TheStockBandit.net

As traders, we always have to stay aware of our surroundings. Ideally, we’re seeking to maintain an edge on our competition, and that means trying to determine with some degree of accuracy what may happen next.

I’m no fortune-teller and I never make market predictions, so instead I constantly ask a handful of questions regarding the market’s behavior. With last week’s failed breakout fresh on my mind, I’m watching for potential market shifts just in case. This may only be some temporary weakness, or it may be a warning that something bigger is on the horizon - it’s just too early to know for sure yet. What we CAN do is to gauge the character of the market, and that’s what I’ll be focused on this week.

Check out this week’s Free Newsletter at TheStockBandit.com where I discuss 4 factors I use to determine market strength when watching for potential market shifts. And when you do, make up your own mind whether or not the bull in the picture looks safe!

By the way, you can sign up for the free newsletter on the Free Newsletter page at TheStockBandit.com. An opt-in form is provided at the top of the page which puts you in full control of your email subscription at all times.

Trade well out there this week!

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

Minor bumps along the way often require slight adjustments in trend lines.

Technical analysis offers a number or tools and indicators to apply to charts in order to better determine buy and sell areas. Some traders have hard-and-fast rules regarding their analysis tools (and I’m a big proponent of having trading rules in place), but there are parts of technical analysis which do require some ongoing flexibility.

Trend lines are the tool I use the most in my trading and charting, and they definitely require keeping an open mind. Drawing trend lines and trading effectively with them is certainly more of an art than a science, because they can morph over time. While a trend line can be defined as a straight line connecting at least two relative highs or relative lows, what’s often left off of the description is that they frequently need to be refined.

The first time I draw a trend line, I usually consider it to be a rough draft. That means I’m willing to adjust it slightly as the chart pattern begins to mature and time goes by. The more times that price bars touch a trend line, the more valid it becomes. However, not every break of a trend line leads to another meaningful move in price. Therefore, if price pierces the trend line slightly but there’s no change of character in the underlying stock (or index or futures), that’s my signal that the break is of less significance and I’ll likely need to adjust my trend lines.

My aim is not to be perfect the first time I set a trend line. What I want is to have something valid I can trade from, as that will not only increase my confidence in the trade but also my profitability over time.

Technical analysis tools exist to help us, not bind us as traders! Trend lines are usually a work in progress and therefore rarely set in stone. Keep this in mind if you use them in your trading, and try to be sure that something meaningful is occurring when you see a trend line being broken. If the volume is up or the momentum is building, you can take the trade with much greater confidence.

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

I’m an independent person and I love to do things my way. Many of us do! But when trying to make our way in the market, we can’t ignore the importance of being on the right side of things, and that means going with the flow.

Trading on the winning team is far and away the most important way to not only locate trading ideas, but also the easiest (or least-difficult) way to extract profits.

Check out my thoughts on the topic in the Free Newsletter this week. There’s also a free trade idea you might be interested in.

And by the way, you can sign up for the free newsletter on the Free Newsletter page at TheStockBandit.com. An opt-in form is provided at the top of the page which puts you in full control of your email subscription at all times.

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

I just wanted to give you a heads-up regarding all of my archived trading articles. There has always been a full list of them available over at TheStockBandit.com (more than 150 articles), and along with the chart patterns page, it’s one of the most heavily bookmarked pages of the site.

But now they’re all arranged by topic, nice and orderly!

That makes it easy to skim the list for any general trading topics which you’d like to read about. The topics include such things as technical analysis, trading psychology, trading tips, and there’s even a nice archived list of my free newsletter articles which started being posting directly on the site a few weeks back. So the next time you need some reading material, check out my stock market articles list!

Hope you enjoy them, and I’ll of course continue to churn out the content here going forward!

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

Are You Trading Too Big?

The market tends to expose our every weakness. Whether it’s emotional extremes, a lack of preparation, or simply being stubborn, trading will reveal your Achilles’ heel!

One common mistake we all make from time to time is trading too large of a position. This may be the case when an account is too small, or it may be a product of the market you’re trading and whether or not there’s ample liquidity to allow for entries and exits with minimal slippage. Sometimes trading too big can mean trading your normal size in an overly-erratic market. While there are several factors involved in trading too large for your own good, focusing on realizing when you’re trading too large can be quite helpful.

Here are 3 clues that you’re trading too big:

If you’re adding on trading size because you’re on the wrong side of a trade, you’re trading too big. Why add fuel to the fire when you’re wrong? It costs money and you’ll often come out of the other side of the trade not knowing which way is up! Compounding one mistake with another will often lead to even worse performance, so focus on working your way out of the first bad trade without adding to it.

If you can’t sleep at night, you’re trading too big. The phrase “sell down to the sleeping point” is often used but for good reason. If you walk away from your screens at the end of the day and all you can think about is the trade you’re in, then it probably means too much to you. Lighten up on your position, and you’ll usually find greater clarity which leads to profitable decisions.

If you are acting like a baby, you’re trading too big. Screaming at monitors, smashing keyboards, and banging on your desk is for toddlers, not traders. If you’re not acting rationally, then it’s time to cut down that trading size. I’ve been on a number of trading floors and witnessed this behavior, as well as been guilty of some of it myself. Such actions indicate that emotion is in the driver’s seat rather than logic, and that’s a huge disadvantage in trading. Trading plans should be in place to direct your next move, but how can anyone follow a logical plan when they’re busy throwing a temper tantrum? I don’t ever recall my own or anyone else’s childish behavior leading to a good day or rescuing a bad one! If this sounds like you lately, take a breath, lighten up on that position size, and get back to your game plan.

Position sizes should be increased when you’re trading well, not struggling. Cutting down position sizes during times of frustration will allow you to get your confidence back and find some clarity.

Wait for your mojo to return before you step back up to full size, and while you wait, focus on trading well rather than P&L!

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