TheStockBandit.net » Trading Tips

Interview Archive with Charles Kirk

TheStockBandit — Fri, 30 Jul 2010 19:20:56 +0000

Today’s live interview with Charles Kirk of The Kirk Report was a lot of fun, and I hope you were able to join us for the discussion.

For those of you who were unable to attend, I’ve embedded the chat transcript below so that you can review the conversation sometime over the weekend. Hope you find it helpful!

By the way, if you were in attendance and did not get your question answered, feel free to either contact me or post your questions in the comments area and I’ll gladly address them.

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Enjoy your weekend.

Trade Like a Bandit!

Jeff White
Swing Trading & Day Trading Service
www.TheStockBandit.com

Are you following me on Twitter yet?

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Intraday Extremes Offer Big Opportunities

TheStockBandit — Tue, 20 Jul 2010 14:02:40 +0000

The old adage says to ‘buy low and sell high.’ That’s misinterpreted by most, as they tend to sell their strongest stocks when strength is still present or buy before corrections are completed.

To the inexperienced, it may look like the move is done, but often times is followed by an encore of sorts. Timing is everything, indeed.

Extremes can really pay quite well. When fear is at its highest, it’s a great time to get long. And when everybody and their mom is making money, it’s certainly time to raise cash. But for the sake of this post, I’m not talking about buying a “generational low” or calling a long-term top in the market. In fact, I’m not even referring to the daily timeframe here.

I’m talking about how some of the best trades will happen at extremes…

…the kind which are found intraday.

Profit Where Others Fail to Look

Define it however you like, but at the heart of it, an extreme is approaching quickly whenever a move is unfolding at an unsustainable pace.

That might be a parabolic uptrend, or intraday capitulation. An extreme is a price spike which is showing exceptional momentum now, but the enthusiasm is beginning to fade, and soon there’s going to be a reactionary move.

That reactionary move is the one you and I can catch most often. I say that because once we see a stock that’s really on the run, the odds are that the easy money has been made for that particular move. Attempting to join the move means chasing price without a clear-cut exit plan, and that’s a huge no-no for any professional trader. So, the reactionary move is the money train for those who missed the original move.

What’s so funny is that most traders see a huge intraday run and just know they missed it. Don’t be as closed-minded as them. They drool over what it would have been like to be on board, and fail to recognize the opportunity that’s about to unfold. Dare I say, a more defined-risk opportunity.

You Missed the ‘Move’ - So What?

Take Monday for example. Education stocks bolted higher in the morning, ripping through offers on the way up as they painted the tape bright green. By the time most of us noticed them, they’d already put up very impressive gains.

Maybe you saw APOL, ESI, COCO, DV and others up in the neighborhood of 10% in just the opening few minutes. It looked like they could keep going, but suddenly the buying frenzy morphed into profit-taking, and thus, opportunity arrived.

RIG provided an excellent move for me (from Sunday night’s premium newsletter), but my most profitable trade of the day actually came in a short sale of ESI. Let’s take a look…

ESI ripped higher by $9 right off the open Monday, but I wasn’t long. It was up about $6 by the time I noticed it, and I’m not a buyer of that kind of strength. So instead, I waited for the enthusiasm to wane. And shortly after, it did.

The stock had painted a high of $95.62, and then backed off slightly. It spent several minutes consolidating, and then on the 3-minute chart I saw something noteworthy. I shorted at $95.10, set a protective buy stop up above, and waited to see if profit-taking would develop.

An hour later, the stock was more than $6 lower, trading in the low $89’s, and I was out of the last of my shares (after scaling out). It didn’t last long, but the overreaction on the upside was followed by a nice reaction on the downside, and that was the move that paid me.

Here’s a closer look:

Chart courtesy of Worden

I outline my entire method for trading these extreme reversals in my Advanced Trading Course, so the specific details are reserved for students, but I will give you a few general pointers here.

Profiting from extremes begins with a mindset shift. When you see a giant move, don’t kick yourself for missing it. Instead, start looking for a way to profit once it’s over. Be creative - the market requires it!

Take note of intraday extremes. Don’t chase them, just watch them. See if the pace of the move begins to slow down, and at the first sign of a turn, you’ll know you’re looking at an opportunity. They will not all pan out, but the risk/reward associated with them makes them well worth studying, and often times quite lucrative to trade.

Trade Like a Bandit!

Jeff White
Swing Trading & Day Trading Service
www.TheStockBandit.com

Are you following me on Twitter yet?

Sponsored By: TheStockBandit.com Take the Money and Run!

