RSSArchive for May, 2006

Very Superstitious

May 25, 2006 at 5:13 pm

There’s little controversy over the idea that trading is largely a head game. Throw in the spectrum of emotions which ranges from pure elation (home-run trade) to all-out fear (blown stop-loss), and there’s a lot of ground to cover. Somewhere in between the extremes is the topic of superstitions, and traders have a LOT of them! Those with risky jobs are the most likely to have superstitions or rituals in an effort to maintain emotional stability, so traders certainly fit the mold! What about you?

As a rule, I’m not a superstitious person. I’m not afraid to step on sidewalk cracks or walk under a ladder. I don’t carry a rabbit’s foot or consult my daily horoscope. I really just do my thing each day and try not to worry about the things which are out of my control, even though it sometimes rains after I wash my car ;-).

When it comes to trading, there are lots of opportunities to think that our actions lead to certain results. The only one I can think of for me is that early on in my trading career, I’d set my dream car of the week as the wallpaper on my PC. It was completely unrelated to trading, but somehow I found that about every time I’d do that, I’d go on a losing streak! I think it probably just made me overly aggressive in an effort to make the money to buy the car, but the result seemed to be poor trading. These days, you won’t find a sports car as my PC wallpaper, which is probably ironic coming from the guy who just claimed not to be superstitious! (Traders know when to break the rules, right?)!

I’ve seen and heard of some interesting trader superstitions:
– I knew one trader who insisted on using the same keyboard he started trading with, no matter which PC he happened to be using. There was nothing special about the keyboard of course, he just felt it was his connection to good trading mojo.
– One trader avoided the number ’13’ at all costs. He wouldn’t bid or offer at the .13 level, he wouldn’t take a 13-cent winner or loser when he wanted out, and he traded more carefully when it was the 13th of the month.
– Jim Cramer has mentioned wearing a lucky green shirt to snap out of a losing streak back at his old hedge fund.

What about you? Do you have some funny trading rituals or quirks like refusing to wear red when you’re long? Do you avoid specific restaurants because of the “poor track record” it’s left you with on trading days after eating there?

Let’s have a little fun with this…..if you’ve got some trading superstitions, post them in the comments section below and let the rest of us know if we’re missing out on something that works for you!

Have a fun & safe holiday weekend,

Jeff White
President, The Stock Bandit, Inc.

StockTickr Trading Journal

May 24, 2006 at 10:35 am

Good money management can mean all the difference in the world when it comes to your trading results.

I’m a big proponent of keeping tabs on trading results periodically so that you can know where to make adjustments in your game plan. It’s common knowledge to back down trading size during poor performance and ramp it up when trading well, but let’s go a step further.

Enter: Expectancy. Recently I did a post about position sizing, but it goes hand in hand with the topic of Expectancy. Simply stated, Expectancy is what you can expect to make (on average) per dollar risked. Mathematically it is calculated with the following equation:

Expectancy = (Winning Probability x Avg. Win) – (Losing Probability x Avg. Loss)

Although this formula isn’t difficult to calculate, there is a simpler way – let technology do it for you! StockTickr Pro offers a “Journal” which not only calculates your Expectancy, but also the factors which go into the equation above. If you’ve ever wondered what your win/loss rate is or what your average winning trade is, the Journal in StockTickr Pro will tell you. A trading tool like this will make it far easier and faster at the end of the week or month when you’re reviewing your trades to see what mistakes and weaknesses need working on so that you can correct them and avoid trading mistakes which are costing you.

The StockTickr Journal also includes some very cool and useful features such as dynamic position sizing and a great summary page where you can measure your progress over time in terms of your risk.


May 21, 2006 at 11:55 am

There’s a great post over at Invest2Success Blog about Winning Trader Traits which I wholeheartedly agree with and recommend reading.

I’ve discussed trader preparation before, and to the Winning Trader Traits post I would only further submit that the mental preparation involved in good trading is every bit as important as the physical side of being at the PC and studying results and methodologies.

The idea that “the great ones cultivate a work ethic that is superior to those in the good camp” is particularly true in almost every arena. Consider Michael Jordan or Tiger Woods or Lance Armstrong – three of the most successful athletes of our time. Although they may have had some talent to begin with, their desire to outwork their competition and prepare themselves for success undoubtedly elevated their skills, and almost certainly added the mental edge needed to compete and win on the highest levels.

Trading is the same way – a little talent helps but a lot of hard work and determination will definitely get you to the next level.

Jeff White
President, The Stock Bandit, Inc.

Great Expectations Series – Conclusion

May 18, 2006 at 9:33 am

The Great Expectations Series for traders has been fun to write and I hope you’ve gained something from it. The aim was to take a closer look at several aspects which combine to make up our expectations when it comes to trading. Although “expectations” could be interchangeable with “goals,” there is definitely more to the story! Let’s hit the highlights and wrap this up.

The Chameleon Trader

May 17, 2006 at 10:15 am

(This is Part 6 of the Great Expectations Series for traders. Be sure to read Parts 1-5 in case you missed them!)

In the wild, adaptation is the key to survival. No, I haven’t lived on the plains of the Serengeti or in the Amazon Rainforest, but I do watch Animal Planet and the Discovery Channel! Almost every program showcases a particular species which seems to fit perfectly into its environment, and by now you ought to be seeing where I’m headed with this.

Throughout this series, we’ve reviewed numerous elements which combine to form your expectations, but they’re all worthless if you’re unable to survive out there.

Successful trading requires adaptation. The market is wild, often running on pure emotion and very little logic. There will be times when you can do no wrong, but there will also be times when every trade feels like a struggle. Being willing to change, expecting change, and learning how to change will be the keys to your survival.

Your adaptation will be needed in a few areas: your method, your position sizing, and your personal spending. Let’s take a closer look at each one.

Eyes on the Prize

May 16, 2006 at 10:55 am

(This is Part 5 of the Great Expectations Series for traders. Be sure to read Parts 1-4 from the main Great Expectations Series page!)

What good is having a road map if you aren’t quite sure which direction to travel? Goals are underrated benchmarks which are entirely created by you. They’re the destinations you’ll be traveling toward on your road to profitability, so let’s jump right in and see how to blend them with your trading expectations.

It’s been said that “if you can see it and you can believe it, then you can achieve it.” In my own experience with trading, sports, or any other endeavor, I know this is true. There’s absolutely no substitute for having a target to aim at. While it’s good to keep your nose to the grindstone and have a trading routine, you’ve got to be able to look up and measure your progress. Knowing where you’ve been is only half of the equation… absolutely HAVE to know where you’re headed.

Knowing what you’re aiming for

The Other Side of Discipline

May 14, 2006 at 11:24 pm

The “D” Word is for both sides of a trade.

While taking small losses is widely accepted as the way to survive in trading, good discipline will serve you well on the profitable side of a trade too.

TGB is a little stock which just gave us a huge upside pop in spite of it’s low share price. I recently listed this small gold stock in the “Momentum Movers” portion of The Bandit Broadcast stock newsletter with a buy point of $3.50.