Swing Trading with The Stock Bandit

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2005-12-06T20:51:00.000-08:00

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Short Selling in a Strong Market

2005-12-01T21:02:00.000-08:00

Short selling includes the word “short” for a reason……you’ve gotta be quick! Stocks tend to fall faster than they often climb, for a few reasons. One reason stocks fall quickly is that high trading volume is not always required (in the form of a large seller) to push them lower – bidders can simply step out of the way and cancel their orders. Another reason is that owners of the stock can be prone to panic selling or capitulation once things begin to turn ugly.

In uptrending markets, shorting stocks gets tricky. One approach to shorting in a strong market is to look for rising support in the form of trend lines. Shorting in situations like this is best done in a day trading situation to catch a quick move down rather than fighting the market trend.

Wednesday night in my stock newsletter, I highlighted SNDK as a weakened stock which looked to be completing a minor bounce. This created a potential short sell situation to be played as a day trade in spite of the climbing NASDAQ. Additionally, SNDK has been prone to gapping a number of times lately, preventing it from being an ideal swing trading stock. A small rising trend line provided the trade entry, which was a downside break of $50.65.

Today as the stock broke the support area at $50.65, SNDK headed south in a hurry, falling more than $2.00 in just an hour. This made for a very nice day trade, which lasted only a short time (pardon the pun).

When you short sell in a market that isn’t downtrending, be quick and take profits when you have them. Then get back to your shopping list and find some long exposure!

Jeff White
President, TheStockBandit, Inc.
http://www.thestockbandit.com/

Dealing With Idle Time as a Trader

2005-11-30T09:21:00.000-08:00

Many people think of full-time trading as a super exciting career and never a dull moment. This is certainly not always the case if you’re trading for a living! Perhaps new traders swing for the fences day after day, but they won’t be able to for very long. To trade successfully, you must learn that there are some very slow and quiet times when trading the market. Whether you are waiting for the right conditions to establish new trades or if you’re waiting for trades you are in to develop, dealing with the idle times in an effective way will put you miles ahead of others on the road to profitability.

Markets and stocks spend time in uptrends, downtrends, and consolidation modes. Your method as a trader will dictate which of these market conditions are best, and when it’s best to sit on your hands or get away from your screens completely. If you trade continuation chart patterns, the trending markets are your time to be active. Recognizing a trendless market or a channeling stock will help you to avoid getting chopped up by initiating trades in narrow trading ranges. If you prefer reversal chart patterns, then the slower market days lacking a trend will be the times when you will be more active, and you’ll want to avoid the trend days which can be costly to a fade trade approach.

Once you have established your trading positions, you absolutely must allow them to develop according to your original trading plan. Many traders fight the urge to micro-manage positions, and it’s easy to with direct access brokers which provide hotkey orders and dirt cheap commissions. What ends up happening when you over-manage your trades is that you either don’t give a stock enough room to move and you get stopped out too early, or you are afraid of any pullback which may temporarily erase some open profits, so you sell too early and lose your position in a good trade.

How does a trader avoid micro-managing trades? For some, it might mean setting conditional alerts and walking away completely to tend to other matters. Maybe you go play golf or head to the bookstore. One of the best traders I have ever been around used to sit in the row behind me on our trading floor. He had a big account and would patiently wait for his favorite conditions to develop so that he could establish some large trading positions. I can recall several occasions when he was up 6 figures for the day and you would have thought he was asleep in his chair, rocked back with his hands behind his head and eyes closed. He forced himself to relax and think about something other than the giant profits on his screen which he may have been tempted to take had he been watching every tick.

Regardless of whether you are day trading or swing trading, there will be idle times as a trader which you must learn to deal with properly. Wait for the right conditions, enter your trades, set your exit parameters, and find a way to let the trades develop without interfering.

Jeff White
President, TheStockbandit.com
http://www.thestockbandit.com/

When to Raise Stops

2005-11-28T10:41:00.000-08:00

Trading rules are a must if you want to trade for a living. Only by following a systematic approach will you be able to find trading success. Most of the time, stocks require some room to move, and tight stop loss orders don’t offer a lot of upside potential for swing trading. However, on rare occasions, you can book greater profits by knowing when to raise stops and pay yourself with big gains.

Recently, the market has been tremendously strong. We’ve had a number of big winning stock picks, and it’s important to know when to tighten stops. Because the market has moved almost straight up (nearly a parabolic uptrend), it's time to get more conservative and raise stop loss orders on open positions. Markets don’t move in straight lines for very long, so it’s important to recognize when an uptrend is getting a bit tired and due for a rest. It’s at times like this when a stock trading strategy can use some conservative adjustments to capture profits.

Last week, instead of following my swing trading strategy which gives my trades room to move, I raised stop loss orders aggressively to lock in big gains. Whereas most of the time it’s best to follow your stock trading strategy, occasionally it’s wise to get a bit more conservative when the market is on the verge of some consolidation. With the DJIA having rallied 800 points from the October lows and the S&P 500 and NASDAQ moving virtually straight up (7 straight sessions worth of gains), it’s only prudent to take some profits off the table and patiently allow new trades to set up. The move up earlier this year from the April lows was followed by several weeks of horizontal price action, which is a possibility here as well. This provides an excellent area to raise cash and await the next market signal.

As the market corrects from this bull run, more stock picks will emerge in the coming weeks for swing trading. Right now, I’m willing to let the market come to me rather than chasing extended stocks for new buys, and I’m raising stops and cash in the meantime.

Jeff White
President, TheStockBandit.com
www.thestockbandit.com

Trend Lines: Good Areas to Buy Stocks

2005-11-23T22:29:00.000-08:00

Trend lines define and confirm trends by connecting a series of highs or lows. Trend lines offer excellent places to buy stocks within an uptrend, because they offer a natural stop loss area just below them.

Right now, the stock market is trending higher. We’ve been swing trading aggressively on the long side during the past few weeks, but the virtual straight-up move lately offers little in the way of new stock picks for buying. While the trend remains solidly up and we’re expecting additional rallies in the coming weeks, we’ll be looking for pullbacks to uptrend lines to establish new positions.

One example of an uptrend stock is AAPL. We highlighted AAPL in our stock newsletter on November 10th with a buy price of $61.25. Wednesday it reached $67.98, which is a very nice gain of 11% from our buy price in less than 2 weeks.

This stock and many others will be on our radar to highlight for additional buys in the near future as they find rising support at their uptrend lines.

Jeff White
President, TheStockBandit.com
http://www.thestockbandit.com/

Pet Stocks

2005-11-21T19:50:00.000-08:00

It’s easy to fall in love with a stock when it treats you right. We all want a little TLC, don’t we?

In my trading past, I would make a good trade and, once I was out, couldn’t wait to get back into the same stock because it had treated me so well. After all, I must have really figured that one out. Yes, it was a quality chart pattern. Yes, the stock was in an uptrend. Maybe I just have a real feel for that stock, I would tell myself.
I still see this regularly in other traders after they pull a few points out of a trade from my stock newsletter and immediately ask when they should get back in. The answer is, maybe never!

If the object is to make money, which it is, then we have no room for pet stocks. Why show favoritism toward a stock which worked in the past but may not be the best place to put cash right now? If your trade produces a winning stock, congratulations! Keep an eye on that stock, it may set up again soon. Just don’t be captivated by every tick, itching to get back into it. Don’t decide after one good trade that you must have that stock figured out. Such an attitude is bound to cost you, and you may find that you become a stuck holder for a little while if you jump back in too early.

Trade only the best technical setups. Put your trades on, and keep a stop-loss order in place. Let the trade develop, and when it’s time to take profit, be willing to move on to the next trade.

There’s no room for favorites in the trading game. If a stock keeps setting up for good risk/reward trades, then by all means continue to trade it. The trading error occurs when your fond memories of a profitable trade in XYZ stock cause you to forget your trading rules and buy under imperfect conditions.

At TheStockBandit.com, we find the best setups for swing trading and list them when their chart patterns indicate it’s time to buy. Sign up today for your free trial to our stock pick service and find out how we make our living as traders!

Jeff White
President, TheStockBandit.com
www.thestockbandit.com

Day Trading ETF's

2005-11-17T22:05:00.000-08:00

Day trading limits the potential return on any given trade, but it certainly has some advantages. I spent several years purely day trading, wanting to go home in cash every night. It allowed me to wake up with a carefree attitude and no market bias. Watching the futures leaning one way or the other in the pre-market had no effect on me. Naturally, I could trade the market in whichever direction it moved on a given day. But during the past few years, market ranges have contracted, leaving fewer opportunities for a day trading strategy, while opening the door for swing trading larger moves over the course of several days.

I still like being able to day trade when I find good opportunities, though. This year, the bulk of my day trading has been in ETF’s. These exchange traded funds (ETF) trade like stocks, with several of them tracking indexes and a number of them serving as baskets for individual market sectors. The one I prefer to day trade most often is IWM. IWM is the Russell 2000 tracking stock, and of the 3 most liquid ETF’s (QQQQ, SPY, IWM), IWM has the largest average true range. Average true range measures how much a stock moves each day, so IWM is the best moving market index ETF to trade. IWM has had average volume of over 32 million shares per day the past several weeks. This is more liquid than DELL, making it very easy to get into and out of with very minimal slippage. The high volume also allows for large positions.

Trading IWM can be done through the American Stock Exchange, but I find that execution on ECN’s such as ARCA or INET is instant, making the ECN’s my preferred trade route. ETF’s allow for short selling on a downtick, which makes them prime candidates when looking for a way to catch a market move to the downside. While I don’t mind trading the long side, I do also like the ability to hedge long positions almost instantly by shorting IWM, being that it is tied to a major market index.

If you’re a day trader who usually just trades whatever is in play for the day, you might consider adding ETF’s like IWM to your trading list. You can jump in and out or reverse your position very quickly with the high-volume ETF’s, and they really are an easy way to trade the market indexes. IWM offers the most bang for the buck, and day trading it is a great way to quickly get long or short in a liquid trading vehicle that offers plenty of movement.