Free Webinar Tuesday March 30

TheStockBandit — Mon, 29 Mar 2010 10:45:30 +0000

I wanted to be sure to post a quick announcement here that I’ll be presenting a Free Webinar on Tuesday (March 30th) with the folks from StockFinder, and I hope you can join us!

Targeting Trade Candidates with TheStockBandit

It’s scheduled to be a 45 minute webinar, the first 30 minutes of which I’ll be going through quite a few stocks of interest, pointing out to you what I’m seeing in the charts for both bullish and bearish candidates.

There will be 15 minutes of Q&A time at the end where you might want to bring forth your favorite stock and we can take a look at those too.

I certainly do not have all the answers, but it’s going to be a chance for me to convey what I’m seeing out there and hopefully not only teach you a few things, but also put many stocks on your radar which you might find interesting.

Oh, and the best part about it is that this event will be FREE, so be sure to register at this link for details (and access to the recorded version if you can’t attend live):

Chart Reading with TheStockBandit

Remember, free webinar this Tuesday night, 45 minutes of charting reading with you and me - I can’t wait!

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

Sponsored By: TeleChart 2007 #1 Charting Software

Keys From a 6-Month Streak

TheStockBandit — Wed, 13 Jan 2010 20:18:48 +0000

Anytime you find yourself in the midst of a streak in your trading, it’s worth paying attention to. When you’re winning, you need to find out why.

A few years ago, I was fortunate to put together a 13-month streak of consecutive net profits (profits every month for 13 months). The longer the streak continued, the more I thought about it, and the better it made me to sort of ‘observe myself’ during that run. I made note of not only my routine and the kinds of plays which were working, but I also included my thought process and the mentality I was bringing to the table. I still occasionally reflect on those notes to stay sharp.

For the past 6 consecutive months, we’ve put together net profits in each month over at TheStockBandit.com (July, August, September, October, November, December). Results can be found here.

Although I am trading confidently, I’m not telling you this in order to boast. I’ve been at this long enough to know the market will serve up a healthy dose of humility when it’s needed!

Rather, I want to share with you some of the things I’ve been focused on in recent months that have brought consistent success, hoping it can improve your own process.

Here are 5 Keys I’ve taken from the past 6 months:

* Be Patient. I have not forced trades. When setups were plentiful, I would get more aggressive. Hence the reason some months had more trades than others. When the setups were harder to come by, I was willing to wait. The year is long, and there will be an abundance of opportunities, so there’s no need to try to make something happen. Watching and waiting for the must-take setups to come along pays off.

* Picky is Good. Before committing capital, I have been requiring high-quality chart patterns and situations which carry a nice potential payout. Lowering your standards to second-rate setups will result in overtrading and a higher barrier to success, and trading is already hard enough without that. You deserve the best, so require it if you’re putting money into it.

* Take the Conservative Route. The occasional home run is nice, but they don’t always happen on purpose. In fact, swinging for the fences will send you right back to the dugout more often than it’s likely to put you on base. My approach has been to hit singles and ring the register more often, paying myself when I catch a nice move, but now wearing out my welcome. The conservative route brings with it consistency and confidence, two things I strive for.

* Have Directional Flexibility. A willingness to trade both the long and short sides has led to my booking winning trades on the short side in every month during this run, despite the fact that the market has pushed relentlessly higher. This was extremely helpful during July, September and October when we saw some brief market pullbacks as well. Looking for outlier stocks can pay off, both in terms of winning trades and the occasional hedge to long positions.

* Monitor the Behavior of Positions. Never trust a skinny chef, or any stock you hold a position in. I don’t mind giving trades some wiggle room, but I do keep a close eye on the price action and how volume corresponds with it. During this run, whenever I started to notice a discrepancy between what I expected to happen and what was actually happening, it was a clue that an adjustment may be necessary. Every stock has some personality associated with it, so if that begins to change, give it your attention and be willing to modify your trade parameters.

The next time you find yourself in the midst of a nice run, take a little time to see what you can learn from it. Take note of what’s working and what isn’t, do more of that which is working, and keep plugging along. It will help you not only perpetuate the process you’re already in, but it’ll help you return to the same mode later on.

Trade Like a Bandit!

Jeff White

Are you following me on Twitter yet?

Sponsored By: TeleChart 2007 #1 Charting Software

How to Lose Like a Winner

TheStockBandit — Tue, 15 Dec 2009 18:48:24 +0000

I recently heard that in relationships, you can be happier if you choose to accept the whole person. The idea is that instead of trying to weigh everything you like vs. everything you dislike, accepting them as generally positive is a better decision. Thankfully, my wife does that for me, looking beyond my numerous flaws and allowing my positives to overshadow them.

