RSSArchive for March, 2008

Trading Video – 3-26-2008

March 26, 2008 at 2:52 pm

I thought I’d mix things up a little bit and post a video of a trading lesson I learned in the market today.

If we’re open-minded and attentive, the market is always showing us ways to improve our trading results. Today’s video shows you a trade we just closed out today for a nice gain over at, and I hope you find it useful!

Feel free to share it if you’re a fellow blogger, the embed code is on the YouTube page.

Without further delay, here’s the clip:

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

[tags]Stock Market, Day Trading, Stock Trading, Swing Trading, Trading Video, Investing[/tags]

Practicing Technical Analysis

March 25, 2008 at 7:00 am

If you’ve ever watched the TV show House, you’ve no doubt seen the main character Dr. Gregory House assert his opinions and act on them. He’s an extremely good doctor (at least he plays one on TV 😉 ), but he sure isn’t always right. What I find so interesting is that he’s actually wrong quite often, and yet he saves the lives of his patients/actors.

Dr. House practices medicine. Sometimes he’s right and sometimes he makes mistakes, but he’s always working toward a solution and willing to try multiple methods if necessary to get there. The key is how closely he pays attention to the results he gets. Making a decision is one thing, but setting the ego aside with a willingness to modify the game plan is of utmost importance when striving toward a goal.

Should we be any different as traders? No way. I think as traders, and in particular those of us who use technical analysis, must take the same approach of making decisions, evaluating our results, and then modifying our approach as needed. Our objective is to turn a profit, and there are many ways to accomplish that.

Simply attempting to turn a profit in the market requires that we make choices and accept some level of risk, but that’s only the first portion of the plan. Once that step is completed, it’s time to monitor and evaluate how well our decisions are paying off. When things are progressing as anticipated, we simply have to stick with the plan and patiently let it play out. However, when we aren’t seeing the results we’re seeking, a willingness to go back to the drawing board is a requirement if we want to continue making forward progress.

Technical Analysis is by some considered to be hocus-pocus, but what’s so funny is that technicians will often give fundamentals a similar lack of credit. I view technical analysis as an interpretation of where supply and demand are concentrated, but it is not always an exact science.

A doctor will ‘practice’ medicine, interpreting symptoms to determine the best course of treatment in seek of a cure. Over time, new discoveries are made, experience is gained, and an open minded physician may alter their treatment habits as a result.

The technical trader operates in a similar way. The best methods for gauging momentum can evolve over time, and certain chart patterns which worked well a few years ago may not be yielding similar results right now. A breakout trader might need to start entering more trades on pullbacks to support if the market conditions warrant that. Certain technical aspects may deserve more attention than they used to if the trading environment suddenly changes, and the astute technician will know that if he’s doing his homework. After all, the market is always changing.

Become a student of the market. Commit to closely observing the results you’re getting, and be consistent in your approach long enough to decipher what’s working and what isn’t. Keep an open mind to what elements of your method might need adjusting, and remember that technical analysis is an ongoing practice. Mix it up when you know you should, and stay attentive to what your trades are telling you.

Trade well out there!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]

Should You Be Trading BSC?

March 24, 2008 at 8:18 am

First BSC got a $2 bid from JPM and yet it continued to trade above that level.

Now JPM has raised its bid to $10/share and BSC is currently trading far from that level.

What is going on?

Because there are some great resources out there that can explain the details of the evolving deal far better than I, let’s focus on what it means for you as a trader. Observing the deal is one thing, but wanting in on the wild price action in the stock is a completely different matter.

You can find the complicated answer elsewhere, so I’ll give you the simple one here: if you don’t understand it, don’t hold it overnight.

The stock is ignoring any technical action on the daily chart, which is the timeframe you need to be watching if you’re swing trading. However, on an intraday chart, a pure day trader with a shortened timeframe can still find some plays in the stock. Given that the majority of news comes outside of market hours, the risk of overnight gap is omitted by day trading it. Furthermore, a day trader is simply responding to price action over the course of seconds, minutes or hours. That’s the only way to trade such a news-driven stock like BSC is right now.