Jeff White
President, TheStockBandit.com
www.thestockbandit.com

Direct Access Trading & Hotkeys - A Necessary Convenience

2005-11-16T10:32:00.000-08:00

Convenience is a driver of our society, as well as trading. Every trading publication seems to have advertisements offering an easier way to trade. The most convenient way to trade is through a direct access brokerage. In fact, if you aren’t trading through a direct access brokerage, you should be.

Having traded in day trading firms for several years, I have grown quite accustomed to trading through a software application rather than placing orders on a broker’s website. My platform of choice is the CyberTrader Pro platform which I've been using for over 2 years, and it offers me everything I need all in one place. I have multiple chart windows, watch lists, level 2 quotes, news headlines, real-time position P&L, trade alerts, and many other bells and whistles which are important to my trading style.

My favorite feature of trading with such a platform is that I can enter orders with a single keystroke. I set up hotkeys to route my orders through different venues, such as ECN’s like ARCA or INET, and separate market orders from limit orders. This way, when I locate a trade, I can hit one key and buy or sell with the push of a button. Particularly with Nasdaq stocks, I usually have the shares in my account by the time my finger comes off the hotkey, it literally is that fast. The number pad on my keyboard has different share sizes assigned to each number, so I can also easily adjust my lot size if my default is different than what I wish to trade. Hitting the ESC key will cancel my order. This is way faster than a browser-based order entry which requires new pages to load or refresh while waiting for confirmation of a fill or cancel. While I use trading alerts to automatically place orders for positions I intend to hold, hotkeys give me incredibly fast fills on discretionary trades like day trades. If you aren’t using hotkeys, you’re a step behind.

Hotkeys also allow me to “scalp” with ease, day trading stocks for small intraday moves. Direct access also usually offers commission pricing plans on a per-share basis, rather than per trade. This has saved me untold thousands of dollars, and has allowed me to trade much more frequently when the market is moving. While I prefer swing trading, the cheap commissions and instant order placement lets me employ a day trading strategy to capture intraday moves. This is a nice alternative on days when my overnight positions are not moving much, but when I still find opportunity (such as a trading range or channeling stock).

My trading platform allows me to constantly monitor my account value, my P&L for the day, and how much buying power I’ve used and have remaining. I also can see exactly how much commission I’ve spent, how many shares I’ve traded, the market value of open positions in relation to my account, the long market value and short market value of open positions, and many more stats.

If you’re a full-time or very active trader, I highly encourage you to convert to a direct access trading platform such as CyberTrader Pro or something similar. You’ll likely enjoy cheaper commissions, faster order entry and fills, and many more tools at your fingertips designed to make your trading better. I can’t imagine going back to a browser or web-based trading method! It would make the already tough game of trading more difficult.

Jeff White
President, TheStockBandit.com
www.thestockbandit.com

The Difference Between Positive Thinking and Denial

2005-11-14T10:55:00.000-08:00

The market requires our very best every day. We have to show up with our game face on, ready to go from the opening bell. Preparation is a necessity and part of trading confidence, but that all happens long before stocks start moving. Once that bell rings, it’s all about execution and having the proper mentality.

Positive thinking has been a hot topic for a long time now. What I do know is that thinking positively is certainly needed for good trading results. Pulling the trigger to initiate a trade is based on confidence, and learning to be a profitable trader begins with preparation and confidence. But on the flip side, stubbornly fighting a losing battle is denial. Where do you draw the line?

When you do your homework and locate good trading setups that fit the current market environment, it’s easier to be confident. You might find trades on your own by screening for chart patterns, or maybe you get your trading list from a stock newsletter like our Bandit Broadcast. Either way, your preparation is part a part of your trading plan which should give you confidence. Developing a stock trading strategy entails knowing where to get into a trade and where to get out, and is also part of a complete trading plan. Having a trading plan for each of your ideas gives you confidence to hit that stock once your trading criteria have been met.

Thinking positively includes not only hitting trades once they trigger, but also being willing to upwardly revise your trading target in a stock with excessive momentum. A profit objective that is met faster than expected may be a signal that you found a big winning stock, allowing you to stay in on the profitable side of the trade for longer than you planned.

Denial is the other, dark side of the coin. Denial is when you blow stops and insist that you’re right on the trade, in spite of your P&L yelling that you are in fact wrong. You’re wrong when your stop loss is triggered, so exit the trade. Your P&L may be a scoreboard as to how well you’re doing, but it also can be your magic 8-ball to tell you whether or not you’re correct on a trade. Accept that you’ll be wrong a good deal of the time, and learn to manage losses appropriately rather than deny that you’re wrong.

Show up each day with your very best. Have a game plan. Know your exits. Think positively, and accept the results.

Jeff White
President, TheStockBandit.com
www.thestockbandit.com

Finding Stocks to Trade

2005-11-12T08:46:00.000-08:00

Producing a stock newsletter every night requires finding good chart patterns on a regular basis for members of my service. My inbox is frequently full of inquiries of just how to go about finding chart patterns for trading. The short answer is that I look for them!

Each afternoon following the market close, I use TCNet by Worden Brothers to scan for stocks which meet a variety of criteria. This tool is essential to my finding good trade setups for my own trading and for my newsletter. Because I trade the stocks in my newsletter, I want to find and highlight only the best technical setups.

The scans I run are basic, filtering out the low volume stocks and cheap stocks which don’t move enough for short-term trading. I generally will cut out all stocks below $10.00, and will rarely look at a stock with less than 250,000 shares/day average. This leaves me with a large list of stocks which have adequate volume for getting in and out of trades with minimal slippage, as well as stocks which have a larger range of movement.

From this point, I sort the list according to how strong or weak the stocks closed that day. Stocks which finished at their highs for the day are at the top of the list, and stocks that closed at their lows of the day are at the bottom of the list. Sorting stocks by this method helps me to find more long trading candidates at the top of my list, while finding more shorting candidates (weak stocks) at the bottom of my list.

Finally, it takes time. TCNet allows me to quickly scroll through all stocks in the list by hitting the spacebar. I generally will end up with about 1500 stocks in the list, which takes me a little over an hour to manually review. The rate at which I go is fast, because I am flagging stocks as I move through the list. At the end of the review, I am left with around 40 stocks which I will look more closely at to locate my swing trading picks for the following day. My final selection is based on market direction, the momentum of the stocks in the list, and how clean each chart looks to me as a trading candidate.

Jeff White
President, TheStockBandit.com
http://www.thestockbandit.com/

Should You Trade That Stock?

2005-10-30T20:28:00.000-08:00

Traders have personalities of all sorts. Some are hyper-active and impatient, darting in and out of trades at a moment’s notice. Others are patient and willing to let a bigger move develop. Some take small risks, while others go for broke. Some watch the tape, while others make decisions based on chart patterns or indicators. You name the personality, it can be found on a trading floor.

Stocks are the same way!

Grandma’s slow but she’s old. Some stocks are both old and slow. Others make real-time quotes seem slow with the speed at which bids and offers change. Some stocks trend nicely, while others change directions every other day. Deciding which trades you should take is largely a matter of matching your personality with that of the stock in question.

The next time you’re stalking a trade, take a look at the history of the stock you’re watching. Does it frequently have big overnight gaps which might be costly? Does it move so much that it may stop you out too quickly? Or does it move so slowly that it’s likely to bore you out of it? Consider your personality and determine whether your stock matches it. Patient traders willing to wait for profits may be better served to trade the slow but steady stocks. Scalpers will likely do better in the high-volume momentum stocks which are in play for the day, providing them a number of chances to make incremental profits over the course of the day.

Whatever your personality, be sure to find stocks that are a good fit to trade. Seek out stocks with the right personality for your trading style. Whether you’re day trading or swing trading, you’ll be miles ahead of most traders who never take this into consideration.

Jeff White
President, The Stock Bandit, Inc.
www.thestockbandit.com

Why Technical Analysis

2005-10-27T19:08:00.000-07:00

When people find out I’m a trader, one of the first things they as is “what stock should I buy right now”? My answer, of course, is that I have no idea.

They want a buy-&-hold investment. They’re wrapped up in their own jobs and lives, and they wouldn’t notice something like a lower high or a high-volume reversal as a signal to bail out. They need some diversity, a long-term outlook, and most importantly, an advancing stock market.

I’m a technical trader with a short-term horizon. If something doesn’t act right, I can change my opinion in a heartbeat. I may even reverse my position. The market can stagnate and I can still make money. That’s the beauty of being short-term. I only have to be right for a limited time, ring the register, and then move on to the next trade.

When I try to explain why I select trades on a technical basis, several reasons always surface:

Short-term trades are all about supply and demand. Technical analysis is founded on price action, not fundamental trends over the course of a business cycle. I want something that can pay me today. Waiting for next year isn’t going to work for me. Chart patterns help me take notice of support, resistance, and momentum which will tell me whether I should be in or out of a stock. Knowing where buyers and sellers lurk provides me with opportunities to make money as I consider the emotions each group may be dealing with. Only technical analysis can reveal this.

Technical analysis of chart patterns provides me with good risk/reward setups. Trading is much more about money management than many give it credit for. By entering positions where I stand to lose only a little if I’m wrong but make much more if I’m right, my approach puts me at a big advantage. Finding chart patterns with a nearby stop-loss allows me to put my money to work with more confidence.

Trading on fundamentals puts me at a disadvantage. If I try to convince myself that my research of XYZ Company will reveal the same information that a multi-billion dollar fund can uncover, I’m kidding myself. Scouring Yahoo Finance in my spare time and trying to guess what next quarter will hold for a company will never compare to a research team that’s regularly in touch with management. The little guy doesn’t have access to the same info as the big dogs, so the playing field isn’t level.

I can compound my money faster. Technical trades are short-term in nature, so I’m in and out of the market much more frequently, compounding my money. Making 5 consecutive trades which each earn me 2% on my money will outpace the return of making one investment which shows me a 10% gain. Considering that fundamentals can take months, quarters, or even years to play out, I’m convinced that consistently hitting singles in the meantime will put me in the Hall of Fame without trying to uncover the next Microsoft or Cisco.