If you stop to think about it, this is a pretty good way to measure everything and everyone in our lives. Staying objective about ‘it’ lets you recognize that overall it’s a positive thing.

The successful trader is no different. He looks at his overall trading operations for a given timeframe, and if the profits are there, then the mission was accomplished.

That’s not always an easy thing to do. In fact, I’d suggest that your inability to view your trading in that general light could put you in the popular camp of those who can’t cut it in this game. It’s much more natural to allow specific trades to stand out and influence our line of thinking. It can result in a directional bias, a pet stock, or a slew of other closed-minded patterns of thinking - all of which can lead to the destruction of one’s account.

What we want to do is to win. And if winning is defined as overall profitability, then winning will involve some losses along the way. You and I have to be able to lose like winners!

Here are 4 ways you can do that:

1. Allow no single trade to define your trading. Dwell on it for a short time if you must, but then move past it whether it was a big win or a disappointing loss. You might have put a lot of preparation, concentration, and capital into that one great idea, but it’s over now. Either pat yourself on the back for a trade well done, or brush yourself off and get back on your feet. Think about how you can use it to your advantage. Maybe you fattened your account with the profits from it, or expanded your comfort zone because of it. Great. Get back on your horse.

2. Win the war, not every battle. Put on individual trades which have sensible risk/reward, but place emphasis on your overall operations rather than each individual effort. Basically, see the forest and not just the trees! Accept that there will be some some losing trades, perhaps frequently, depending on your timeframe, and aim to overcome them with larger or more frequent winners. The point of taking this step is not to go to battle with every trade due to the mindset of having to be correct. Accept it when you are wrong, and no single ‘battle’ will ever sink your ship.

3. Cast fear aside. Fear is arguably our biggest enemy in trading. It can cripple you if you allow it. This is manifested in ways like trading so small that a win or loss has virtually no impact, or maintaining stops so tight that the stock isn’t able to fluctuate naturally without shaking you out. Those who spiral down the drain of losing are often times gripped by fear. Don’t allow that to be you. Maintain a healthy respect for the market, but don’t be afraid of it.

4. Learn from every loss. You’ve paid the tuition, so you might as well get the lesson! This makes a loss something you can still gain from, and every winner does it. Always seek out ways to increase your trading knowledge, whether through specific education like a stock trading course or simply picking up on subtle behaviors in price action that are starting to surface. Is the market starting to change, or are you refusing to avoid methods which aren’t paying off? Keep an open mind, always look for the lesson, and let the long-term losers be the stubborn ones.

Lose like a winner this week, and you’ll have more to show for it.

Thanks for stopping by and I’ll see you here soon with more. Until then…

Trade Like a Bandit!

Jeff White

Are you following me on Twitter yet?

Sponsored By: TeleChart 2007 #1 Charting Software

Bearish Engulfing Bars Warrant Caution

TheStockBandit — Thu, 22 Oct 2009 02:35:13 +0000

Following gains of more than 7% in just a dozen days, today we saw the market averages tag new recovery highs and then reverse sharply to finish in the red. The bearish engulfing bars which resulted on the daily charts aren’t pretty, especially given the elevated volume which accompanied them.

It hints that this market is finally showing us a little fatigue, and that perhaps more than a few buyers morphed into sellers - at least for today.

If we did see a pullback begin to develop here, it wouldn’t at all be an unhealthy thing. Several dips have occurred since the March lows were set, with each of them being bought. Now, at some point that is going to change - it’s imperative to understand that - but we don’t yet have enough technical evidence to jump to conclusions at this point for anything but the next few days. And on that note, caution is warranted after today’s action.

Just a little while ago over on the trading videos site, I posted the following video. In it, I discuss what took place today, and offer up a few levels on the downside we could see tested if Wednesday’s selling pressure sees follow through.

Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.

Thanks for stopping by and I’ll see you here soon with more. Until then…

Trade Like a Bandit!

Jeff White

Are you following me on Twitter yet?

Sponsored By: TeleChart 2007 #1 Charting Software

Why I’m Not Trading AAPL

TheStockBandit — Mon, 19 Oct 2009 15:27:26 +0000

AAPL is set to report earnings after today’s closing bell. It’ll be the focus of attention at times both today and tomorrow as the dust settles post-news, but truth be told, I have no interest either way.

Obviously it’s one of my trading rules to avoid stocks when they’re reporting earnings, as scheduled fundamental news simply carries with it no edge for me as a technical trader.

