September 02, 2008 at 7:18 am | | Comments 0

Quick-Hit Trading

Say a friend offered to give you a penny today and then double the money every day for a month. “Gee, thanks” you might say, expecting that to add up to maybe $25 or so.

But that response would make you rather ungrateful considering that you’re looking at more than $10,737,418 by the end of that month. You have a better friend than you thought! As Gary B. Smith once noted, constantly compounding money can bring truly amazing results.

I’m a short-term trader, and I don’t at all mind getting into and out of most positions over the course of just a few days. As a result, it’s only natural that Bandit is the word I use to describe my style. Rather than let long-term themes try to develop, I’m far more interested in compounding my money at a faster rate, making sure it’s doing its job whenever I put it to work. I love to catch the quick-hit moves.

Short or Long (Term)?

My swing trading approach necessitates that I use pretty tight stops to keep my risk in check at all times, so it’s typical that I’m shooting for moves more like 10% than 50 in my trades. I also scale the risk side properly as well, limiting losses on average to 3-4%, as opposed to the 15-25% a longer-term trader might allow.

A true hands-off trend follower might be looking to call the top or the bottom in the overall market or a given sector, but they’re also going to have to endure some difficult times along the way. Whenever their trades go stagnant, they stay with them in hopes they’ll get back on the move. Painful pullbacks and drawdowns must all be endured for the purpose of letting a larger move unfold, and those can often be of the gut-wrenching variety!

Some very successful traders have been longer-term trend followers, and I won’t argue with some of the advantages of that approach. It just isn’t best for me.

Get In, Get Out, Getaway

I don’t mind booking smaller but more frequent gains over the course of a few days. Quick money is fine with me – it adds up more rapidly and I rarely have the patience of a Turtle to stay long or short a stock for more than about 2-3 weeks. I want my money turning over more rapidly, so the tighter stops and narrower targets I tend to use help me to accomplish that.

As traders, every one of us must determine what we want out of the market, and then employ the best approach to get there. Take a closer look at your trading and consider what you want out of it. Consider the holding periods which suit you best – that’s how you’ll know the kind of trading style you ought to have.

From there, continually look to improve your approach over time, getting more and more efficient with your timing, entries and exits. Evaluating your trading for the sake of growth will pay off big, because even the occasional minor change can make a big difference. Review your results regularly, and you’ll start to make out like a Bandit!

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

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

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