“Good companies” don’t always go up. The object is to turn a profit when my money is at risk. That means only one thing: if I’m buying a stock, it better be moving up. I don’t care if it’s a great company or not, if there’s no demand for it or no new money flowing into it, then it is not going higher. While a company may be great right now, how long will I have my money sitting in it before it is discovered? What opportunities might I miss elsewhere because I’m waiting for this one to pan out? No thanks! Good investments go up, not necessarily good companies.

Ultimately, I put my capital at risk only when opportunities present themselves, and preserve it the rest of the time. Trading with a technical approach allows me limit risk, maximize rewards, and even have a plan of action as I go.

Jeff White
President, The Stock Bandit, Inc.
http://www.thestockbandit.com

Trading: Art or Science?

2005-10-26T18:41:00.000-07:00

I usually hate junk mail, but one popular broker recently sent me a card describing all the success I could have as a trader if I would just implement a more scientific approach. It got me thinking…..does the average trader just need to backtest and automate a strategy to find that golden road to the land of profits? I doubt it, but there’s something there for the new trader to consider.

I’ve encountered many traders with all different approaches. Some are rules-based traders who want to see conditions A, B, and C in place before they act with orders 1, 2, and 3. Other traders seem to have no written trading rules, but they do very well consistently with their instincts. Take my good friend Wes across town, for example. He’s day traded for over a decade, spending countless hours watching tickers and order flow. He’s a high-volume scalper who frequently will trade 200,000 to 300,000 shares daily. He watches only a few of stocks, trades each of them many times a day and does quite well. That’s trading that can’t be taught. That kind of trading is an art.

So where should one begin?

While I am not a proponent of backtesting trading strategies and retro-fitting the past to the future, I do think that trading by way of specific rules early in a trading career is a good idea. When a trader is first getting into the markets, there’s so much to see and learn and do. You have no instincts. Everything you read seems like a great idea and should quickly become your new approach. Having a bad day at the office must mean you need to make a drastic change, right? Surely there’s something out there that works ALL the time! No. Not even close.

The reason I like the idea of following a game plan, especially early on, is that only by being consistent can you truly measure your results accurately. Suppress those urges to fade a rally or buy a selloff, and stick to your rules. Only when you are taking the same kinds of trades consistently can you truly know over time if they are working or what needs to be adjusted vs. thrown out the window entirely. One day does not a trend make! Therefore, one day does not make or break a trading approach. In the beginning, it’s important to go slow and learn which approaches can prove valuable and which approaches will prove useless for you. In short, the beginning trader ain’t seen nothin’ yet, and those gut feelings he thinks he has are nothing but indigestion.

As time goes by, your trading style will evolve. Gut feel gradually becomes a part of your approach. You learn when to follow your rules and when to break them. It’s a matter of patience and experience, and learning to let your intuition play a role. No longer does that rally ahead of the economic release mean you should get long. Something just seems to tell you to watch for a sell-the-news reaction. That’s gut feel. It doesn’t mean that once you have it, it’s always right. Quite the contrary. Learning to trust your instincts means letting them play a legitimate role in your decision-making process, while not letting them take over and dominate.

So, take inventory of where you are. Have you done well during all kinds of markets? Have you been around long enough to know when to break your rules? If not, hang in there and follow your trading checklist for now. Start with making it a science, and you'll develop the feel that makes it an art. You’ll get there eventually, but trying to take shortcuts will be costly. Just remember, capital preservation is the key from day one, so starting with an approach that is quantifiable is a good idea.

Jeff White
President, The Stock Bandit, Inc.
www.thestockbandit.com

Life-Savers: CyberTrader Alerts & Templates

2005-10-14T07:07:00.000-07:00

I am fortunate to have a good relationship with CyberTrader. A group of us moved over to them from another day trading firm in Austin two years ago, and we actually traded in the building at the CyberTrader headquarters. Working with them each day for many months was a great experience, as their tech team (I.J., Sergio, Matt, Diana, Paisley and others) is a class act and fun to deal with. They provided us with a place to trade and we as traders provided input on what additional features would be helpful to us in executing trades. It was a great relationship which I continue to enjoy today, trading on beta releases of the software and being able to contact them directly with suggestions or to request support.

One of the features I like most about the CyberTrader Pro platform is the Conditional Alerts. I use these daily in a number of ways, and honestly couldn’t trade without them. Whether I want an order executed or just to be notified when stocks or indexes reach certain levels. I know that once I set the parameters on alerts, I can walk away without worry, knowing that my positions are taken care of.

The best way I’ve found to use the Conditional Alerts is through the use of Templates. Templates allow fast loading for alerts often used, without having to start from scratch every time I want to set an alert. For example, one alert I use regularly is a long position stop-loss. Setting up this Template is a one-time thing, and after that it is extremely fast and easy to load.

Here is where to begin to set up an Alert Template:

Next, select “Add”…..

Now, give your Alert Template a name, like “Stop Loss Multi-Day” and enter conditions where it says “When”……

Add conditions and actions which characterize the alert. In this example, I am using a long position stop-loss which will stay in effect until I cancel it, and is only good during market hours. I’ve stated that time must be “later than 9:30 AM ET” and “earlier than 4:00 PM ET” and that “’s trade price decreases to points.” By leaving the symbol and value empty, I can use this template for any stock I want. Be sure to check “Keep alert active after logoff” which will make this a multi-day alert. You can even set a future date as a time to deactivate. Click OK.

Now that the alert template is saved, you can use it anytime. To load it, simply right-click in the market-maker window (level 2 window) and select “Apply Alert” to (symbol) and then select the name of your template to load. In this example, we want to use “Stop loss Multi-Day.”

Finally, all you have to do on the fly is enter the price, share quantity, and order type (market, limit, etc.) and click OK. You’re all done!

Be sure to save your layout!

Using these Alert Templates has made a world of difference in my trading, and it allows me many freedoms during the day once I’ve entered positions. No longer must I watch every single tick for a trade if I know my exit parameters beforehand, such as the stocks I highlight and trade from my swing trading newsletter. And thanks to all the good folks at CyberTrader who continue to improve on the best trading platform out there!

Jeff White
President, The Stock Bandit, Inc.
http://www.thestockbandit.com/

Focus on the Process Now, Results Later

2005-10-13T06:04:00.000-07:00

One of the ideas that I constantly stress to other traders while reminding myself is to focus on how you play the game. Most of us have advanced trading software which will tell us the “score” at any point in time as measured by our P&L. However, I feel it’s more important to focus on the process rather than the results. Here’s why.

The subject of one of my favorite websites, Kenny Rogers said that “there'll be time enough for countin’ when the dealin’s done.” Yes, he was talking cards, but the same lesson applies to trading. Focus on the trades on your trading list, execute them as they meet your criteria, and then later, when the market is quiet again and the day is over, look at your results. During market hours, following your game plan is what is most important.

Lessons of this sort have occurred to me on both sides of the market. I’ve had plenty of days when I started getting signals for trades which all started to work, quickly taking me over my profit expectations for the day. When I watched the results (P&L) during the process (in the middle of trading), my decisions were affected adversely. Wanting to get above a nice round number kept me in some trades too long, while the urge to book profit and bag a good day would other times cause me to take profit too early in good trades I should have kept. On some occasions, I would pass up new trades entirely which looked great, simply because I wanted to keep my profit intact. On losing days, I shifted into defense mode and passed up good potential trades simply to avoid further losses. Many times the trades on my sheet for the day would have bailed me out had I only taken them.

Ideally, a game plan is designed during an unemotional time when the market is closed. This promotes clear thinking, and then when the market is open you can just execute the trades you have planned on taking. Focus on this process, and look at your results later. You’ll find that sticking to your original plan will help you in the long run to achieve the success you want so badly.

The Stock Bandit
www.thestockbandit.com

Don't Lose the Lesson!

2005-10-11T06:28:00.000-07:00

This market is causing the bulls lots of frustration since last week. Traders who prefer the long side are getting kicked in the teeth, causing them to second-guess not only their trade approaches but their ability to find profits anytime soon. As the landscape changes, the market has a way of frustrating traders.

Losing trades can have the same affect - if you let them. However, if you look at each trade as just one of your next 100 or even one of the next 1000 trades you’ll make in the next year, you’ll begin to attach far less emotion to the outcome of each trade. Detaching emotion from individual trades is one of the best ways to build confidence in yourself and your long-term success as a trader.

Losses are inevitable; they simply are a part of trading. How you handle losses is what can ultimately determine your level of success moving forward. Even a losing trade can be beneficial if you take what you can from it. Ask yourself, “Why did this trade fail? Is it a function of a market reversal, or a miscalculation on my part? Was my stop-loss set too close as a result of too large a position? Did I micromanage this trade and adjust my numbers on the fly? Did I completely abandon my trading plan?” A loss means you’ve already paid the tuition, so you might as well stick around for the lesson.

Ask the right questions when a trade doesn’t work out or when you hit a rough patch with your trading. The answers you find can help you greatly as you progress as a trader. Whether those answers allow you to avoid making the same mistake again or if they just give you some closure following a bad experience, take what positives you can find and move forward.

Bottom line: cut the loss but keep the lesson!

The Stock Bandit
www.thestockbandit.com

When I Turned the Corner

2005-10-08T08:51:00.000-07:00

I got into the market in 1998 after getting married, and soon I was watching the market quite closely. I didn’t have a lot of money to trade with, but I was eager to learn and grow the modest nest egg we started with. CNBC became part of my morning routine before I left the house each day. In the evening, I would update my TC2000 charting program and begin to look through many charts, hoping to find two or three that looked promising. I did well trading breakouts and momentum plays, as the market was ripe for such a trading style for the next couple of years. This evolved into a passion for trading, and when the time was right, I decided to make trading my full-time job.

