Guest Post at StockTickr
June 18, 2008 at 7:05 am
Just want to give you a heads-up that I wrote a guest post today over at the StockTickr Blog called Finding New Edges from Old Trades.
I think you’ll want to check it out, because it goes hand-in-hand with some of the things we’ve been discussing here recently (such as my previous post).
Here’s that link to today’s post one more time, and while you’re over there be sure to take a good look around – there’s a lot of great stuff!
Trade well today,
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Evaluating Trading Performance
June 12, 2008 at 7:25 am
A trader recently asked me how I evaluate my performance as a trader, and while to many the answer might seem obvious, in reality there’s certainly more than one answer.
That’s because there are numerous ways to evaluate our performance as traders, but let’s look at 2 general categories for the purpose of this post.
The most common way to evaluate performance is based purely on the results…P&L, win rate, max gain vs. max loss, drawdown depth from account highs, etc. That’s the quick conclusion most people jump to, and those statistics are definitely important, particularly to those who simply want to know the bottom line.
The only problem with the data is that it only tells part of the story. Many traders know the bottom line, but they aren’t sure where to get answers pertaining to how to improve it.
Getting across that bridge requires another strategy.
Another way to evaluate our performance as traders is to closely examine our trading process. Doing this in an honest and objective manner can reveal some very useful information when it comes to modifying our trading plan moving forward.
In order to accomplish this though, we have to ask ourselves some difficult questions in search for the truth, some of which might be:
Did I have a specific plan for that trade and follow it?
Am I taking plays which I understand and which are suitable to my trading timeframe?
Am I trading too large, and as a result making poor decisions as I respond only to my P&L?
Am I preparing myself for the trading day by doing my homework?
Am I trading responsibly?
Do I have some reliable strategies which can produce a profit over time?
I think the deciding factor between these two main evaluations is the difference between data and our mindset. Sometimes we trade with the proper attitude and emotions, yet our data needs fixing. Sometimes our data is a little off, but what really needs fixing is our attitude or our mental approach (overtrading, revenge-trading, carelessness, fear, etc.). Taking notice of the symptoms will help us know which way to turn.
Personally, I used to evaluate my data at the end of every month, but now that I’ve been at this for a while, my frequency and evaluation style will vary as needed. When things are going well, I really don’t evaluate much at all, I just try to keep doing what is working.
When I get in a slump, I’ll first look at my routine to be sure that’s in order. Then I’ll turn to my win rate and determine if something is causing that to falter (like certain chart patterns not working, for example). If I’m still seeking a solution, I’ll then see if my max gain vs. max loss during that period is out of whack, or if my average gain vs. average loss size comparison needs to change.
As I go through this process, total honesty with myself is required or else I’m simply wasting time. And as I see certain things begin to stand out, I’ll impose some restrictions or new rules on myself in order to first stop the bleeding, and then hopefully right the ship.
So the next time you get to thinking about how your trading is going, be sure to look at some different angles than purely your P&L. While that may be the bottom line that you’re striving to improve, examining some other areas of your trading process can shed some very helpful light on how you can go about growing your trading account.
Trade well today!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Worden Blocks Raising Eyebrows
June 5, 2008 at 7:30 am
In case you haven’t heard, the charting program that two years ago I referred to as “the future of charting” is now… (wait for it)… FREE!
In a similar spirit to that of the ever-evolving trader, the fine folks over at Worden and The Blocks Company have shifted their approach and are now offering their revolutionary charting program free of charge for end-of-day data.
That means that those of you who have considered checking out this amazing trading tool can now get your hands on it free and right now. This does not appear to be a limited-time promo, which is really incredible when you consider what this thing can do.
I have a feeling that everyone who is currently using free charting packages such as QuoteTracker or web-based StockCharts are about to step out of an old pick-up and into a Ferrari and find out that it’s completely in another league from what you’ve been using. Build watch lists, annotate your charts, add indicators from a plethora of choices, scan and sort without any limitation on what’s possible…it’s all in Blocks and it’s fully customizable.
To those of you who want integrated news, BackScanner, or of course real-time intraday data, each are available (along with several other services) with separate pricing. But to those who have been needing a charting program and didn’t want to pay for it, you’ve now got the very best at a price that you literally cannot beat!
To download and install the program:
– Visit Worden.com
– Click the Blocks icon at the top of the page
– Click the Download Now button.
Trade well today!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Skipping Trades Can Be as Bad as Overtrading
June 3, 2008 at 6:30 am
This guest post comes from a friend of mine, Dave Mabe of StockTickr, an automated trading and performance analysis tool designed to help traders improve their results. Dave’s post outlines the benefits of adhering to a trading plan, as well as the pitfalls of deviating from it.
Most traders are aware of the dangers of overtrading, that is, taking too many trades or trading with size that’s too large. Overtrading can quickly turn a reasonably bad day into a disaster. However, the less obvious problem of undertrading or skipping valid trades can be almost as bad.
If you’ve been trading for any length of time you’ve no doubt experienced it. A setup comes along that fits your trading rules just fine – but you find a reason NOT to take the trade. No harm, right? We all know what happens next – it runs and runs and had you taken that trade it would have been a nicely profitable trade. But you’re still sitting on the sidelines.
