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

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While teaching in Dallas recently, an attendee casually said to me prior to my presentation, “TheStockBandit…huh…just like Wall Street?“  No.  I explained that he couldn’t be more wrong to compare my style or what our trader education business is about to the crooked suits who aim to dupe investors Madoff-style into handing over their money.

The guy had no clue what’s in the name TheStockBandit, so I explained to him that day what it meant.  In case some of you don’t get it either, I felt it was appropriate to clarify here as well so that there are no misconceptions of what the name is all about.

Here goes…

Think of the great heist movies…Ocean’s 11, The Italian Job, etc.  In them, we see that the best bandits plan the hit extensively.  They mock up the situation, review scenarios which may unfold, and determine how they’ll handle them.

Then they execute that plan with total precision, even if it means making some adjustments along the way.

In turn, they get away safely and move on to the next job.

That’s exactly how I like to trade.

I want to plan for what might happen in the trade, and do my homework to locate the best setups (targets) in which to allocate capital.  Then I need to have the discipline to execute that plan, stay objective throughout, and make any logical adjustments along the way in order to protect myself and my profits as the trade progresses.  That allows me to get away (exit the trade) and then shift my attention to the next opportunity.

It’s a blend of survival and protection.  I’m ensuring that when a trade goes wrong, I don’t have to surrender any more than is absolutely necessary…I simply abort (stop out).  It allows me to survive, to stay flexible, and to maneuver again when an opportunity arises.  And when I’m right, I’m capturing those gains and then shifting to the next play.

The word ‘Bandit’ has a negative connotation to some, but that isn’t the case here.  I’m not ‘the stock magician’ fooling people with smoke and mirrors, or ‘the stock thief’ pulling the wool over people’s eyes in order to take advantage of anyone.  I’m not out to con anyone – I just want to make great trades.  Like a Bandit – because it works.  Come trade with us and see what I mean.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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

In his book Confessions of an All-Night Runner, he makes the following statement:

“Struggling and suffering are the essence of a life worth living. If you’re not pushing yourself beyond the comfort zone, if you’re not demanding more from yourself – expanding and learning as you go – you’re choosing a numb existence. You’re denying yourself an extraordinary trip.”

So, this being a trading blog, it begs the question:  how well do you embrace the struggle of trading? At times it’s really smooth, and trading can provide extraordinary profits in incredibly brief amounts of time, but not always. Sometimes trading’s a real grind. You question everything you’re doing, your results offer you no condolences, and you’re just flat-out suffering.

If you’ve been through that before and you’re still a trader, congratulations! You have been able to overcome the pain and doubt and press on and work your way out of it. Others of you, however, might be facing that right now for the first time and you’re wondering if you have what it takes.

Here’s the thing…if you fall into the latter camp, this is where the rubber meets the road. You’re facing a choice of whether to persevere or to walk away. While moving forward might or might not deliver the success you so badly want, I can guarantee you that permanently walking away will never allow you to reach your trading goals.

Struggle, Suffering, and Success

Struggling and suffering in trading are common side effects of the job, they come with the territory.  As you well know, if it were easy then everyone would be doing it. Trading can be hard, it can be demanding, and boy can it be frustrating.

That same struggle can also propel you to new heights of success, but you have to respond the right way – and it’s not gonna be comfortable.

3 Ways to Grow from Trading Adversity:

1. Appreciate the ache.  It doesn’t mean you enjoy the frustration.  Appreciating it means you acknowledge it’s here, you recognize the fact that a change is needed, and you understand that if you don’t shift in some way it’ll be the end of your trading – at least for a while.

2. Expect to grow.  Why shouldn’t you?  What you’re doing isn’t working, as otherwise you wouldn’t be facing adversity to begin with.  Watch for new kinds of moves, implement some different techniques, and anticipate some different results.  If you survive, you’re going to be a better trader because of this time and how you respond to it.

