Trading Goals – 5 Steps Toward Reaching Them
December 16, 2005 at 8:52 am
With New Year’s rapidly approaching, most of us will take the time to review 2005 and make at least a mental list of what we’d like to accomplish in 2006. It might be your waistline that you choose to focus on, but if it’s trading, here are 5 ideas for making them happen.
Be realistic. When setting goals for anything, it’s important to be realistic. You want to set the bar high enough that you’re challenged to meet them, but not so high that they seem unattainable. Setting reasonable goals will keep you motivated and won’t have you feeling “behind” if you don’t meet your objective. If you’re trading with a $10,000 account, it would be unrealistic to expect to make $100,000 by the end of the year if you’re only trading stocks.
Measure your progress. Periodically measuring your progress will keep you on your toes to alert you of possible needs to adapt your strategy. You may want to do a weekly review of your progress, with more intensive check-ups monthly and quarterly. A day-to-day approach would likely be looking too closely under the microscope, causing your stress level to fluctuate more than your account balance.
Consider both process and results. Striking a blend between process-related and results-related goals will help you determine your goal AND a way to get there. Process goals may include a commitment to finding chart patterns each night for the following day’s session, or monitoring your win/loss percentage. Result-based goals would include the profit you expect to make each month, or a percentage return you hope to post by the end of 2006. Think of your results goals as destinations, with process goals being the road maps to get there.
Be willing to revise your goals. As time progresses, your goals may need adjustment. If you prefer short selling and the market is strong, then you’ll need to adjust your expectations. If you prefer the long side and sentiment shifts, it may require that you make a change to your trading strategy or your goals. On the other hand, a fast start might mean that this is finally your year and you are poised for greatness. Embrace that success and expect more from your trading than you had initially planned.
Finally, write down your goals. Just like the way mental stops tend to get blown, an unwritten goal can easily be forgotten. A written goal can be like a binding contract, motivating you to uphold your commitment. Place your goals where you’ll see them frequently, and it will greatly increase your odds of reaching the goals you’ve set.
I hope that 2006 is a breakthrough year for you in every aspect of your life – including trading! Sign up for your free trial to our stock newsletter and see if you aren’t closer to reaching your goals in 2006!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Averaging Down
December 15, 2005 at 9:04 am
It’s common to hear that as a trader, you should never average down. After all, throwing good money after bad isn’t the best way to come out ahead in the long run. Investors with longer timeframes are happy to see lower prices to allow them to improve their cost basis, but a trader who makes a habit of adding to losing positions will at some point pay dearly.
But….
There is a time when it’s OK to average down – when you originally planned to do so. Maybe you’ve been stalking XYZ stock to short sell a quick rally right to resistance. It is looking like a double top to you, so you decide to put on a partial position to see if you’re right. The stock begins to roll over, bounces a bit past your entry but resistance holds, and you put on more shares. This is the kind of scenario in which adding to a losing trade is acceptable with your stop-loss nearby. You planned to do so, and adding to the trade only took you to a full position size – not above it.
On the other hand, we’re all plenty familiar with the blown stop loss and that urge to improve our average price by adding to a losing position. Those are the times when emotion is taking its toll, and the need to be right overcomes goal number 1 of capital preservation. You’re soon over-exposed in a stock that you’re clearly wrong about. Adding shares in times like that are a recipe for pain and an eventual disaster. Getting away with it a few times just reinforces a bad trading decision, and it’s gonna hurt down the road when it fails to work!
So if it’s part of your original plan to add to a trade at worse levels, then go ahead and do it if you still have the conviction. If you’re stuck in a bad trade and you’ve already got more than you want, look for a good spot to exit and rid yourself of the trade ASAP.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Goal Number 1
December 14, 2005 at 8:39 am
New traders want to know how much they can make. If they have X dollars in their account, how much stock can they buy and how soon can they get rich?
Veteran traders know better. They became veterans by surviving. They endured the occasional painful losses, yes, but even more so, they were able to withstand the times when trading just has very little to offer. Veterans are willing to wait out the slow trading times without putting it all on the line to make a quick buck or add some excitement. A veteran trader will tell you that goal number 1 in trading isn’t about how much you can make. Goal number 1 is all about protecting your capital and staying in the game.
Trading capital includes the cash you have to trade with…….your seed money…..your bankroll. It’s what you absolutely must have to stay in the game, and only then can you reach toward goal number 2 – making money. Protecting the cash in your account will enable you to seize opportunities when they arrive so that you may profit.
I think there’s a certain amount of emotional trading capital each trader begins with as well. To me, it’s as important as the cash in my account, because I could always borrow additional funds to trade with if it came down to it. I take as many precautions to protect my emotional capital as I do to protect my cash. If I lose my confidence trading, then it won’t matter if I have cash left to trade with! If I get on a losing streak or overtrade when the market is choppy, then I end up confused and clueless what to do next. That’s no way to make money trading! Protect your emotional capital too – get smaller when you’re trading poorly, or step away entirely when things aren’t clear.
