All Entries Tagged With: "Trading Psychology"
Bulls Still Getting Outsold
May 8, 2012 at 12:34 pm
The bulls haven’t found their footing yet as the market moves lower within its range. In some cases, we’re seeing some important recent levels get broken, namely S&P 1357. The DJIA has approached the lower portion of the 600-point range, and we’re getting a bit stretched in the near term.
Nonetheless, the bears are winning at the moment. All news is bad news at the moment, and I’m mindful of the Seinfeld episode The Serenity Now where George Costanza gets outsold by his childhood rival Lloyd Braun. No matter what George tries, he gets outsold. The bulls can certainly relate. (Hit the video link below for an entertaining 1-min clip.)
Lloyd Braun outsells George Costanza
While it’s important to be careful pressing shorts at this stage of the pullback, it’s equally important to respect the fact that each bounce has been sold of late. Trying to get long before we see some stabilization could result in being ‘early’ (read: wrong), thus trapping you. It’s never good to need bailing out by the market.
Best suggestion? Stay patient here. Lighten up on shorts if you’ve caught some good moves. Keep a shopping list handy if you’re eager to get long, but protect capital here and wait for better setups to arrive. Most bearish charts need some rest, and bullish charts are hard to come by at the moment.
For those curious about our trading style in the member area, we’d love to show you what we’re all about. We’ve been short since the end of last month and it’s been a nice little ride lower. Check out the free trial to our stock pick service if you’re interested in adding our ideas to your own.
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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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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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
Think Like a Poker Pro
April 4, 2012 at 7:40 am
I love the movie Rounders, in which Matt Damon is a poker player looking for a big break (and then a way to get out of some serious trouble).
In the movie, his character Mike McDermott makes a comment early on that as a player, “your goal is to win one big bet an hour – that’s it.”
Notice he said “win one big bet” rather than “place one big bet.” There’s a key distinction here and it applies to trading.
Amateur Hour
Amateurs too often think they need to place some big bets in order to win big. They couldn’t be farther from the truth.
Amateurs are also generally too proud to fold. That’s admitting defeat, and rather than seeing the bigger picture of losing some battles in order to win the war, they take a stand when they shouldn’t – and they pay for it.
How the Pro’s Play
Professional traders, on the other hand, realize there’s plenty of quiet time to endure before those payout opportunities occur. They realize it’s a matter of hanging around, staying in the game, in order to be fit to capitalize on the best “hands” they are dealt.
Professionals understand that taking small hit after small hit is easily undone by just a win or two – so long as they’re losing smaller and winning bigger. Be willing to fold repeatedly if necessary – the goal is to be net profitable, but that won’t happen every single time you commit your capital.
Trading is a numbers game, and professionals only play (or play for meaningful stakes) when conditions are most favorable. Very simple, but very difficult for many amateurs to do.
So the question is… are you thinking (and acting) more like an amateur or a pro?
(Hint: your results are likely already reflecting it.)
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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Follow @TheStockBandit
When The Bell Rings – Episode 1
April 2, 2012 at 7:30 am
I’ve been doing free trading videos here for a long time, but they’ve all been in screencast style as I narrate what’s on my charts and share insights with you. Those will continue, because certain things in trading must be illustrated in that manner in order to show you what I’m telling you.
But…
It’s time to put a little different spin on things and I felt that through some on camera face time, I’d be able to connect with you a little better and deliver some ideas and concepts that you absolutely MUST have as a trader.
So today, I bring you something I’ve been excited about lately but haven’t previously revealed with this new video series. I’m calling it When The Bell Rings, and here in Episode 1 I’ll explain why. Subsequent episodes will of course build on what’s delivered here, so by all means stay tuned and share your feedback if you’re finding these helpful.
Enjoy!
(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
LIVE Chat on Thursday, March 29, 2012
March 27, 2012 at 8:00 am
This Thursday morning for the eTradingExpo, I’ll be chatting live at 11:30am ET. I hope you can make it to my session!
Specifically, I’ll be discussing Adapting to Changing Market Conditions. I have a lot of good stuff planned, and we’ll talk about being equipped with different techniques and having an awareness of what to watch for to indicate the landscape is shifting. I’m excited about giving you some insights for better trading and having the opportunity to answer your questions live.
Make plans to attend virtually by pre-registering today (it’s free)!
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Get our free newsletter to keep up!
Follow @TheStockBandit