But I’ve had no interest in trading AAPL for a few months now. Let me explain why.

The short answer is that AAPL simply doesn’t move enough. For a stock that’s highly liquid (over 15 million shares/day on average) and within sneezing distance of $200, it should move a lot. And yet it doesn’t. On an average day, it’ll see an Average True Range (ATR) of about $3. There are stocks trading at a fraction of AAPL’s price which move that much and are still highly liquid, so why pay up for less movement?

Let’s take a look at the chart.

Over the past year, we’ve seen AAPL’s price rise dramatically, while its movement has shrunken dramatically. ATR is a price-based measurement (not percent), so as price gets higher and higher, often times we’ll see ATR expand along with that. That’s not the case with this stock.

StockFinder Chart courtesy of Worden

Anytime you’re trading the high-priced stocks, do your best to gauge whether there’s enough movement there on an average day to justify an entry. Others like GOOG, CME, and BIDU all are higher-priced than AAPL, but on a relative basis (when comparing ATR) they each move considerably more than AAPL.

At some point, AAPL will be worth trading again, but on an average day right now, the moves are just too limited to warrant an entry.

Thanks for stopping by and I’ll see you here soon with more. Until then…

Trade Like a Bandit!

Jeff White

Are you following me on Twitter yet?

Sponsored By: TeleChart 2007 #1 Charting Software

Taking Risks

Jeff White — Wed, 26 Aug 2009 18:10:54 +0000

It’s a known fact that in the market, you get paid to take risks. We all know that, right?

But are you getting the proper rewards for those risks? Are you taking the most appropriate kinds of risks? And perhaps most importantly, do you recognize the extent of the damage which can be done when you take on risks which are larger than you can handle?

I’m in the midst of re-reading a great book on risk right now (I’ll put up a post before too long about it, because it’s something you should read), and it’s got my wheels turning. I’m reconsidering exactly what is risk, how much I should be taking, and why I need to embrace it.

Before sharing too much about the book, let me share with you a couple things which are on my mind right now, and I’ll lay out the rest in a later post once I’ve finished the read.

Defined Risks are the Best Kind

Option traders often refer to their ‘max risk’ on a given trade, because on some strategies they are able to truly limit their downside risk to a set amount. If they’re long premium, the most they can lose is 100%, for example.

But an equities trader like me needs to think in terms of a different kind of risk factor. Yes, I could buy 1,000 shares of XYZ at $20 per share, and my max risk (in terms of capital outlay) would be $20,000. But that’s not realistic risk, because it’s so incredibly unlikely that stock is headed to $0 - especially over the course of a few days when I’d expect to be in the trade.

Instead, it’s important when trading stocks to think in terms of max $ risk if the trade fails (not if the underlying company fails). I touched on this concept of dollar risk per trade earlier this month, but let’s look a little closer at it. If I know my entry and I can designate a stop loss on the trade, then barring any drastic circumstances I’ll be able to exit at or very near that stop should an adverse move occur. That’s the risk I want to be familiar with. The kind of risk that says “if this trade doesn’t work out, what do I stand to lose?”

That’s very different from simply looking at every trade from a capital outlay perspective. It’s a major shift for some of you to start thinking this way, but it can also make a major impact on your trading to implement it.

Know Your Exit

Making what could turn out to be a difficult decision before getting in the heat of the moment can be the most important part of your trading plan. It’s one thing to hunt for entry after entry, locating breakout levels and spots where trend lines could get broken, but it’s an entirely different thing to know where you’ll look to exit that same trade, whether it moves in your favor or not.

I’ve said before that a good trade is usually a planned trade, and that definitely involves knowing your exit from the outset of the play. So before you place that order to enter your next trade, decide on where you’ll get out of it. Set a bracket order or jot it down, or at least verbalize it somehow! That’s still better than thinking you’ll get around to it later. Don’t procrastinate - decide on an exit.

Have a Goal

There is no reward without risk, and there should be no risk without reward. Knowing this, there’s absolutely no reason why each trade shouldn’t have some favorable objective associated with it, so set a goal for each trade. A realistic one that could quite feasibly be reached during the course of the trade.

Perhaps you’ll set a hard target and book profits once that level is reached regardless of how strong the momentum seems at the time. Or perhaps you’ll plan to book partial profits at intervals along the way.

At the very least, having some idea of a level where your stock could move to is still going to help you formulate a game plan, even if you don’t choose to leave a resting order in that zone to book profits.