3. Require more from yourself.  Maybe you got stagnant, and that’s what brought you to this point of frustration.  You’ve had some approaches which have worked, and you rested on them – perhaps a little too much.  As traders, we have to continually blend a loyalty to what’s working now with a willingness to employ some new methods. So push yourself more going forward, keep moving, never sit idle when it comes to growing as a trader.

And finally, for some of you this is a wake-up call.  You’re starting to become set in your ways, but you now recognize you’re in for a rude surprise if you continue to operate in that manner.  No more!  Seek out ways to improve, to grow, to add to your skill set.  Because according to Dean, getting stuck in your comfort zone means you’re denying yourself something extraordinary – maybe even that elusive next level.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Why I Use TeleChart

Last week, the stock broke to a new correction low by undercutting the December lows on heavy volume.  What followed, however, was obviously both shocking and painful for the shorts.

Wednesday’s arrival delivered upbeat news for Weight Watchers as U.S. News & World Report put it at the top of the list for best weight loss diets in 2012.  Consequently, Wednesday’s bar was a bullish engulfing bar as Tuesday’s low was undercut before a close above Tuesday’s high on even heavier volume with a 7% pop.  Then we saw near-record volume Thursday on an 8% advance, and further upside continuation Friday with nearly a 9% gain.

Why I Use TeleChart

Change of character? Absolutely.  Value-buyer accumulation? Hardly.  This is the portrait of a short squeeze, and it’s one reason shorts require absolute stop losses.  The sudden shift can rip the faces off of shorts who panic and rush for the exits while opportunistic bulls get long.  The combination can be explosive, as seen here in WTW.

The lesson?  Watch your shorts and don’t give them more leeway than they deserve.  Keep stops in place and be mindful of what’s possible when the tide shifts.  This is one kind of move you don’t ever want to experience from the wrong side of the trade!

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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

I’ve talked quite a bit about goals here, so rather than reinvent the wheel, I’m going to review goals posts from the past. Get your clicker ready and hit the links at will!

Trading shouldn’t be everything, so have some off-the-screen goals to go alongside your account-related objectives.

If you go about it the wrong way, goals can actually impede progress, but done correctly they can provide big incentive and some satisfaction.

Your dedication and preparation in the year ahead can deliver impressive results, but keep in mind that making big progress in trading requires patience. It’s a process, so it’s all about making good trades and trusting that the results you want will be there.

Stay in the game and believe that the opportunities will be there if you’re around to identify them. You’ll need to take these 5 steps to reach your goals, but a year from now just imagine the difference it could mean to your trading.

Know where you’ve come from, yes, but also where you’re going. So say what you will about goals, but I think they are a must.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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

re-cov-er-y (noun) – the regaining of something lost or taken away;  restoration to a former or better condition;  the extraction of useful substances from waste.

Traders have to go through recovery on almost an ongoing basis.  Sometimes it’s from a paper-cut-sized hit to the account, while other times it involves coming back from an amputation of sorts – whether it be a major drawdown to actual or emotional capital.

Either way, without the ability to recover, you’re done.  (Obvious alert: that’s no place to be).

There are steps to recovery which should be taken, and I want to discuss some of them.  By no means is this an exhaustive list, so please add your own in the comments, but here are a few which I think are necessary on the (sometimes long) road back.

Admit it.  Face up to what it is.  Call it a slump, call it shattered confidence, call it a big scary market monster.  Whatever “it” is, you have to get it on the table so you can deal with it.

Seek help.  Maybe you shouldn’t go it alone.  Without some accountability, it’s easy to relapse.  Find a mentor or some coaching to get you back on track, and add some skills to your repertoire.  The fact of the matter is that left to your own abilities as they currently stand, you may very well be facing a similar situation again.

Take inventory.  Take an inventory of what’s left of your capital, both in terms of cash and confidence.  It may be that you simply don’t have enough left to consider a comeback right away, so perhaps you incubate for awhile and prepare in other ways for your eventual return.  Or perhaps you assess your situation and realize you have more than enough to start the process.