The first day I became a “full-time” trader, I placed 4 day trades and made $1006.00 after commission. I was so excited! My 4-point winning trade on the short side of GENZ with 200 shares made my day, and I was convinced that soon I’d be very wealthy. After all, it wouldn’t be long and I’d be stepping up my trading size and imagine what a better trader I would be by then! If I can make a comma ($1,000 or more on a trade) my first day, I couldn’t wait to see what results I’d be getting 6 months later.

Then reality set in.

I did remain positive in my trading account, and fortunately did not ever slip into the red. That was truly a blessing, as I didn’t ever want to have to fight back to get even. But what did happen was that my account stagnated. I would make money with a good stretch of trading, and then I would struggle and give back profits with the tough trading stretches that are bound to occur to all full-time traders. My strength has always been discipline, so where was I going wrong?

As time went by and I evaluated many months of trading results, I began to notice what I had initially missed. I wasn’t managing my losing trades very well! It was not an issue of large and staggering losses or standout hits to my account which had cost me. It wasn’t a matter of being able to admit when on the wrong side of a trade. Instead, my ratios were off. I was offsetting good winning trades with losers of similar size. Overall, my account was bigger, but I wasn’t making much real progress.

Following this initial discovery, I had to dig a little deeper. What was my win/loss percentage, and what should it be? What was my risk/reward ratio, and what did I want that to be? A closer look revealed that my ideals and my reality were different, and I had to get them more in line with each other.

My trade sheets for each trading day show the symbol, entry time and price, exit time and price, and gain/loss for the trade. By adding up and averaging out many months of these trade sheets, I noticed that it wasn’t my win/loss percentage costing me money, but rather my risk/reward ratios that needed adjustment. I was right more often than wrong (although still wrong plenty), and I was cutting my losses at acceptable levels. However, I wasn’t staying in my winning trades long enough to more than offset the losing trades I was bound to make. I was taking profit too quickly. Many of my winning trades kept moving in the direction I had traded them, but I was only getting a fraction of the move because I was unwilling to endure pullbacks and give them time to continue working.

By realizing that my winners could be much bigger if I did not allow myself to take profit so quickly, the opportunity for account growth became much more real to me. I adopted a 3:1 ratio at a minimum for profits vs. losses, meaning that I expect to make at least 3 times what I am willing to risk on a trade, or I simply will not take the trade. Now, not all of them worked out as planned, but by keeping my winners larger than my losers, I began to book profits very consistently, month after month. This added capital to my trading account, but just as importantly, it added confidence to my psychological capital, which is such a necessity for successful trading.

The Stock Bandit
www.thestockbandit.com

The "D" Word

2005-10-06T07:14:00.000-07:00

For months, the market has offered fewer intraday trend moves, and more intraday reversals with narrow ranges. Tuesday was such a day, with the morning being choppy but positive, and an intraday reversal that made bulls’ hooves curl. When this is the case, it’s always a good time to review your trading style as well as your discipline.

While it is very important to have a sound stock trading strategy, it is equally important to have discipline as a trader. The word discipline has been used many times in reference to trading, and many ignore it completely as an overrated weapon in the trader’s arsenal. After all, they see magazine ads or get junk mail advertising a trading system with an incredible track record that can solve all of their problems. However, it still takes discipline to follow a system, whether yours or someone else’s.

So, what are some applications for discipline? What will discipline do for a trader? For starters, it can allow you to stay in the game. A disciplined trader will not allow losses to snowball and wipe out the trading capital which is required to play the game of stock trading. Discipline can help a trader make money. If the idea is to “cut losses and let profits run,” then the disciplined trader allows those profitable trades to continue working. Human nature urges us to take profit when we see it, but we will rarely come out ahead in the trading game by giving in to such urges, so discipline can help. Discipline can also help the trader know when to trade and when not to trade. By having the discipline to make and follow a game plan, a trader can capture profits during markets which offer opportunity, and protect capital during times which do not.

How exactly does a trader go about “being disciplined?” First of all, make a game plan. Decide which markets you like to trade (stocks, forex, options, etc.). Get clear on which kinds of trades you prefer to take (breakouts, reversals, etc.). Determine a position size that fits your account and your personality, and plan to take trades only up to that size. Next, seek out trading opportunities. This may mean subscribing to a stock pick service, downloading charts and taking the time to manually search for setups, or just patiently waiting in front of your PC for something to come along which you can’t live without. Finally, once you have found the setups which meet your criteria, you’ve got to HIT THEM! You’ve got to be in it to win it, so don’t be afraid to try. If you are wrong, your trading plan is your safety net to limit your losses so that you can try again.

As traders, we’ll be wrong plenty of the time, so the idea is to stick with an approach which lets us stay in the game and find profits. A disciplined approach is the single most important aspect a trader must possess in order to profit over time. Whether you trade stocks, options, futures, or forex, whether you swing trade or day trade, whether you prefer reversals or breakouts, the common requirement for success in every market is discipline. Find trades that fit your game plan, and have the discipline to follow it.

The Stock Bandit
www.thestockbandit.com

The Best of Both Worlds

2005-10-04T21:46:00.000-07:00

Yes, it’s a great Van Halen song. It also is a way you may wish to trade in order to reach your goals while minimizing stress, particularly during certain market conditions. I’m talking about blending day trading and swing trading into a stock trading strategy that can produce trading profits for you and let you sleep.

We’ve talked about finding a trading strategy that suits your personality, as well as when to day trade and when to swing trade. When the market is choppy or volume is light, you may wish to employ a day trading strategy. When market moves are smoother and a bit more predictable, a swing trading strategy may suit you best. How about a little of both? Why not blend each style in a way that provides profits on multiple timeframes? I’m all for it.

Sometimes the market road is a little rocky, but you want to have some exposure on. While you could simply enter half-size positions, you could enter the full position and trade it in a hybrid fashion. Why not enter the best technical setups with a full position on, and take half off as a daytrade to scalp the initial move? Then you can keep a half position for further exposure to a potentially larger and more profitable move. This way, you can pocket some profit and still sleep at night while you wait for a larger move.

I select stocks for my stock pick service which are set up for initial moves (ideal for the day trader) yet look good for swing trades (multi-day moves). Employing a hybrid trading strategy which takes into account the best of both worlds means that when a trade triggers by hitting the stated entry price, the trader can scalp the initial move and offer into strength on the first move up. For some stocks this may mean a quick pop of 30-50 cents, or it may mean a gradual, steady move up of a point or more. The point is, part of the trade is put on with the intention of selling into initial strength (or weakness if short). After the first wave of buying begins to slow down and the position is pared back to smaller size, some rest or retracement is likely but this move will not erase much of the paper profit that the remaining position is showing. Smaller size allows the trader to endure such pullbacks, waiting patiently for a larger and more profitable move over the coming days or weeks.

Trading a hybrid style helps to minimize losses on trades that don’t cooperate. The portion of the trade which was put on for a day trade will naturally have a tighter stop (maybe 1% or so), and if the swing portion of the trade is also stopped, the combined loss is significantly smaller than if the entire position was stopped out as a swing trade. Keeping losses small is the name of the tune, so this strategy is great for helping to minimize losses while seeking to book more frequent gains.

If there are a hundred ways to skin a cat, there must be 1000 ways to trade effectively. The key is to find the approach that works best for your unique situation. Utilize a strategy that fits your personality and your timeframe, and then be willing to adjust it if needed. If you need to take the best of day trading and swing trading in order to achieve your profit objectives and wake up each day stress-free, then perhaps the hybrid approach is for you. The market will open tomorrow, so you better be ready with your game plan!

The Stock Bandit
www.thestockbandit.com

When to Adopt a Swing Trading Strategy

2005-10-03T08:16:00.000-07:00

In evaluating trading strategies, we have seen that personality plays its part, and we’ve taken a close look at when day trading can be effective. Now let’s take a look at swing trading as a way for traders with a longer timeframe to achieve their profit expectations.

Swing trading allows the trader to take a position in a stock and look for an intermediate-term move of a few days to a few weeks before their profit objective is met. I feel it is no more or less risky than day trading, but rather a different way of finding stock market profits. The swing trader takes smaller positions and is therefore less exposed from a dollar standpoint intraday, but faces overnight exposure and the inherent gap risk associated with holding stocks overnight. Not all gaps are bad, it should be noted. Sometimes a swing trade meets its profit objective faster than anticipated due to a favorable overnight gap, but the opposite can also be true. It’s important to adjust trading size appropriately when considering holding a stock overnight.

When determining if conditions are proper for swing trading, take into consideration whether the overall market is trending or not. This observation alone can be helpful when deciding if stocks are likely to see follow-through for multi-day moves or if they will instead reverse course and not trend at all. Also, look at the price history for the stock in question. Does it have a history of large price gaps? Does it seem to trend well when it breaks out from chart patterns? Does the stock move for several days in a row when it breaks out or does it go for one day and soon after reverse course? Questions like these will help you decide if a swing trading approach is best for the stock you are looking to trade.

Another important consideration is scheduled news. Is the market on hold awaiting a big announcement or event such as a decision on interest rates or an unemployment number? Does your stock have an earnings announcement or conference call scheduled to take place soon? While there are definitely many unknowns in the market, one can be sure that scheduled events will command respect from traders who know their importance. This means your stock with a great setup may simply not move much ahead of such an event, with the deep-pocket traders waiting to take a large position until after the unknowns have seen the light of day. During such times, a day trading strategy is often a better approach.

Swing trading certainly has its advantages. When the market is moving well and volume is strong, swing trading can offer great rewards. Stocks and markets with momentum will often see follow-through in the form of favorable gaps. A swing trade allows the trader to participate in these gaps, which adds to your profit in the trade literally overnight. This is an opportunity cost of day trading. Swing trading also has the potential to generate big returns in short amounts of time, as breakout stocks can find momentum and move quickly to a profit target. Swing trading also allows a trader to enter positions and follow-up stop-loss and profit-taking orders and simply let the trades go. Swing trades require little maintenance once exit orders are entered, with trailing stop-loss orders being the only dynamic element of the trade. The part-time trader can enter a position, set a limit sell and a stop-loss order, and then walk away. This can be far less stressful than watching every tick on the edge of your seat.

