade 100 times, but the one time a left-field event occurs, it can spook us forever.
The other night, I let the dog outside before bedtime. He’s a 7-year old Boston Terrier, so I’ve done that literally a couple thousand times. This time, however, he returned to the porch with an unusual look. I knew what happened before I even opened the door, because I could smell it…he’d been sprayed by a skunk.
An hour later after thoroughly bathing him outside, our house still reeked – despite not letting him in until he’d been bathed. And let me just say, fresh skunk spray smells nothing like roadkill skunk. It’s WAY worse.
Thankfully, the stench is long gone now, but that single event conditioned me, and I’m concerned now when I let him out every night…all because of that one awful experience! Doesn’t seem right, does it?
Spooked By The Past
In trading, we have to remind ourselves regularly to remain in the present tense. Because this setup burned you last time doesn’t mean it will this time. Maybe your first couple of trades of the day were losses, and now you’re scared to touch another trade. Or perhaps you’re coming off a tough few months and you’re afraid to get back in the mix.
While respect for the market and quality risk management are of utmost importance, what I’m referring to here is the crippling fear that’s costing you. It’s the fear that’s preventing you from elevating your performance, or from digging out of what should be a manageable hole. It’s the kind of fear that has you paralyzed and unable to pull the trigger on anything.
Return to Trading Confidently
Here are 3 Ways to Overcome Your Fear of the Past:
1. Understand your odds for success. This of course includes an honest risk assessment of the play, but it also means knowing whether this type of play is likely to work given the conditions. Going over your results consistently will reveal which kinds of plays are working in the current environment and which are more likely to fail. If you understand your odds for success and you’re able to have some mathematical confidence, it would be more costly to skip the trade.
2. Understand failure. Knowing the worst-case outcome if this trade happens to fail can reduce the fear inflicted by a previous failure from an unseen event. Black swan events aren’t common, so it’s not reasonable to fear them every time you approach a setup. Weigh the potential for loss, and if it’s outweighed by the potential for gain, the probabilities are favorable enough to participate.
3. Choose to move forward. All of us have the ability to choose, whether it’s our career or our spouse or our attitude. Maybe your fear somehow gives you comfort right now, because it’s been a habit you’ve allowed. That won’t cut it though, so it’s time to change. Eventually, you either decide to get back on the right path, or you’re completely done trading. Make your choice and get on with it – and don’t look back.
Don’t let the past haunt you into skipping potentially solid plays. Assess your risk, and then take the trade confident that over time, the numbers will work to your advantage.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Avoiding Indicatoritis
October 13, 2011 at 1:59 pm
Would-be traders all tend to focus on indicators. The sense, I suppose, is that if there’s just some magic indicator to be added to the chart, then trading becomes easy.
They’re way off.
Personally, I don’t rely on indicators. I am price & volume based when making decisions on trades, and although I might occasionally glance at a moving average or something, I like to keep my charts clean and put my focus at the roots of all indicators – price and volume.
Does that make me better? Maybe.
Does it make me more decisive? Absolutely.
Back when I first went full-time as a trader (remember I already had over 2 years of part-time experience trading), there was a guy in our trading office who suffered from indicatoritis. His monitor was the most colorful thing in the office, but also the most confusing. It looked like a child had taken the entire spectrum of dry-erase markers and drawn all over his screens – a complete mess from which no sense (or cents) could be made.
This was a man grasping for some kind of a signal, but what he actually got was 50 different signals which contradicted each other. His search for clarity resulted in confusion.
That’s not a technician at work, it’s a futile (and wasted) attempt at adding an ounce of consistency to his results. He was looking in the wrong place.
A few years later, I saw a presentation by a guy (who still maintains a pretty large following in the technical analysis community) who “sees” his plays develop from charts with so many indicators that price itself is virtually obscured. Are you kidding? Suffice it to say, I think he derives zero value from those charts in terms of actual trade signals, but rather makes a really good living off confused traders seeking a magic bullet.
Indicators:Â Use Sparingly
Traders by and large rely too heavily on indicators, when it’s far better to use those indicators for confirmation. The price chart should tell you everything you need to know, but if you want some secondary assurance, then an indicator can provide that – so long as you’re using the right ones and at the right time.
Remember this when it comes to indicators: more does not equal better! Simple is ideal.
The hard part of trading is getting out of losing trades and staying in good trades. The hard part is not locating the magic bullet. Don’t waste your time expecting to find the secret to 99% profitability, because it isn’t out there.
A better use of your time and effort is to focus on improving your methods. Even better, improve your mentality, because that’s where the real game of trading is won or lost.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Day Trading Gaps
October 10, 2011 at 4:56 pm
Day traders love to fade gaps, but it’s not always the right thing to do. In this video, I’ll point out some key traits of big gaps to watch out for when deciding on initiating gap-fill trades.
Day trading gaps can be quite lucrative, particularly when it happens early in the session. However, there’s a flip side to it which must be considered – and it costs many traders money to ignore the warnings.
Check out the video for more on this topic, and be sure you’re on the email list so you’re always notified of new updates like this one.
Be sure to view in HD (720P) and full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Can You Trade Full-Time? Part 4
October 7, 2011 at 9:46 am
Be sure to check out Part 1, Part 2 , and Part 3 of this series if you haven’t already, as they offer some important groundwork for this series.
This is the final portion of the 4-part series on “Can You Trade Full-Time.” It’s one of the most common questions part-time traders ask me, so I wanted to give you a list of considerations as a resource in case you’re wondering if you’re equipped with what it takes to make it.
Keep in mind that the things I’m sharing here are my opinions of things I think are needed in order to trade full-time, but your unique situation may differ, so modify accordingly.
Here in Part 4, we’ll look at risk, your needs, and your trading plan.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Can You Trade Full-Time? Part 3
October 6, 2011 at 8:07 am
Be sure to check out Part 1 and Part 2 of this series if you haven’t already, as they offer some important groundwork for this series.
We’ve arrived at Part 3 in the 4-part series on “Can You Trade Full-Time.” This is a subject I’m asked about all the time, so I thought you’d find it helpful to compile this list of considerations as a resource to you as you wonder whether you’re equipped with what it takes to make it.
Keep in mind that the things I’m sharing here are my opinions of things I think are needed in order to trade full-time, but your unique situation may differ.
Here in Part 3, we’ll discuss how to avoid the mistakes that trading professionals avoid.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Can You Trade Full-Time? Part 2
October 3, 2011 at 12:27 pm
Be sure to check out Part 1 of this series if you haven’t already, as it offers some important groundwork for this series.
Here’s part 2 in the 4-part series on “Can You Trade Full-Time.” I’m asked this regularly and wanted to compile a list of considerations as a resource to you as you wonder whether you’re equipped with what it takes to make it.
Keep in mind that the things I’m sharing here are my opinions of things I think are needed in order to trade full-time, but your unique situation may differ.
Here in Part 2, we’ll look at the question of “Do I have enough to trade with to make a full-time income?”
We’ll also take a closer look at what you’ll need to be starting with in terms of both capital and trading tools.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