Get uncomfortably familiar with the cause.  What was it that put you in need of recovery to begin with?  Overconfidence?  Lack of respect for the market?  A series of small mistakes which compounded your problems?  Understanding the root cause of your wounds, even if painful, will help you prevent it from happening again in the future.  After all, you’ve already paid the tuition, you might as well get the lesson.

Get back in the saddle.  The last step in the sequence is to return to trading and begin rebuilding.  Start thinking about what that’s going to look like for you and how you’ll avoid the same pitfalls which got you this time around.  Visualize yourself back in the routine again, making plays, staying disciplined, and having success.

** What are some steps you think are necessary to begin the healing process following a big trading loss?

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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

They have to drop the bait in order to escape the trap, but their greed and ignorance prevents them from letting go?

I’ve made some trades in that same manner, and I’m guessing you have too. The ones where I just refused to let go in time because I wanted it to work so badly, and ultimately they proved extra costly.

Dropping the “bait” in those cases would have freed me to go in search of many other, better opportunities, but my short-sightedness prevented it.

Monkey Brained

And while every single one of us has been there at some point in our trading, what’s curious is that it originates not with the setup or a poor strategy or a flawed technique for entering or exiting. It starts with not having a properly prepared mind.

It’s a flaw with our pattern of thinking.

At times it’s based on a fear of scarcity, whereby we stay with a mediocre or poor trade because there’s nothing else on the radar.  In effect, we’re bored, in which case we shouldn’t be trading anyway.  Listen to the charts!

Other times it’s that our pride is too much on the line and we’re more interested in defending that than our capital.  That prevents us from moving on to a truly worthwhile trade, thus keeping us trapped.

Remember the Goal

I’ve talked at length previously about trading as a numbers game, but it’s such a fundamental viewpoint to have as a trader – something we just can’t lose sight of.

Over time, we want lots of at-bats to let our edge play out. When sifting through setups we select actual trades based on probabilities. That’s the aim.

And on any given trade, if we’re keeping that in mind, we’re willing to let go when the feedback we’re getting doesn’t support our original expectation for the play. The price action is weak, a key level fails to hold, or a reversal of direction has begun and the charts are telling you to shut it down – yet you aren’t listening.

Stay on track.  Keep the bigger picture in mind.  Be willing to lose in this one trade if you need to, so that over the next dozen or hundred or thousand trades you can be profitable.

… In other words, Trade Like A Bandit – not a monkey!

Jeff White
Producer of The Bandit Broadcast

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

Instead if equating a trading loss with personal failure, shift your mentality for what a loss means.

Does it mean you’re stupid?  Not necessarily.
Does it mean you were wrong? Yes, in at least one way.
Does that mean you will never get it back?  Absolutely not.

Losses are an event, yes, but it’s also a distribution from your account.  Consider them a cost of doing business as a trader.  Brick-and-mortar stores have overhead, but as a trader, the biggest portion of your overhead is the losses you take.

When businesses cut costs, they’re reducing their overhead as much as possible to fatten their profit margins.  Do the same with your trading.  Reduce your ‘loss overhead’ by accepting a loss quickly and moving on to the next trade.

It’s much more fun to always be adding to your account rather than seeing funds flow out, but as soon as you start viewing trading losses as something impersonal, it’s going to change your perspective in a very helpful way.  Rather than fret over them and allow losses to cloud your thinking or alter your mood, viewing them through the proper lens will help you more quickly get them back and then some.

Like it or not, trading is a business…how are you managing yours?

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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

The other night, I let the dog outside before bedtime. He’s a 7-year old Boston Terrier, so I’ve done that literally a couple thousand times. This time, however, he returned to the porch with an unusual look. I knew what happened before I even opened the door, because I could smell it…he’d been sprayed by a skunk.