If you’re a part-time trader or a full-time trader with patience, the right market conditions can mean great profits with the right swing trading strategy. Always be evaluating your approach and the market conditions, and then stick to your game plan as your trades develop.

The Stock Bandit
thestockbandit@thestockbandit.com
www.thestockbandit.com

When to Adopt a Day Trading Strategy

2005-09-28T11:25:00.000-07:00

Now that you have considered which stock trading strategy suits your personality and timeframe, let’s look a closer look at day trading. What is it? Is it risky? What’s with the bad reputation? Why would I want to day trade?

First, let’s just clarify that day trading by definition is simply entering and exiting a trade in the same day – a day trade. The phrase day trading became popular several years ago as people made and lost fortunes in the highly volatile market by stubbornly trading on margin when they were already losing large sums of money. This has tainted the image of day trading, which is actually a trading style designed to limit risk!

Day trading may be your choice of trading style if you have another job and cannot manage positions all day, or just cannot sit in front of your computer for hours on end. You may have a short attention span and enjoy a faster pace in your life, uninterested in patiently waiting for bigger moves to develop. If this sounds like you, then maybe a day trading strategy is what you need. Day trading is all about capturing small, incremental profits numerous times throughout the day rather than catching one lasting move. After all, you can turn a profit in the market by taking a small position and looking for a big gain, or you can take a bigger position and look for a small gain. The latter is what day trading is all about.

Because day trading timeframes are so brief, traders who day trade often pay lower commission rates due to the volume they generate with numerous trades. Brokerages like to be able to boast about the volume their traders generate, so they entice day traders with extremely low commission costs. This helps the day trader to overcome the cost of trading when looking for smaller moves many times each day.

Day traders will generally trade more shares per trade than they would if they were holding a position. This is not necessarily risky, as the day trader is immune from overnight gaps which may haunt the dreams of a position or swing trader. A day trader may be more willing to use margin buying power when the trade is only expected to last a short time and the sell button is right at their fingertips. This advantage helps a day trader achieve the same profit objective that a swing trading strategy can attain without requiring several days to capture it or taking on overnight risk. A lot can happen in the world between the hours when the market closes and the following morning’s opening bell, and day trading eliminates that exposure.

Knowing when to day trade is important, and market conditions should be favorable to such a timeframe in order to maximize your profit potential. Generally, when the market is spending many days in narrow ranges and volume is lacking, it is a better time to day trade. The tendency of the stocks during such periods is to make quick initial moves but then fizzle out because they lack the volume required to fuel a bigger move. The summer months are often this way, with many traders on vacation and stocks not moving much with the light volume the summer months often produce. Holiday weeks are often the same way, and day trading initial moves to capture quick profits can be a good way to continue pulling money out of the market during the times when long lasting moves are basically nonexistent. At times, the overall market may be range-bound while awaiting a decision on interest rates or a big economic number to be released. Day trading during these times is also usually a more favorable approach.

While there are day trading strategies which may work under many market conditions, the adaptive trader who is willing to shift trading timeframes can day trade when market conditions warrant such a mode of operation.

In part 3, we’ll take a closer look at swing trading and which conditions are suitable for a longer trading timeframe.

The Stock Bandit
thestockbandit@thestockbandit.com
www.thestockbandit.com

Trading Strategies - What's Right for You?

2005-09-26T07:51:00.000-07:00

It’s the age-old question that so many traders ask themselves and each other: which stock trading strategy should I follow? Does day trading offer better rewards than swing trading? Should I scalp or hold positions? How can I best limit my risk, yet still generate the returns I want?

Like others, I have often wondered whether I should be day trading or swing trading. I have found ways to do both, and each style has its advantages and disadvantages. Ultimately, I think it’s a question traders should continually ask themselves, rather than just once early in their trading careers. Isn’t adaptation the key to successful trading over time?

The adaptive trader is always evaluating current conditions. Always be asking yourself questions. Is the market in an uptrend? Is the market in a downtrend? Is the market trending at all? Are the intraday moves smooth with good volume, or are they narrow, choppy and drifting on light volume? By staying aware of current conditions, a trader is able to determine which trading style will suit him best in the near term, allowing him to limit risk and maximize the rewards of profitable trades.

As you consider the best way for you to trade, be sure to evaluate your own personality traits. By employing a trading style that corresponds with your personality, you are essentially being your own best friend (a cheesy phrase but a necessity for traders). If you’re patient, consider a longer timeframe. Your personality will help you to stay in positions while you wait for the outcome to develop. If you are hyper-active with lots of energy and a short attention span, you may be better of day trading smaller incremental moves on a short term basis. Take stock of your personality when contemplating the best trading strategy for you, and soon you’ll be on the right path toward claiming the profits that have your name on them.

In Part 2, we will take a look at day trading strategies, the pro’s and con’s of that approach, and what market conditions are best suited for that style of trading.

The Stock Bandit
thestockbandit@thestockbandit.com
www.thestockbandit.com

Confucius Say.....

2005-08-23T20:12:00.000-07:00

My friends and family can attest that I could easily get by eating PF Chang’s 3 days a week, as long as the other 4 have pizza involved. Tonight the Chang’s Spicy Chicken was superb.

It’s this fortune cookie I can’t get over.

No one conquers who doesn’t fight.

What? I went from polishing off one of my favorite meals to contemplating my lifetime goals in 2.9 seconds! Even faster than those Ferraris at Wynn Las Vegas. I wanted my fortune to say that people like me or that all my dreams will come true without having to vote for Pedro. Instead, this thought is all over me. I had to shave and shower just to see if it would go away, but nope. Even after my favorite show Rock Star: INXS, it was on my mind.

No one conquers who doesn’t fight.

I know there are many applications for this and many examples in our world today. Lance Armstrong. Tiger Woods. Superman. Pretty much anyone who refuses to take NO for an answer is a fighter, and as a result they conquer. I’ve fought to achieve, and it takes determination. I worked for my All-American plaques, but it wasn’t easy and I sacrificed a lot of other things to get that label. Winning takes effort and pain and…..WORK!

But what about trading? That’s the part that’s bothering me. Trading isn’t always about sweat. I can’t grit my teeth on this trade and force it to work. I can’t look at the guy beside me and decide that I want it more than him and go get it. Profits are often elusive. Profits don’t care how many charts I looked at last night, or what size my trading account is, or how many trades I’ve executed over the past decade. To get them I have to be right.

I took vacation a week ago, and this week the market isn’t moving yet. My brokerage wonders if I’m at the movies instead of logged in. Basically, this week I haven’t been in the fight much at all, so how am I supposed to conquer?

Then I realized this doesn’t apply directly to my next trade. How could it? If it did, then one day my determination might blow out my account, and that would be bad for business! So, since I can’t apply this from one trade to the next, I have to look at the process in order for this to work. I have to look at my results over time, my effort over time, my P&L over time, and THEN decide if I’m fighting hard enough to conquer. The fact is that as a trader, if I want to be successful and keep losses under control, I must check my ego at the door every day.

Times like this when the market is offering very little (as I stated tonight in my swing trading newsletter), my JOB is to sit back and wait for the market to come to me. I can’t go on attack mode when I don’t have an edge. My job at the moment is to wait for this market to indicate a direction, set up some quality chart patterns, and THEN enter the fight.

Until that happens, I’m going to assume these are lucky numbers on the back of this little paper and not Fibonacci retracement levels.

Have a great night,

The Stock Bandit
http://www.thestockbandit.com

My Trading Hardware

2005-08-08T18:31:00.000-07:00

Because I trade for a living, needless to say, it’s important to cover all the bases! While I do not continually buy the latest and greatest gear, I do my very best to be sure that I can rely on my equipment and have peace of mind.

I have 3 PC’s, two are desktops and one is a laptop, and all are made by Dell. I have found Dell to be extremely reliable and their service is excellent. Plus, they are located right up the road from me! All of these PC’s are Pentium 4’s with 2.6GHz on up. I find that RAM makes the biggest difference in operating speed, so go with 1GB if you can – you will certainly see a difference. Each of them has an ample hard drive, although I do not find that of greatest importance. The desktops have video cards which support two monitors each, so I have a total of 4 19” Dell LCD’s in addition to my laptop screen. I want plenty of screen space so that I do not have to open and close windows throughout the day. This is all on one big bow-front desk, so it is a lot of screen space in one place. My wife refers to it as “geek world!” The LCD’s are excellent monitors and take up far less space than the old school CRT boxes. In the upper corner of the room I have a wall-mounted television so that I can watch premarket news and unfolding events (but it’s usually on mute).

I have two internet connections: cable, and a DSL line. The cable connection consistently has tested 5 times faster than the DSL line, making it my primary connection and the DSL a backup. What’s great is that DSL works in the event of a power outage, so I can still place orders when the lights go out from a storm or nearby construction. More importantly, I have a pair of backup batteries which my machines can run on for about 25 minutes if the house loses power, giving me plenty of time to exit positions or place protective stops. They are called UPS backups, or uninterruptible power supply, and you can find them anywhere from Amazon to Office Depot. When the power goes out or surges, my machines never know the difference and my money is not at risk. I run each modem through a router, which allows me to connect multiple PC’s through the same internet connection wirelessly. It’s great to be able to take a laptop into another room to monitor positions or outside in the back yard to play Frisbee with the dog (he learned to catch it in the air last week, so I’m proud!). The routers also serve as hardware firewalls, helping to protect my PC’s from all the bad guys on the internet. If you don’t have one, I highly recommend one. Mine are made by Linksys and Netgear, and I have no complaints.

Generally, I will login to my trading account on the primary desktop, and use the other desktop for working on my stock picks website. The secondary PC is also where I run Trade-Ideas.com’s real-time streaming stock alerts software, as well as TCNet charting software. I use the laptop for financial news sites (like Briefing.com), e-mail, and travel.

