Author Archive for Jeff White
Jeff White is the founder of www.TheStockBandit.com, a nightly newsletter for active traders. He has been trading his own account for over a decade and currently trades full time in Texas.
Trend Lines Often Need Adjustments
January 17, 2007 at 1:41 pm
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
3 Signs You’re Trading Too Big
January 9, 2007 at 3:12 pm
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
Two Freebies to Start 2007 Right
January 2, 2007 at 7:53 pm
It’s the start of a brand new trading year, so why not kick it off with a pair of freebies? Be sure to check out this week’s Free Newsletter where I discuss trading goals (just in time). I talk a lot here about having some direction in trading, and as with any other endeavor worth pursuing, I believe that setting specific goals for yourself is a must if you want to propel yourself to a new level of success.
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.
And don’t forget the weekly Market View page, which is a direct excerpt from the Bandit Broadcast stock newsletter where you can get a glimpse of what the major market indexes are looking like and some key levels to watch in the days ahead. This is provided nightly for our members along with specific trades I’m planning to make, but the market excerpt is posted weekly for the public so stop by and check it out!
Trade well this week and kick the New Year off right – I hope it’s your most profitable year yet!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Getting Ready for 2007
December 27, 2006 at 11:12 pm
You may be trading the holiday market this week, but I am not. It’s been a great time to get away from the screens and spend time with family and gear up for next year (next week I guess I could say). As you and I get ready for 2007 to begin, we’ve got a few things to keep in mind.
We need to set lofty trading goals because we’ll be starting over again. It’s also important to keep in mind that the market could very well shift gears and throw us a few curves, so anything could certainly happen once January arrives.
Whatever your plans are for trading in 2007, remember that small mistakes add up slowly, keep Goal Number 1 at the top of your list, and honor those stops at all times!
I’ll see you on the other side,
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
The Best Way to Upgrade Your Hardware
December 18, 2006 at 9:48 pm
CyberTrader is running a pretty sweet promotion right now where any new account opened and funded will get you a free 17″ dual display. This is perfect if you’ve already done your holiday shopping but forgot to take care of yourself! The best part is that it doesn’t cost a thing, so you won’t feel a twinge of guilt. I already trade through CyberTrader for the best trading tools and executions out there, but maybe I need to open another account so I can get the free dual display!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Minor Changes Make Major Differences
December 13, 2006 at 9:39 pm
Not long ago I noticed that buying dips and pullbacks within uptrends has been working much better for me than the breakout plays I generally prefer. This is largely a function of the market having run for so long without a meaningful rest, and fortunately my trading experience helped me to recognize that (along with, of course, a few failed breakout plays!). This has shifted my focus toward more of these types of plays in recent weeks, and my performance has improved substantially as a result of this minor and simple change.
The key to this change was when I took a closer look at my trades to see what was working well and what was costing me money (I do this regularly). It can be tough to admit the need for change if your ego is tied too closely with your trading, but remember that we’re in this to inflate our wallets, not our heads!
What aspects of your trading might need a little changing? Closely examine your process and the results you’re getting, and I’m confident that if something needs tweaking, it will stand out. Sometimes the smallest adjustments can make the biggest differences.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
The Day After
December 9, 2006 at 12:10 pm
Secondary stocks can often make huge moves if you know what to look for.
Tuesday was a great trading day for us at TheStockBandit.com. You wouldn’t know it by glancing at the market. The NAZ was up 3 points, the S&P was up 5, and the RUT was up 1. In fact, you’d probably think that Monday was a big day and Tuesday was rather quiet.
It’s funny how that often works, but it’s just a function of the kinds of stocks we trade. We like to trade the names which are a little more obscure. Occasionally we’ll trade the biggies like AAPL and GOOG, but they are so dominated by the big funds that it’s harder to know what’s really going on with those stocks on a given day, not to mention they rarely make big percentage moves (which is the best measure of a move). Furthermore, options play a huge role in how the big names move, and you can never be sure if a lasting move is taking place or if it’s just part of the aftermath from the shifting or unloading of a large position held by institutions. They make for good day trading stocks, but they’re not ideal for swing trading.
A Different Breed
The stocks we tend to play are a little more secondary. Yes, they move well and have plenty of volume (our minimum volume cutoff is around 200k/day avg.), but the moves tend to be cleaner (and usually much larger) than the bigger names and that means a huge difference to the bottom line by the end of the month!
These secondary stocks often catch some nice follow through moves on days after the market averages make a jump, which means that some of our best days actually come after a big market move. When other traders are looking to play “follow the leader” the day after a big surge, it brings more activity into the stocks we are often already positioned in. This makes for some nice account growth on days when the broader market may be pulling back or just catching its breath.
So, the next time you feel like you’re missing out on a big market move, don’t discount the possibilities for the next session! There are a ton of stocks out there poised to move if you will do your homework and just find them. Believe me, they are out there!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