There’s More Lost Than Just an Opportunity
In the scenario described above, there is the obvious opportunity loss of a perfectly good trade. You could have made money on that trade, but you spent time warming the bench instead. But there’s a more important loss that is often overlooked. By skipping trades that meet your trading rules, you’re going to have an incomplete picture of your trading system’s performance. Think about it – when you go back and review your journal to gauge the performance of your trading system, you’re looking at the trades you took. If you’ve skipped trades that met your trading system’s criteria then those performance results are skewed and less meaningful than they could be.
It’s easier to imagine how a losing trade that you skipped can skew your results – when you review your trading metrics your system looks like it performed better than it actually did – it’s a little like looking through rose-colored glasses.
What Those Skipped Trades Might Actually Mean
If those skipped trades are starting to mount up, it might mean that your system needs a little more clarity. There are probably some additional trading rules that need to be more clearly thought through and applied to your trading plan. A well defined trading plan will allow you to be decisive and give you confidence to take trades that meet your critieria without hesitation. I’m not one of those guys that preaches that you need a fifty page thesis for a trading plan before you start making trades, but you do need a clear definition of the setups you’ll trade. You also need to be flexible enough (and humble enough!) to be able to look at your results objectively and make adjustments to your plan over time based on what the market and your journal are telling you.
“Small” Mistakes Can Often Lead to Bigger Ones
The seemingly benign mistake of skipping a trade can lead to more painful ones. Think about your worst trading days – many times they start with a small mistake that leads you into making larger trading mistakes that do put a dent in your trading account. It’s easy to slip into revenge trading after missing a good trading opportunity. Sometimes these skipped trades can snowball into a disaster.
Your Trading Plan is There For A Reason
Having a game plan is critically important. Without a well defined plan you’ll be subject to our human emotions which often encourage us to do the opposite of what is required for profitable trading. Take the trades that meet your criteria – no more AND no less.
Dave Mabe
www.StockTickr.com
Patient Progress
May 22, 2008 at 10:09 am
Developing an effective trading methodology takes time and patience. It doesn’t happen overnight, even if you hit a home-run in your first at-bat. It’s been said there is no substitute for experience, and that is as true in trading as it is anywhere else.
There will always be stories of new traders who had no idea what they were doing who happened to get lucky with a big score early. They are the exception, not the rule, so pay them no mind. The truth is that becoming a great trader and gaining the experience you’ll need is likely to take some time, so pull up a chair!
I’ve always found it interesting how in the trading realm, speed does not necessarily trump wisdom and discernment when it comes to capturing big profitable moves. Oh sure, the gunslinger-type might be able to impress with some rapid-fire executions, but they’re often outgunned by guys who have been around the block a time or two. The point of trading is to make money, so even if your trading style involves the need for speed, remember that it’s going to take some time to formulate your opinion. You might be eager to learn, but be careful not to rush the process.
Truth be told, you’ll be far better off pulling up a seat beside an experienced trader any day of the week than to hear a story from an overleveraged and overconfident new trader who just made a heroic trade. The experienced trader has been around and seen it all, and often times can spot a move coming from a mile away. Plus they have an uncanny ability to sift through all the noise and get to what really matters – gauging the forces of supply and demand. Stated otherwise, they know how to wait on the market.
So as you proceed down the path in search of profits, remember to be patient with yourself. Take it slow if you’re just starting out, and don’t force trades, especially if you don’t have a defined trading plan or method. Preserving your trading capital so that you can stay in the game is your number 1 priority if you’re going to find success in this game.
Observe the market, observe other traders, and always observe yourself. Don’t let your emotions get the best of you – and you will find yourself fighting them plenty! Giving yourself the best odds for success in every individual trade, every week, and every month will leave you knowing that over time you have an edge.
And finally, keep tabs on your progress – not just monetarily, but psychologically as well. If you’ll be honest with yourself along the way about what you’re learning and how well you’re applying it, you’ll shorten the learning curve significantly. The idea is to always be gaining momentum as you progress, just like a good trade!
Trade well out there!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Blocks Webinar
May 17, 2008 at 11:16 pm
Just wanted to post a quick heads-up here regarding a webinar I’ll be attending on Monday evening for Blocks.
What’s New in Blocks Trader – Monday, May 19th 8-9pm ET
The webinar will be put on by a friend of mine, Worden’s Training Director, Craig Shipman. Craig has educated many thousands of traders on TeleChart (which I’ve used for almost a decade) and now Blocks (which I’m integrating more and more into my research). Needless to say, I have no doubt at all it will be worth attending for some tips & tricks on using this amazing charting software.
I wrote long ago how Blocks would “revolutionize the way stock chartists and researchers tinker with data, because it allows the user to combine data sources all in one place – on the code level.” I continue to be impressed with the way Worden is improving and updating the program, which is no surprise given the tremendous success they’ve had with TeleChart for so long.
To register and attend the Webinar:
Visit Worden.com
Click the Blocks icon at the top of the page
The center of the next page will have the Webinar info.
Have a great weekend!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Trading Video – The Influence of the Market Indexes
May 16, 2008 at 10:33 pm
Here’s another video of a trading lesson I learned in the market today.
I do my best to stay aware of what the overall market is doing, and particularly the major indexes, because they so frequently have an impact on how individual stocks move. Today’s video discuses exactly that.
Feel free to share it if you’re a fellow blogger, the embed code is on the YouTube page.
Without further delay, here’s today’s video. Enjoy the show!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Swing Trading, Trading Video, Investing[/tags]