I should mention that I own two external hard drives, one for each desktop PC and I scheduled the backup software to run nightly. This way, any changes I may make to my trading platform layout, the website, and everything else always has a duplicate copy. I have made the mistake of not backing up frequently enough in the past, and am determined not to lose the data which is so important to me. Pick one up, you will someday be glad you did!

Sitting at a desk so much of the day requires a comfortable chair, and I bought a Herman Miller Aeron. It is a little pricey, but offers ergonomic solutions which many others don’t. When I get up from my desk at the end of the day, I want to feel just as good as when I sat down.

My hardware may be slightly behind cutting-edge, but in the field of technology that will almost always be the case. I sleep much better at night knowing that if a hard drive were to fail, not only do I have the data stored elsewhere, but I have at least one other PC I can use while I seek a replacement. If trading is your business, don’t short-change yourself with the hardware you select when your trading capital is on the line! Eliminate worry and you are one step closer to focusing on finding profits.

Have a great week!

The Stock Bandit
thestockbandit@thestockbandit.com
www.thestockbandit.com

Your Trading Success Depends on You, Not an Indicator

2005-07-18T11:46:00.000-07:00

Nicolas Darvas was a highly successful trader who wrote a book, How I Made $2,000,000 in the Stock Market. Darvas said, “I slowly came to see that though I was becoming a diagnostician I could not be a prophet. When I examined a stock and found it strong, all I could say was ‘it is healthy now, today, at this hour.’ I could not guarantee it would not catch a cold tomorrow.”

What a great observation! For a guy who made so much money back in the 1950’s, even he was not immune to ugly reversals and getting stopped out of trades.

It is so easy in trading to want a “sure thing.” Often we tell ourselves that the next time we see the perfect trade, we’ll hit it hard and knock it out of the park. Perhaps you have searched for the perfect indicator or trading system which will virtually guarantee you profits if you will just stick with it. No doubt, we have all heard stories of other traders who claim to have found the “holy grail” of trading and fully expect to watch their account values skyrocket now that their search is over. However, the fact is that there are no sure things. Every trade has a risk associated with it. All profitable trades (even the home runs) started with a chance of losing money. We have no guarantee that our stocks will continue in the direction we want them to.

I used to trade in a daytrading office with several dozen other traders. In a group that size, you can find all kinds of personalities and trading types. Two guys in particular were off the chart analytical, pardon the pun. Each had several computers running calculations on various algorithms, and their charts had almost every possible indicator applied to them. I could hardly see the price bars for all the other moving averages, Bollinger Bands, stochastics and Fibonacci retracement zones. It looked as if a small child had taken markers and drawn all over their monitors. Needless to say, these traders never made any money. In fact, they hardly ever pulled the trigger on anything because of their paralysis by analysis. Too many factors had to line up for them to put their money at risk to turn a profit, because they were waiting on the “sure thing.”

No matter how successful your trading becomes, you will not ever have the guarantee of having only winning trades. You must focus your efforts on two things: finding the best setups, and executing your trading plan. Your success will depend on how well you can do these two things rather than how well you can locate the next magic bullet. Take good chart patterns and hit those stocks as they begin to move. Place a stop-loss order in case you are wrong and then let the law of averages work in your favor.

Amateur traders become successful when they stop seeking the perfect indicator and begin to focus on managing their trades better. Make it a point not only during this earnings season, but for the rest of 2005 to do what you can to manage your trades better. Keep stops in place, and move them up as your stocks show you a profit. Allow your losing trades to trigger your stops, don’t try to dollar cost average and hope. Your success won’t boil down to how many times you were right. Your success will depend on making as much as you can when you are right, and losing as little as possible when you are wrong (and you WILL be wrong!). Don’t expect to find the golden arrow for your trading success – it isn’t out there waiting for you! The sooner you are able to look inward at your tendencies as a trader, the sooner you will see your account getting larger.

The Stock Bandit
thestockbandit@thestockbandit.com
http://www.thestockbandit.com/

How I Select Trades

2005-06-23T16:31:00.000-07:00

How I Select Trades

Successful trading is about managing trades once you are in them, regardless of where they came from. I think a great trader could probably turn a profit taking random trades, as long as he manages them well. Now I do believe that finding quality chart patterns is essential, mostly because trading good setups in liquid stocks allows for the best risk/reward relationship on the front end. That is why I run my swing trading website – to highlight the best charts in the market for potential trades. My trade selection process is based on my ability to manage those trades, therefore I want to find only the best. Why not predetermine your stop in case you are wrong by taking the trades with a natural stop-loss nearby?

Having said that, let me touch on the last comment regarding stops. One of the first things I want to know before I take a trade is how much I am likely to lose in case I am wrong (and I will definitely be wrong some of the time). This helps me to determine two things: position sizing and profit expectation. If I am willing to lose $1000.00 on a trade and the natural stop is 1 point away, then a position size of 1000 shares will be obvious. Furthermore, if I want to keep my reward-to-risk relationship at 3 or 4 to 1, then I would look to pull at least 3 times my potential loss out of the trade on the profit side. This would be a 3 point profit for this example.

Now, how do I go about finding those trades? Each night I begin with all the stocks in the market and run some basic scans on them which filter out the low-dollar stocks and the low-volume stocks using TCNet, my charting software. Once I have the remaining list, which is typically about 1600 stocks, I sort that list by their close relative to that day’s range. This simply means the stocks at the top of the list finished the day near their highs, and the stocks at the bottom of the list finished near their lows. Sorting by this helps me to first find my likely long candidates and then move on to the short candidates, as I typically like continuation plays. Once the list is sorted, I use the spacebar to screen each stock in pretty rapid succession. Going through the list takes me about an hour. Simply scrolling through so many stocks each night also helps keep tabs on the overall market health.

As I move through the list, I keep a finger on the “F” key and “flag” the stocks which are good enough for a closer look. After screening the big list, I am left with about 50 flagged stocks which I look closer at to determine my trade candidates which will be in the swing trading newsletter. It is at this point that I separate the good from the great. I want stocks which are able to move. A stock like MSFT which sees daily changes of only a few cents is just not a candidate. I want potential for a good, quick profit. I also want to find tight setups where my stop is nearby. A wide, sloppy chart will add slippage and make it more difficult to know when to exit. This is why I often overlook momentum stocks which have already broken out. Why make trading any more difficult than it already is?

Volume is the next thing I will really key in on, as it is the best true measure of activity and just what the “big boys” are doing. Does volume support the overall look of the chart? Has there been more activity lately than normal which may indicate a move is about to occur? If so, then that stock makes my list.

When looking for shorts, I want to see lower highs, downside volume and relative weakness to either the market or that particular stock’s sector. This indicates to me that pressure remains on the stock and the path of least resistance is still down. Any stock that is unable to participate in market strength gets my attention quickly.

The next morning, I set alerts in my CyberTrader Pro trading platform which will trigger when the stocks from the newsletter meet their breakout prices. Most of the time, I set these alerts to actually get me into the trades automatically for at least a partial position. I also set up my watch lists in Trade-Ideas Pro, which helps me to gauge momentum and relative volume. Their product is excellent, and is an essential part of my trading.

As the day progresses, I keep a close eye on market activity (or inactivity it has seemed to be lately). If buying is strong and the futures are holding up well, I will add to longs in expectation of strength (vice versa for shorts). If the futures are flat and choppy, then I cut way back on my activity and grab a good trading book. Watching the market action with this in mind helps me select which trades are worth adding to and which are not.

From there, it is all a matter of execution and sticking with a good, disciplined trading plan. Cutting losers and keeping winning trades on my screen is the only remaining part of my job once I have found the trades, which is also the most important part!

The Stock Bandit
thestockbandit@thestockbandit.com
http://www.thestockbandit.com

Resisting Urges

2005-05-02T08:05:00.000-07:00

Watching and trading the market full-time offers tremendous opportunity to capture profits. Something is always on the move, and to profit, you only need to catch a piece of it. With daytrading buying power being 4:1, there is also leverage at your fingertips to place the big bet when you think it has arrived.

The past couple of weeks, the market has flopped back and forth on pretty much a daily basis. As I write, the prior 9 sessions each went different directions! This is not the kind of environment where I find it appealing to place the aforementioned big bet. The market is never easy, but there are certainly better times to have a trading bias than right now. Television guests are willing to make big claims about where the market is going for the next few months, but the truth is that none of them know. I am purposely leaving my television off to avoid listening to such opinions for most of the day. I might catch some pre-market news or the economic releases, but I have no interest in listening to Joe Fund Manager who simply wants to beat the market (even if that means a negative return). My objective is profits every month, not to simply “outperform” the S&P 500 by the end of the year.

Range-bound markets have a way of getting traders to force trades, which rarely works. Avoid the urge to be in trades just for the sake of activity in this choppy market. Avoid the urge to place the big bet in hopes of catching the absolute bottom of this year’s down move. Avoid the urge to guess how the market will respond to earnings on a particular stock for the overnight home run. The fact of the matter is, for every home run you get lucky on (and earnings plays are about luck), there will be a number of strikeouts to offset that isolated success.

So, as we watch this market go back and forth and we wait for better signals that a larger move is coming, I want to stress the same thing I’ve been saying for weeks now: BE PATIENT! A lasting move, a REAL move will offer plenty of chances to jump on board and deploy capital into the market. Until then, resist the urge to be active and book giant profits, because they are much harder to find at the moment. Quality chart patterns are much harder to find in this environment due to the complete lack of momentum. Instead, begin to plan how you will react to market moves once they do arrive. That is likely the best use of time right now unless you are scalping the small moves intraday. Soon we will have our chance for swing trading larger and more aggressively, but right now the current environment simply calls for lighter trading and more planning.

Have a great day!

The Stock Bandit
thestockbandit@thestockbandit.com
www.thestockbandit.com

Stay Positive in a Negative Market

2005-04-04T11:03:00.000-07:00

Trading is not always easy. They say if it were easy, everyone would be doing it! Not to mention that if that were the case, we wouldn’t be paid as well when we are right.

