TheStockBandit.net

Lots of traders (myself included) notice that stocks behave differently as they approach round numbers, like $20 for example. That’s probably due to many stops being set around those levels, both on the buy and sell side. Once a stock gets through the large buildup of orders at those whole numbers, they often see a nice pop because the resistance (of sellers, or of buyers on the downside) is now behind the stock and it’s now able to move more freely.

But have you noticed the same thing in your trading account? As your account nears a nice round number (whether it’s $10,000 or $3,000,000), do you notice some “resistance” in clearing those zones? I sure have.

Of course, once they are cleared, things seem to cruise along nicely again. The trades tend to keep producing, and the account balance climbs.

I finally realized why that is….it’s because as my account approaches a nice round number, my attention gravitates to that number rather than focusing as I should on my trades. I get to thinking about how a particular trade might impact “the number”, but that’s not what got me there to begin with.

Fortunately, my broker has a great tool which allows me to hide “the number” with a single click, and that helps a lot. It makes me turn my attention back to my open positions so that I can manage them the best way I know how. That’s what good trading is all about - managing each position well.

If you’re finding it difficult to get over the hump in your account as you reach a certain number or account highs, HIDE THE NUMBER! I’ll bet it helps you focus on your trades much better, and that alone should get you back on the right track in growing your trading account.

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

Huge up days in the market like today have amazing power. Ordinary investors love them, because everything they own goes up. Traders sometimes hate them though, because underperformance can be common.

It almost never fails that on days when the market makes a giant move, my friends or family will inquire about how great my day was. It isn’t always what they might think. Maybe you’ve had similar experiences. Some of the best days even come when “the market” does very little, which is funny. But back to the topic….

Days of big point gains leave underperforming traders feeling like they need to JUST BUY SOMETHING so that they can participate in the move. That’s not always the solution, because if you’re a disciplined trader there are certainly days when the stocks you look at for possible trades simply don’t fit your criteria. So if you happen to underperform on a day like today, consider a couple of concepts which may help you get beyond the frustration of “missing out.”

* Walk away. It’s a choice each of us have as traders. Just shut down the PC and get out of your chair. Some days you don’t have it, so don’t force it if that’s the case. Maybe it’s you, or maybe it’s the market, but either way the bottom line is you’re not making bank. Come back and fight another day.

* Trade ETF’s. Sure they move slower than many of the high-beta names you might prefer to trade, but they are a definite solution that allows you to participate directly in large market moves. You can leverage up to offset the slower percentage moves, plus they’re liquid as can be so that makes them easy to jump into and out of.

* Be confident in tomorrow. I’ve had some great days right after major market advances like today. It’s funny, but I don’t really trade the mega-cap Dow components like many of which were leaders today. I like to trade lots of secondary stocks, and on days like today those are often an afterthought. Often times the following day, the mega-caps will cool off but traders are still just as eager to buy something. They turn to the secondary stocks, and that’s when you can knock out some nice gains.

Trade well Friday and enjoy your weekend!

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

Last year during this same time I wrote a series on Trading and Golf to outline a number of lessons between the two games (yes, trading is a game!). So with the U.S. Open final round set to air tomorrow afternoon, no doubt it will take center stage for a great number of traders. There are a lot of similarities found when comparing the pressures of trading with the challenges golf brings, so be sure to check out some of last year’s posts (there are 18 total posts but most are brief).

And of course, to those of you who are Dads, Happy Father’s Day!

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

Technorati Tags: Golf, U.S. Open, Stock Market, Day Trading, Stock Trading, Investing, Swing Trading

The DJIA is going for its 15th up day in the last 16 sessions. That’s only 1 losing day in the last 3+ weeks! Have we seen pullbacks? Sure, but they’ve remained very shallow thanks to one phenomenon:

Dip-Buyer Domination.