An hour later after thoroughly bathing him outside, our house still reeked – despite not letting him in until he’d been bathed. And let me just say, fresh skunk spray smells nothing like roadkill skunk. It’s WAY worse.

Thankfully, the stench is long gone now, but that single event conditioned me, and I’m concerned now when I let him out every night…all because of that one awful experience!  Doesn’t seem right, does it?

Spooked By The Past

In trading, we have to remind ourselves regularly to remain in the present tense. Because this setup burned you last time doesn’t mean it will this time.  Maybe your first couple of trades of the day were losses, and now you’re scared to touch another trade.  Or perhaps you’re coming off a tough few months and you’re afraid to get back in the mix.

While respect for the market and quality risk management are of utmost importance, what I’m referring to here is the crippling fear that’s costing you.  It’s the fear that’s preventing you from elevating your performance, or from digging out of what should be a manageable hole.  It’s the kind of fear that has you paralyzed and unable to pull the trigger on anything.

Return to Trading Confidently

Here are 3 Ways to Overcome Your Fear of the Past:

1. Understand your odds for success.  This of course includes an honest risk assessment of the play, but it also means knowing whether this type of play is likely to work given the conditions.  Going over your results consistently will reveal which kinds of plays are working in the current environment and which are more likely to fail. If you understand your odds for success and you’re able to have some mathematical confidence, it would be more costly to skip the trade.

2. Understand failure.  Knowing the worst-case outcome if this trade happens to fail can reduce the fear inflicted by a previous failure from an unseen event.  Black swan events aren’t common, so it’s not reasonable to fear them every time you approach a setup.  Weigh the potential for loss, and if it’s outweighed by the potential for gain, the probabilities are favorable enough to participate.

3. Choose to move forward.  All of us have the ability to choose, whether it’s our career or our spouse or our attitude.  Maybe your fear somehow gives you comfort right now, because it’s been a habit you’ve allowed.  That won’t cut it though, so it’s time to change.  Eventually, you either decide to get back on the right path, or you’re completely done trading.  Make your choice and get on with it – and don’t look back.

Don’t let the past haunt you into skipping potentially solid plays. Assess your risk, and then take the trade confident that over time, the numbers will work to your advantage.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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

This market has been plenty heavy of late. The big moves I’ve caught recently have all been on the short side, and bearish consolidations abound in the charts. Simultaneously, bullish setups are few and far between, to say the very least.

But let’s look at the bullish case right now.  If I’m leaving anything out, please share it in the comments, but here are a few things to consider regarding those who are counting on a lasting turnaround:

- Nowhere else to put cash right now.  This is true, and a biggie.  With the bond bubble keeping money managers quite leery, and precious metals already correcting sharply from their recent highs (have you seen gold?), the so-called “safe havens” haven’t been immune to the selling either.  Equities are still seen as the place to be going forward.

- Multiples are contracting, value players getting more interested.  The biggest difference between a technician and the fundamentalist is how momentum is viewed.  Fundies look at low prices as entry opportunities, whereas technicians look at them as downtrends which may continue.  These days, the value players are seeing better numbers, which may get more of them involved.

- EVERYONE seems to be sitting on considerable cash piles right now.  If this market catches a bid, that cash is tremendous potential fuel for a lasting rally.  As prevalent as fear has been on the way down, it will also be relevant on the way back up — who wants to miss the big rally?  Nobody who runs money, I can assure you.  Underperformance is worse than losing money (sadly) in the world of portfolio managers, so you can fully expect cash to come off the sidelines quickly when signs of stability finally emerge.

The bear is still alive and well, with fresh 52-week lows being made Tuesday in every index.  Nonetheless, it’s always wise to look at the other side of the trade.  It’s responsible, and it either lets you keep defending your stance or it presents reasons to shift (which the best traders are always willing to do).

Keep an open mind, nothing is ever out of the question in this market.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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