The recent market has certainly tested the patience of many traders, mine included. I am more than willing to go short, so the market’s direction is not the problem; it is the price action which has been tough. The past several weeks have been marked by trades starting to work only to reverse and cause teeth gritting and desk banging! Take heart! You are not alone if this is how you have felt.

Possibly the most frustrating part is that the market has been drifting steadily lower but the intraday moves have been sloppy and sudden, making it hard to chase trades if you did not already have a position. For me, this has resulted in some winning trades and some losing trades and overall, not a lot of progress. We are not seeing smooth moves followed by small pullbacks that offer multiple chances to get on board a trend, but rather quick whooshes followed by complete reversals on a dime. This will not last forever, I am confident of that.

In my trading past, I would continue to trade aggressively during times like this even when my results were less than great. This resulted in greater frustration and deeper account drawdowns, which meant that once conditions smoothed out and I got back on the profit wagon, I had some ground to cover to get back to where I had been. I was also mentally tired after wrestling with the market to no avail.

This year, I am trying to take a different approach, and so far so good. I made it a New Year’s Resolution to back off significantly when my trading results started to slow down or suffer, hoping to shallow out my account drawdowns during rough trading conditions. My new approach has me being much more selective with not only which trades I take, but what size I do those trades in.

Hopefully, once the market moves become more predictable (they may never be easy, keep in mind), I can resume profitability from the same place I had been, rather than make my own money back before growing my account again.

When day trading or swing trading, we often feel obligated to always be in a trade to stay busy. Busy is not always good in trading, I have learned. The mark of a great trader isn’t just measured by profits made when correct, but how little do they lose when they are wrong. Recent market conditions are ideal for putting this thought into practice, with many narrow-range days and only an occasional move to catch. Fighting this whipsaw market action will have your confidence lowered and your confusion heightened to the point that when smoother waters do arrive, you are unwilling to set sail. Be willing to patiently wait for your favorite trading conditions. They will be here so be sure you are ready for them mentally when they do arrive.

Stay patient in this market, and make your trades prove to you that they are worth keeping. With commission costs so low, the willingness to exit and re-enter is an inexpensive way to step back for some clarity.

Overall, make it your goal to stay positive in a negative market, with your account balance and your mental toughness intact. Keep a good trading book on your desk, and stay mentally sharp for the better conditions which are sure to return!

The Stock Bandit
Swing Trading - Stock Picks
www.thestockbandit.com
thestockbandit@thestockbandit.com

The Losing Streak - Lighten Up!

2005-03-08T11:52:00.000-08:00

Trading full-time certainly has its ups and downs (pardon the pun). The hours can be great, the pay can be nice, and there is always a challenge if you are up to it. On the flip side, it can be a lonely profession, and there are the losing streaks to contend with. Our egos are often tied to our results, and it is in our best interests financially and emotionally to avoid losses when we can. The tough thing to accept is that losing is part of the game!

Every trader goes through times of success and struggle. Just as the market tends to have a rhythm with the way it moves, so can your results be as a trader. Sometimes, you will see things more clearly and anticipate moves correctly. Other times, it can feel as if the light at the end of the tunnel is still many miles away. Losing is an inevitable part of trading, as I mention in several places on my swing trading website. Ultimately, your success as a trader will be determined by how you are able to deal with losing.

I try my best to keep close tabs on my trading results. It is important to know where I stand, whether for the week, month, or year. This helps me stay aware of my equity curve, whether it is climbing, falling, or just moving sideways. When I trade well, I get more aggressive. When I am losing money and my win/loss ratio slips, I know rather quickly from my results that it is time to make a change.

Once I am faced with a losing streak, whether it is a few days in a row or a couple of weeks, I take a serious look at what needs to change first. Simple mathematics and my experience both tell me that decreasing my size while going through an account drawdown will minimize the severity of it. I typically cut my trading size in half to begin with, which gets me thinking less in terms of total dollars and more in terms of am I right or wrong with this trade. If a trade begins to work and gains momentum, I can always add to it and get more aggressive. However, if I find little follow-through or my trade reverses, I not only give back less open profit, but I am less prone to fall into “hope mode” as is common with positions which are too large for my own good.

The second change I make when my trading mojo disappears is that I take fewer total trades. I become much pickier as to which setups I am willing to trade. I get more disciplined with how the market needs to be acting in order for me to press buttons. Basically, I sit on my hands more. This also helps to curb losses when I am not trading my best, but it does more than that. I monitor my trading results closely, and by just getting more selective with the trades I do take, it helps to eliminate many varieties of trades which may be costing me. By simplifying my approach, I am able to find the light more easily.

Finally, remember that there are more important things in life than trading! Try to get out more often. Catch a movie. Work out. Play golf. Lighten up! This too shall pass!

So, the next time you find yourself in a trading funk, remember to trade smaller and less often. These surprisingly easy adjustments will not only help to soften the blow to your account, but they will help you find your way faster than a stubbornly aggressive approach.

Have a good night!

The Stock Bandit
thestockbandit@thestockbandit.com
http://www.thestockbandit.com/

My Typical Trading Day Routine

2005-02-21T16:57:00.000-08:00

I believe routines are important when seeking consistent results or evaluating performance. By following a routine, a trader can get involved in the process of trading each day, rather than getting wrapped up in analyzing results. Evaluating results certainly has its place, but it can be a hindrance to trading your best from day to day.

My routine begins in the morning about 90 minutes prior to the opening bell. I come into my home office and get my computers up and running. I have 3 PC’s and 4 screens which I use each day. I take a look at the news and see what headlines may have an effect on the day’s open (CNN.com), as well as what stocks may be in play due to news on them (updated throughout the day at Briefing.com’s In Play page available from my CyberTrader brokerage account). I then start to load up my watch lists into quote windows, as well as into my Real-Time Streaming Stock Alerts windows. I use Trade-Ideas Pro, which alerts me the moment stocks hit new highs or lows, or any of a number of other criteria are met. It also helps me search for patterns or volume moves intraday, which I find useful for daytrades.

Once I have loaded those lists, I then turn to my primary brokerage account which is CyberTrader. I use the CyberTrader Pro platform, which has every tool I have ever needed to execute trades and monitor positions. I use the Market View windows for quote lists, but my favorite feature of this direct-access trading platform is their conditional alerts feature. So during the premarket, I set conditional alerts for my swing trading newsletter picks, by using time, bid/ask, and price conditions. I can set these to automatically generate live orders once they trigger, or simply to alert me once the conditions are met. I generally set them to get me into at least a partial position, and then I will monitor the pilot position and add to it as I see fit. Once I am in the positions, I then set automatic exit alerts as stop-loss orders to close out the trade for me if needed. This not only saves me valuable time, but it allows me to focus on remaining positions rather than second-guess whether or not I should exit. Let me say that many more times than not I am quite glad to have had an automatic stop order generated for me using these conditional alerts! Nothing is worse in trading than fighting a losing position and regretting not getting out at the originally planned stop-loss price. These alerts take that possibility out of play for me, and let me keep trading and looking for the next move.

Throughout the day, I keep tabs on the market in a few ways. I read some financial websites such as RealMoney to keep me aware of current and upcoming events, and it is always good to read trading articles from other traders. I also am on instant messenger with a few other traders which I have worked with for several years. We work well looking for intraday setups together better than any of us might do individually. As long as you can stay focused on the market and not get sidetracked discussing other topics, this is a good way to trade. I have never looked at other traders as competition, but rather as helpful resources to share ideas with and seek out new ways to profit. It also gives me interaction with people which is good when trading in a home office. A trading chat room can be helpful (but sometimes expensive) when looking for others to share ideas with, but I am not a member of any.

I probably place about 20 round-trip trades per day on average. I will keep stocks overnight, but I also daytrade. I don’t let commissions deter me from entering new trades, because they have become so cheap that only a very small move in the stock can more than pay for the commission. If I feel the market is on the move, I will become more aggressive in adding to open positions or seeking new ones. If the market is slow-moving and range-bound, I am reluctant to add new positions unless they are for swing trading.

Once the closing bell sounds, I get away from the computer fairly quickly. I do not stick around for earnings, as I never hold stocks going into the announcements. After staring at my screens so long, I want to get out of the house! About 90 minutes after the close, I begin my research and scan for stocks using my stock charting software. I run scans for custom criteria to narrow down the list, but primarily I am manually scrolling through hundreds of charts looking for chart patterns I like. This process takes well over an hour, and then I begin to compose my swing trading newsletter. The newsletter takes another hour, and then I publish it to my website and email it to subscribers. Now I have my swing trading candidates for the following day as well as some potential daytrades which I may have found while scanning the universe of stocks.

Finally my work is done for the day, and I can eat dinner and kick back for some serious reality TV! If you don’t have a DVR or TIVO, I highly recommend getting one!

Follow a regular routine and you will soon learn what things are most important to your own trading process.

Good night, and trade well tomorrow!

The Stock Bandit
http://www.thestockbandit.com/
thestockbandit@thestockbandit.com

Selling On The Way Up

2005-02-04T21:41:00.000-08:00

An old friend of mine is just getting into the stock market after primarily being involved in real estate. Over the past week we have spoken a number of times about the market and trading. I told Brandon how one of the toughest things to do in stocks is to sell on the way up!

Stephen Covey wrote a book which was widely read called "The 7 Habits of Highly Effective People." The second habit he discusses is to Begin With The End In Mind. For trading, I equate this habit with planning my exit. If I am to be an effective trader (make a habit of profitable transactions), then it is necessary to know what elements would cause me to exit the trade. Regardless of which reasons you may set for exiting a given trade, once a profit target has been met, being disciplined means taking that profit. Sometimes this means a profit target is met exceptionally soon. It might also mean sustained strength in a position which would cause you to only exit most of your shares upon your profit target being met. The point is, you are selling into strength.

I told Brandon how easy it is to play "what if" as a trader. What if I had kept my entire position? What if I had been out of town or lost my quote feed and had no choice but to stay in? What if I had really been aggressive on that trade? These two words will bother you if you let them, but that may or may not positively affect your trading results. Be careful when playing what if! Psychological capital is of great importance. Preserve it!

