On both Friday & Saturday (Feb. 10 & 11) at the Worden TC2000 workshop, I’ll be teaching live. It’s at The Woodlands Waterway Marriott (1601 Lake Robbins Drive, The Woodlands, TX 77380). The workshop starts at 10am and ends at 4pm, and I’d love to see you there either day.

Specifically, I’ll be discussing Formulating Your Trading Plan (Friday 1:30 – 2:45) and Locating Trades & Evaluating Risk (Saturday 11:15 – 12:30). I have a lot of good stuff planned, plus you’ll see the new version 12 of TC2000.  I’m in the rotation with Michael Thompson and Peter Worden, so I’m excited about being there and giving you some insights for better trading.

Make plans to be there by pre-registering or just show up (it’s free) – but get there early, it’ll be a full house!

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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The NAZ tagged 11-year highs, while the other indexes approached key levels from 2011. All news is good news these days, and it seems stocks may never decline again. Careful though – be sure to manage risk accordingly on new positions after a run of this magnitude. Could be that the first pullback is a good one with so many looking to lock in profits at some point.

In preparation for the trading week ahead, let’s examine some important levels to keep an eye on for the indexes. That will have the greatest influence on how individual stocks are going to move, so it’s part of our Sunday process.

(Direct video link is here for those interested in embedding it elsewhere to share).

Be sure to view in HD (720P) and full-screen mode for best quality in the video.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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I wanted to give you a show-and-tell look at the trades I took this week. It should give you a feel for not only how I managed my trades, but also the kinds of setups which have been working well of late. And for those curious about our trading style in the member area, this should give you a good indication of what a typical week looks like.

Be sure to watch for the weekend index review video as well.

(Direct video link is here for those interested in embedding it elsewhere to share).

Be sure to view in HD (720P) and full-screen mode for best quality in the video.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Follow @TheStockBandit

Here’s an example from this week…

AGP is sitting in a bullish consolidation pattern here within an existing uptrend.  This is a quality pattern – but it has yet to confirm.  A breakout would happen beyond the upper channel trend line, currently at $70.  Check out the setup, then down below let’s discuss trading it.

Why I Use TeleChart

This is a setup which would have delivered some frustration for those anticipating a breakout – at least for those who entered early.  Wednesday saw a move back up toward the upper channel line, suggesting a breakout was perhaps coming soon, only to have a decisive turn lower on Thursday bring it right back into the center of the channel.  The stock is again lower this morning.

There’s a huge difference between how pro’s and amateurs make anticipatory trades, let’s see what they are and what those choices lead to.

How Amateur Traders Anticipate

Many amateur traders make anticipatory trades.  They receive a tip, or they have a hunch, or they just want to see their predictions proven, and they get in before any bit of a move has started.  They load up, then wait to get paid.  A failure of the stock to deliver the move results in the max loss possible under this circumstance, all because of how the amateur entered the trade.

How Professional Traders Anticipate

Many professional traders make anticipatory trades as well.  Their experience provides them with market feel, and when watching the tape and eyeing the charts, they’ll run across trades they like too – maybe even the exact same setups as the amateur finds.  However, their execution methods are worlds apart.

Rather than piling into the trade and sitting back and hoping the market proves them correct, the professional enters a feeler position – a starter.  A trade small enough to watch but not big enough to hurt them or really help them.  It’s a marker.  As the trade begins to prove itself and the pattern starts to confirm, they add to the trade.  They build a position as it works, allowing them to get paid nicely when their hunch proves correct.  A failure of the stock to deliver the expected move results initially simply leaves them stopping out of their starter position for the bare minimum loss.

See the difference between the two?

There’s a big argument to be made for just waiting for confirmation in a pattern to take place before entering a trade, but anticipatory trading can still produce profits, so long as you’re doing it carefully.

For those of you anticipatory traders, the example above is a great example of how to finesse your entry.  Scale in, make the setup confirm before adding, and know you’re covered either way – whether a tiny loss you can easily survive or a winning trade you can build on.

(For more on anticipatory trading, read When to Make Anticipatory Trades.)

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

Follow TheStockBandit on Twitter or get our free newsletter to keep up!

That means you intentionally prepare (both mentally and with an actual game plan), you intentionally execute (have the discipline to stick with your method), and you intentionally improve (by reviewing results, keeping an open mind, working with other traders to expand your abilities, etc.).

The fact of the matter is that if your competition is outgunning you, the way to start having more success is by outworking them.

When I was in 8th grade, I decided to take up golf.  Being in a town with a huge presence of great players (including 8 PGA Tour pro’s), I had an uphill battle given that so many of my peers had already been pursuing the game for a few years.  They were better than me, and I knew I had to outwork them in order to catch up to them or surpass them.

The same mindset applies to your trading.  If your competition is getting the best of you, then you’ve gotta step up your game and work harder.  Don’t be afraid of it, nothing worth doing is ever easy.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

Follow TheStockBandit on Twitter or get our free newsletter to keep up!

There are 12 major axioms highlighted in the book, with a chapter devoted to each, as well as 16 minor axioms.  It’s a relatively short book at only about 123 pages, but the “Rules of Risk and Reward Used by Generations of Swiss Bankers” offers no shortage of wisdom and insights for any trader or speculator.

Without disclosing all of the Axioms, I’ll summarize two of my favorites.

Always Play for Meaningful Stakes.

This minor axiom highlights the importance of trading with enough size for it to matter.  This goes beyond the learning stages in which a developing trader needs to hone his skills and not fixate on the money.  Rather, playing for meaningful stakes is about getting over the fear of getting hurt in such a way that when a play works, it’s well worth the risk taken.

A story is told in the book about the oil tycoon J. Paul Getty, who grew up rich, but once he became an adult he was sent out on his own.  Wanting to enter the oil business, he shunned various opportunities to invest $50 in the early 1900′s in favor of betting nearly his entire savings of $500 on an oil lease he felt was more promising.  After paydirt was hit, he sold his holdings for $12,000 just a short time later.

Getty mentioned that if he had not struck oil, the $500 would have hurt, but that he could have found a way to save that amount back up again.  He was quoted as saying “it seemed to me I had a lot more to win than to lose.”  That’s playing for meaningful stakes.

As a trader, it’s not about walking a tightrope where bankruptcy is the result if you slip.  It means you don’t nickel-and-dime your way throughout the entire year if you want to get somewhere interesting.

Optimism means expecting the best, but confidence means knowing how you will handle the worst.  Never make a move if you are merely optimistic.

What an excellent reminder for traders!  Gunther makes the point that without some level of optimism, one cannot trade to begin with.  However, there is general optimism and there is specific optimism.  According to Gunther, it’s the venture-specific optimism which can become dangerous if you allow it.

The latter mention of what true confidence is just cannot be ignored here.  Do you know how you will handle the worst?  If you do, then you’ve got arguably the most difficult element of a trading plan already in place – the adverse exit.  The ability to fail gracefully in trading – over and over – is what will ultimately define how long you can stay in the game.  Your success may eventually be tremendous, but if you’re unable to handle losing the right way, you’ll be taken out long before the big wins can ever come along.

My advice? Pick up a copy of The Zurich Axioms and get a pen ready to mark up the margins and underline key points.  It’s a quick read and one you’ll return to often.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

Follow TheStockBandit on Twitter or get our free newsletter to keep up!