If you know your stop and you have some kind of upside expectation, then you’ll have a far better grasp of just what your risk is on a given trade and whether or not it should be taken.

Thanks for stopping by and I’ll see you here soon with more. Until then…

Trade Like a Bandit!

Jeff White

Sponsored By: TeleChart 2007 #1 Charting Software

Reversal Characteristics & Candidates

TheStockBandit — Tue, 25 Aug 2009 05:30:30 +0000

Stocks can reverse suddenly or slowly. Sometimes it takes place in one big bar, and other times it’s a process that occurs over time.

Because there are differences in how downside reversals can happen, after running across a couple of reversal candidates in the charts, I wanted to share a couple here on the blog.

Uptrends will often times be followed by corrective action, which may pave the way for further upside down the road. But a reversal is often a longer-lasting change of direction, and that’s what I’d like to discuss in this post.

When looking for reversal candidates, the thing to watch for is a change of character. Something that’s different from previous dips and stands out as a potential shift in the stock. That might be a lower high, or it might be a sudden decline which proves to be much sharper and faster than previous pullbacks were.

Show & Tell

In the video below, I want to point out 2 stocks which might be undergoing reversals. That means there’s plenty more to prove before they can be considered to be in corrective mode (as opposed to merely a dip within their uptrends), but chart reading is always a work in progress. If the characteristics which we’re seeing now happen to change, then so should our expectation.

For now though, let’s take a look at what’s going on and see if these show us the necessary price moves to confirm what the charts of FUQI and RL may already be saying.

Here’s a video explaining it. Select the HD option and go full-screen for best quality:

Thanks for stopping by and I’ll see you here soon with more. Until then…

Trade Like a Bandit!

Jeff White

Are you following me on Twitter yet?

Sponsored By: TeleChart 2007 #1 Charting Software

More on Recovering from Trading Losses

TheStockBandit — Mon, 17 Aug 2009 11:44:26 +0000

Ever been downright frustrated with your trading?

If you’ve been a trader for any length of time, I’m sure you have. There can be stretches of disappointments during which it feels like getting on the right side of a move might not ever again happen. Your account shrinks and your confidence takes hit after hit, causing you to question your desire to continue playing the game.

If it sounds like I’ve been there, it’s because I have been. Multiple times. Every time I’ve hated it just as much as the first time, but every time I’ve emerged as a better trader. No pain, no gain!

Dealing With Drawdowns

I think it’s a good exercise for every trader to know their thresholds, and to determine just what you’re willing to lose during a poor trading stretch. That’s not to say you plan on it, but rather you designate some amounts, which if lost, will prompt you to make some immediate adjustments.

That might be a dollar amount subtracted from your account highs, or it might be how many consecutive losing trades you’ll endure when a drawdown occurs. Once those flags have been raised, it’s time to shift the routine.

It doesn’t mean you entirely abandon an approach which has proven to work for you over time, but rather that you install some safety rails for yourself before the damage becomes far more difficult to repair.

Short-Term Steps for Long-Term Survival

If you’ve suffered from a recent drawdown, it’s important that you take a few steps to get back on track - both in the near term and for the long haul.

In the near term, it’s crucial to preserve whatever confidence you have left. Remember, that’s your psychological capital, and it must be protected. Take a few days away from trading, maybe a week, and just clear your head. This may sound obvious, but stepping away is the best way to stop losing! Discouragement leads to some poor decisions in trading, so come back in a few days to resume trading after some of the irritation has subsided.

When you do begin again, cut your position size down to an amount which is insignificant, whether win or lose. You want to gain some confidence in trading well once again, making some good choices without the influence of recent losses. P&L becomes an afterthought at this stage.

Focus on the method, on making good trades which work, and then gradually increase your trade size so that the profits return. The first few trades might not grow your account, but they can greatly aid your thinking process by lifting the pressure of “making it back” and then you can get to that shortly thereafter.

Staying in the Game

A string of losing trades is no fun - downright frustrating, irritating, and bothersome. But the idea is to limit the losses when they do come (and we know they’ll come, that’s just part of trading) so that we are still trading when the best opportunities come along.

That’s how my method is. I equate it to a poker player who loses small, hand after hand, folding to surrender antes before finally sticking with his bet when a good hand comes along so that he can win a pot. Lose small, lose small, win big - that’s exactly how trading must be. How you choose to respond to losing will make or break you.

Thanks for stopping by and I’ll see you here soon with more. Until then…

Trade Like a Bandit!

Jeff White

Are you following me on Twitter yet?

Sponsored By: TeleChart 2007 #1 Charting Software