My friend Steven says that "missed money is better than lost money." He is right. Let's take a look at the 2 scenarios which can play out when selling on the way up.

Last November I listed BOOM as a buy in my swing trading newsletter at $11.80. This stock rocketed higher over the following 2 days to the tune of 49%. This kind of move would have met most anybody’s profit objective in such a short time. Readers inquired when and where to take profits, and I mentioned how I sold into the strength while the party was in full swing as another friend Adrian would say. It was a good move.

Chart courtesy of TCNet from Worden Brothers, Inc.

BOOM finished well off its highs that day and just a short time later BOOM had returned to its prior price level.

Chart courtesy of TCNet from Worden Brothers, Inc.

They don’t all turn out that well, though, which of course is why I am writing this post! MSO was a long candidate in my swing trading newsletter which triggered just 9 sessions ago with a buy point of $29.00. I have been trading less aggressively during the earnings season, and therefore have been prone to taking profits more quickly. MSO worked nicely for a few days but then started to struggle two days ago. It appeared the party was over for this stock. Selling into that strength was a prudent thing to do. But, this stock jumped another 10% in the past 2 days since then, without me! Another opportunity to play “what if!”

Chart courtesy of TCNet from Worden Brothers, Inc.

The point of my post is this: follow your game plan! If your trades hit your stops or your profit targets, follow your plan and get out, even if it means selling most or all of your position into strength. Yes, you will have the chance to play what if. Yes, it will be frustrating to see stocks sometimes go higher without you. But you will be practicing discipline, and discipline will likely make you many more dollars in the future than you will be able to make without it!

Good night, and enjoy your weekend!

The Stock Bandit
thestockbandit@thestockbandit.com
http://www.thestockbandit.com/

Getting Prepared for the Trading Day

2005-01-29T14:56:00.000-08:00

With the great challenge of facing the stock market each day and the hope of pulling money out of it on a regular basis, a trader can do few things more important than prepare adequately. It should be no secret that many of the brightest minds in the world are at work to make their living in the stock market, and such competition cannot be taken lightly! Furthermore, while traders should not be in the prediction business, we must certainly have a game plan.

As time progresses, a trader will inevitably learn from his mistakes. This experience is the foundation for laying out a game plan in preparation for the trading day. Merely being a student of the market and of one’s own results will teach a trader to react certain ways to market conditions or events. It is this foundation which should be built upon in order for the trader to elevate his game to the next level (and it IS a game).

In order to develop a trading plan, a trader must begin with his personal style in mind. Swing trading involves a plan that may evolve over the course of a few days to a few weeks, while day trading can be faster-paced and more spontaneous. Personality, patience, and profit objectives will play a large role in which style of trading one may wish to employ, but the trader should choose his method as he plans for success.

Once the trading style is known, the trader must take into account current market conditions. Are recent days or weeks characterized by lasting trends, or by narrow ranges and choppy action? Knowing the answer to this question will put you miles ahead of many other traders who walk in each morning without taking current conditions into consideration. The market will catch you off guard as it changes its rhythm or volatility, but recent history serves as a guide until things change. This means choppy, low-volume, range-bound markets should likely be approached with smaller positions and the expectation of taking profit more quickly and in one piece. A trending market with larger range days and greater volume allow the trader to take bigger positions in hopes of scaling out in pieces as the market moves in the trader’s profitable direction.

Whether after the market closes or early in the day prior to the market’s open, some time should be spent determining an IF/THEN strategy for the upcoming session. Some traders may subscribe to a swing trading newsletter or converse with other successful traders, while others prefer to do their own research. One excellent way to find the following day’s trading list is to screen for stocks which meet custom criteria for price, volume, volatility, etc. An affordable stock charting software program will quickly narrow a large list of stocks down to a specifically filtered handful of trading candidates. Worden Brothers, Inc.’s TCNet is one such program, and it will scan thousands of stocks in just seconds or sort them by more than 100 included criteria or unlimited custom criteria. By screening for a handful of potential trades, the decision-making process is simplified and a plan is easier to carry out.

Consider finding a list of trade candidates for both the long and short side of the market, setting specific entry and exit prices, and then simply execute that plan. IF the long candidates rise to your entry prices, THEN purchase them. IF the short candidates break the levels of support you see, THEN short-sell them. IF none of your trade candidates trigger their entry prices, THEN do nothing! This kind of game plan will allow you to effectively respond to market conditions without having to predict direction or hope to be bailed out of losing positions. Approaching the market with the IF/THEN mentality also will help the trader to execute a plan, rather than fight the emotional urges to find excitement or force trades. Sometimes things will work exactly as planned and other times the market will whipsaw you right out of positions. Meeting the market with a game plan and sticking with it will undoubtedly allow the trader to work with less stress and emotion, which are two of the worst negative forces that traders face.

Feeling well physically is a very important trait which must be present for a trader to profit. Staying healthy and rested allows the trader to work with a clear mind and focus on the task at hand. Additionally, personal relationships can play a large role in a trader’s effectiveness. When life is rocky away from the trading screens, the successful trader must be willing to cut back on trading size or even back away from the market entirely. A prideful ego will not only cause rough waters on the home front with relationships, but it will also damage the trading account! A clear conscience allows quality rest and a fresh start each morning for returning to the market sharp and ready. Make the most of your weekends to catch up on personal to-do’s and relaxation. When Monday arrives, if you aren’t at your best, don’t expect your trading to be!

Finally, as the morning breaks and the market’s opening nears, follow a routine to get into the proper state of mind for following your plan. This may include reading up on current events, reviewing your charts one final time, grabbing your morning caffeine, or listening to your favorite song. Whatever it is, find what works for you when it comes to getting into the best mindset to extract profits from the market. Remember, the competition is serious and fierce, sharp-minded, and most of all, prepared. You should be too!

The Stock Bandit
http://www.thestockbandit.com/
TheStockBandit@TheStockBandit.com

Swing Trading Education

2005-01-19T20:58:00.000-08:00

Being a full-time swing trader is not a typical job. I trade from my home and have a commute of less than 10 seconds. I have no boss looking over my shoulder, and the actual stock market hours are less demanding than a host of other jobs. This means I also don’t have someone coaching me or teaching me the ways of the market and how to pull money out of it. Here in the central time zone, the market closes at 3pm, which leaves plenty of time to pursue other interests. But with lofty goals and a strong desire to succeed in the market, I have spent a great deal of time educating myself once the trading day is over. Books, magazines, web articles, and especially poring over my own trading results keep me learning.

I have read many books and magazines about the stock market and about trading. Because I am self-employed and therefore self-motivated, I find it necessary to always be searching for helpful information to continually improve my approach. I want something that I can connect with, something that grabs my attention in a way that may sharpen my skills, develop my method, or make me aware of new trading industry developments.

Among the books I have read, I found the most helpful to be the Market Wizards series by Jack Schwager. These books profile highly successful traders in an interview format. Learning from great traders and the market conditions that fit their approaches is a good way to improve your own results. These interview-based books help you get into the mind of a great trader, which is always a learning experience.

Another learning process is to analyze your own trading approach and the results it generates. If your method of trading is producing consistent profits, then there may be no need to tweak it. But even during times of good trading, there are ways to improve your returns. If your method is giving you mixed results, then you might want to take a closer look.

When I first started trading, I wrote down every single trade, even if it was just a scalp. My entry time and price, my exit time and price, number of shares, and gain or loss on the trade were all recorded on a simple grid sheet. Writing my trades gave me a good record of not only my trades, but the context in which the trades were placed. If losing days were a result of overtrading or pressing when I was down, the evidence was right before me.

At the end of the month, I would sit down and review the sheets and see what I could learn. Calculating my win/loss percentage, the size of my average winners and losers, and of course my profit or loss gave me good numbers to evaluate. If my win/loss ratio was unsatisfactory, then I was probably taking the wrong kinds of trades. If my average winner was not significantly larger than my average loser, then my discipline (cutting losers quickly) needed adjustment. Staying on top of these numbers can really shed light on areas that need improvement, and I would certainly consider this process to be an important part of the self-education process. I still do this in times of struggle.

Finally, stay in touch with other traders. It can be very helpful to stay aware of what trading styles are working or not working. Some of my best trading stretches were a result of knowing certain approaches were just not working. Other traders are a great resource for sharing ideas, and the cheapest way to learn is from another’s mistakes.

Trading is my job, and I realize that over time, I will likely get out of it what I put into it. I am very willing to apply myself in order to continue learning about my tendencies and the market, and I know as time goes on it will continue to pay me dividends. I have never regretted investing time in learning how to improve. Writing a swing trading newsletter also helps to keep me on my toes.

If you want to achieve more in your trading, commit to educating yourself with current industry events, the continual evaluation of your method, and the experience of others. I think you will discover more ways to profit!

The Stock Bandit
TheStockBandit@TheStockBandit.com
http://www.thestockbandit.com/

Swing Trading thoughts

2005-01-15T21:33:00.000-08:00

Good evening Stock Bandits!

I have started this web log to share additional thoughts that are frequently not in my swing trading newsletter. Each night, I send out the letter containing some market commentary and a number of stock picks, but rarely address other trading topics such as psychology, position sizing, goals, training, routines, capital preservation, trading styles, focus, winning streaks, losing streaks, and many other things not found currently on my swing trading site. I might even list a movie pick!

From time to time, I will post here and address these items and more. Your feedback is welcomed and I would be happy to occasionally take chart requests to state my opinion on them. Check back often to see what has changed, and let me know if you are finding value in what you read here.

To my subscribers, I appreciate your input and hope that you are trading better now than ever. To the tire kickers, stop by for a free trial and check it out!

Good night,

The Stock Bandit

As on my site, my disclaimer states that I will not be held responsible for investment actions you take as a result of stocks mentioned here. Your investment actions are your own, and should be done after careful research and consideration, as well as with the advice of a registered professional.