Always keep these two goals in the proper order and don’t ever forget your primary objective every day: survival! Protect your capital and you’ll stay in the game plenty long enough to reach goal number 2.
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
The Do-Not-Trade List
December 13, 2005 at 8:51 am
In the world of small inconveniences, few things are worse than getting caught by some telemarketer at 7:05pm just after sitting down to some Pei Wei spicy chicken. I loved the introduction of the “do-not-call” list, and I quickly added my numbers to it.
Similarly, I’ve almost always had a “do-not-trade” list. There’s a ton of fish in the sea, so with literally thousands of stocks out there to trade, it’s OK to refuse a few of them.
It’s important to trade your personality, as well as the stocks that match it. That means there will just be some that don’t move the way you may anticipate. Some stocks give clearer signals than others, so why mess with the ones that don’t seem to work for you?
As a full-time trader now for several years, there have been plenty of stocks which looked good enough to me on a chart to warrant an entry. Soon after entering, however, some of them reversed and left me with a loser on my hands. Now I’m sure not the most stubborn trader around, but I am willing to give a good setup the benefit of the doubt in most cases and give it another shot if the stock breaks out again. After all, maybe my timing was just off. But in the case of the “do-not-trade” list, additional entries cost me additional dollars, requiring that a stock be added to the forbidden list for at least a short time.
Stocks on your D.N.T. list do not all have to remain there forever, although some will. Some stocks might have legal issues pending which will soon blow over and allow that stock to behave normally again. Others might just act funky and it’s best to avoid them as long as that is the case.
The goal is to turn a profit and make money. Don’t insist on being right! If you try a stock a couple of times and it’s not cooperating, move on to the next trading idea. There’s no reason to tie up valuable time and trading capital in a stock that you’re not in sync with. Keep at least a mental list of stocks which are costing you more money than they’re making you, and stay away from them!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Trading Your Personality
December 12, 2005 at 8:45 am
It’s been said too many times to count – that you must trade according to your personality. In the movies they might call it “being true to yourself” or something cheesy, but it’s a necessity in this job.
Recently I was asked which chart patterns I prefer to trade, continuation chart patterns or reversal chart patterns. My answer was that while I will actually trade either, I suppose the continuation and breakout type of patterns are the ones I trade more often than reversals or buying on support levels.
I don’t think one setup is superior to the other, they both have their pros and cons, and you have to go with what fits your style best.
Buying on support is an anticipatory play, which may take a few extra days to get moving. It can give you a lower cost basis than another trading strategy, but will require greater patience on your part while you wait for the stock to find traction.
Buying a stock which is breaking out puts you (by definition) in a stock that’s already on the move. This is a confirmation play. You get instant feedback on how your trade is developing and how much momentum the stock has.
The setups you select for your trades need to incorporate your personality tendencies on managing those trades once you are in them. For me, I tend to be a bit impatient and I want to know as soon as possible whether or not I’m right or wrong on a trade. Other traders don’t live in the left lane, and they’re willing to give a stock some time to get moving one way or another. They place their protective stop and turn their attention to something else in the meantime while waiting for their trade to make a move. Personally, I prefer to have my money at risk for the shortest timeframe possible. I really prefer the times when the market conditions are producing breakout plays and continuation patterns like the bull flag or ascending triangle patterns.
So, when you’re doing your homework and looking for quality setups to trade, be sure to consider the ones which fit your personality and your style of trading. Those will be the trades which you ultimately will manage the best.
At TheStockBandit.com, winning stock picks of all kinds are shown from reversals to breakouts, so come check it out and take the free trial to find out how we make our living as traders!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Sam the Ugly Dog
December 11, 2005 at 2:26 pm
And you thought your last trade was ugly! Yes, it’s real……if you can believe it! All I could say when I saw this was YIKES.
Maybe you’ve seen this incredibly disturbing pic of Sam the Ugly Dog, the late Hollywood star that earned his milkbones the old-fashioned way – acting. Some Hollywood types die of broken hearts, but I don’t think Sam was as fortunate.
I had to get this out of my head, it’s just flat out scary! And by the way, he was alive when this picture was taken…..supposedly.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Cinderella Man
December 10, 2005 at 12:29 am
I love the movie pass from Blockbuster…….if you don’t like it, take it back and get another one!
We just watched Cinderella Man tonight, and I highly recommend it. I noticed the running time on it is a bit long, but that was before I pushed play. Good stuff!
It’s the weekend, so you might have to catch it next week if everything is checked out, but do yourself a favor and learn a little history while you are entertained!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