If you’re a part-time trader or someone who prefers a little longer timeframe, stay away from BSC. It’s a nice side show, but it offers you far more risk than potential.

Trade well today!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]

Don’t Be a Hero

March 13, 2008 at 1:37 pm

Every time the market gets volatile for a few weeks, the stories start to come out of the woodwork of traders who made it or lost it big….

“So-and-so made $150k in that last selloff.”

“What’s-his-name lost 80 grand on that reversal.”

They’re impressive stories and often eye-opening when the numbers are considered in terms of real dollars, but to some traders these kinds of rumors might do more harm than good. Occasionally, a guy might hear a story like that and decide it’s time to start swinging for the fences and step up his size.

And of course we all know how that story ends!

Wanna know the secret to good trading? It isn’t found in some flamboyant trading style, and it most likely doesn’t require a major change in your method or taking massive swings in your account equity. The secret to good trading is to trade like you know how. Trade the way you know you should. Don’t trade like someone else, and don’t go overnight from trading for a steady paycheck to trading for riches. Take the setups you do well with, and pass on anything that doesn’t fit that mold.

When the market gets volatile, suddenly the urge to go big and catch a major turning point hits traders of all kinds. Those who want to catch the falling knife or short the top will usually pay for it several times before they finally catch a meaningful turn. The funny thing is that by then they’ve either shrunk their account or they’ve damaged their confidence enough that they might only recoup what they gave back in their first few failed attempts.

Don’t be a hero in the market. Leave that to someone else.

The best trades tend to be planned in advance and then simply executed well when the right factors fall into place. Take what the market provides, but don’t force big trades out of your desire to get noticed by your trading peers. Remember, the good thing about trading from the charts is that we don’t have to know where stocks are going (what a relief!)! Just keep working the charts and take the setups as they come, and know that bullish and bearish plays will present themselves at the proper times. That’s all we have to do, and there’s no need to be a hero!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]

Trading With Multiple Monitors

March 11, 2008 at 12:01 pm

In an age of falling prices on LCD monitors and computers, it’s becoming increasingly common among active traders to expand screen space through the use of multiple monitors. Split-screen displays are easy to come by with any dual-head video card, and I’ve seen arrays containing up to 16 screens – talk about information overload! But it is very important to remember that more isn’t always better.

So what is the best way to get started expanding your screen real estate? I think the first step to take is to take stock (pardon the pun) of what info you need in front of you throughout the trading day. Consider which charts, tickers, filters, and various windows of your trading platform (open positions, Level 2, orders, time & sales) are absolute necessities. That’s going to give you the bare minimum requirement for how much screen space you’ll need for your trading, but it’s never a bad idea to have a little space left over. Perhaps you’ll want to save some room for instant messenger or for your favorite website to keep open and read updates on during the day, so those should also be considered.

What’s important though is that you have only a little leftover space – not a bunch. What happens when there’s lots of empty screen space is that many traders tend to start to tinker with things they shouldn’t. They begin to add studies, extra charting timeframes, and basically just complicate an already good trading system by allowing too much info to clutter their thought process. The old phrase, “paralysis by analysis” comes to mind. Before long, they have a very impressive-looking setup, but they have lost their trading mojo and no longer know which way is up.

Here’s the thing about extra screens: you can always add more when you need them! My trading platform offers a huge amount of tools I could clutter up my screens with, but I try to stick with what’s important to me and let the rest be. There are only a certain number of tools which I can effectively use simultaneously.

Good trading doesn’t necessarily mean having more information at your fingertips – it’s about having the right information. Figure out what you need, gather enough screens to display it, and trade the way you know you should based on your own personal style. Just don’t add confusion to the mix in an effort to see everything at once!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]