There seems to have been an amazing amount of cash sitting on the sidelines just itching for virtually any downtick to put it to work in recent weeks. This has kept the market climbing steadily, while simultaneously preventing pullbacks from showing any follow through. As a result, the dip-buyers just have a ton of confidence and they will continue to do their thing until it stops working.

This morning, however, we have a sizeable upside gap which has potential to change things (at least temporarily). After a huge run recently, the market is now up far enough to finally entice some profit-taking. Those who have been buying every dip now have a possible exhaustion gap which is tempting the bulls to line their wallets and book recent gains, and who could blame them?

Technically, this is a good thing. Markets don’t move in straight lines for very long, few would argue that. But the indexes are now up far enough from their uptrend lines to allow them some room to retrace without disturbing the uptrend. That means a breather could set in without panic, and that would be very healthy for this market whether you’re a bull or a bear.

Here’s a look at the DJIA as an example:

(Click for full size.) Chart Courtesy of TeleChart.

Although the odds of a rest have improved after this morning’s gap, don’t be in a big hurry to short sell, because the dip-buyers aren’t likely to run away quickly.

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

Technorati Tags: Stock Market, Day Trading, Stock Trading, Investing, Swing Trading

Pit Bull by Marty Schwartz

There are a handful of trading books which I have read many times and keep returning to on occasion, including Reminiscences of a Stock Operator, and the Market Wizards series by Jack Schwager. I would also recommend one other book which is written by a Market Wizard, Marty Schwartz, which is called Pit Bull.

Schwartz writes candidly about his history as a trader, including the struggles he went through for many years before becoming one of the biggest and most successful S&P 500 futures traders that has been seen. One portion of Pit Bull is called “Honor Thy Stop,” and it contains some excellent thoughts regarding the use of these safety nets in trading. Here are several of his comments on the topic of stopping out of trades. I found these very useful, so you might relate to them as well. I have a few comments thrown in there too:

“You’re the only one who’s emotionally involved in your position.”
How true! The market really doesn’t care about what we’re feeling, which is all the more reason to approach trades with more logic than emotion.

“Taking a loss is hard to do because it’s an admission that you’ve been wrong. But in the market, being wrong some of the time is part of the game.”
It’s how we manage our wrong trades that will keep us on track.

“That’s the problem with amateurs, they only have half a plan, the easy half. They know how much of a profit they’re willing to take, but they don’t have the foggiest idea how much they’re willing to lose……Their plan for a position that goes south is, “Please God, let me out of this and I’ll never do it again,” but that’s (false), because if by chance the position turns around, they’ll soon forget about God. They’ll go back to thinking that they’re geniuses…”
It is amazing how being on the wrong side makes us repent for all of our trading mistakes, but when we’re right we want all the credit.

“What most people fail to realize is that while you’re losing your money, you’re also losing your objectivity. The market…..doesn’t care about you. That’s why you have to put aside your ego and get out.”

“…a stop is an investment in self-preservation because if you’re wrong, it saves you those extra dollars that you’d lose by hanging on to a losing position. It keeps you from digging the hole deeper and it makes it easier for you to climb back out.”
This is a great way to view the use of stops. They are safety nets for our well-being as traders, so why not use them.

“The more you lose in a trade, the less objective you become. EXITING A LOSING TRADE QUICKLY CLEARS YOUR HEAD AND RESTORES YOUR OBJECTIVITY….. By preserving your capital through the use of a stop, you make it possible to wait patiently for a high-probability trade with a low-risk entry point.”

Of course the market is always there to remind us, but it’s still good to have Schwartz’s input on the subject to remind us that a big part of what made him great was his ability to contain losses when they occurred. In fact, Schwartz even states in the book, “I can tell you how I became a winner - I learned how to lose.”

So the next time you’re faced with the opportunity to honor thy stop, remember the success of Schwartz and know that while you’re admitting defeat on that one trade, you’re simultaneously adding objectivity to your next entry.

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

Technorati Tags: Stock Market, Day Trading, Stock Trading, Investing, Swing Trading