All Entries Tagged With: "Confidence"
3 Ways to Overcome Your Fear from Past Trades
October 18, 2011 at 9:44 am
Traders are a skittish bunch. We can make the same trade 100 times, but the one time a left-field event occurs, it can spook us forever.
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!
Can You Trade Full-Time? Part 2
October 3, 2011 at 12:27 pm
Be sure to check out Part 1 of this series if you haven’t already, as it offers some important groundwork for this series.
Here’s part 2 in the 4-part series on “Can You Trade Full-Time.” I’m asked this regularly and wanted to compile a list of considerations as a resource to you as you wonder whether you’re equipped with what it takes to make it.
Keep in mind that the things I’m sharing here are my opinions of things I think are needed in order to trade full-time, but your unique situation may differ.
Here in Part 2, we’ll look at the question of “Do I have enough to trade with to make a full-time income?”
We’ll also take a closer look at what you’ll need to be starting with in terms of both capital and trading tools.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Apply What You Learn or Stop Learning!
September 15, 2011 at 1:06 pm
For whatever reason, a theme hit me this week that I think is highly important to share with you here.
It all started when Tyler recently pointed out that many traders get caught in the nonstop cycle of learning, and he brought forth some excellent points. Most notably that many traders mistakenly aim for breadth of knowledge rather than depth. I think he’s dead right.
Then I ran across another article along the same exact lines, this time aimed at entrepreneurs, highlighting information bias as the tendency to seek information even when it cannot affect action.
After all, what good is information if it’s not altering or improving your actions?
As a trader, you can learn and learn and learn and not see improved results if all you’re doing is learning. Read that sentence again, I’ll wait. In fact, learning without practice will do you no practical good.
In other words, to find greater success as a trader, yes you need to learn, but you absolutely must incorporate that new knowledge into your approach. Without it, you’re wasting time learning!
Learning Isn’t Bad…
Now, don’t get me wrong. I’m passionate about traders learning more, which is why I’ve produced so much quality material through the trading courses, service membership, and the hundreds of free articles and videos for you here on the blog.
And I fully embrace the always-be-learning mentality, so long as it’s for the sake of (1) staying humble and teachable by the market, and (2) to keep growing so you’re equipped to adapt when necessary.
But It Can’t Stop There
Beyond the learning comes the application, so never leave that all-important step out of the mix.
Bella just brought up the highly valid point of how to learn from another trader by seeing their approach, internalizing their rules, “tweaking them, working on executing them, and then internalizing these improved rules” for better results. It’s one thing to learn what someone else did with a trade, but it’s much more to take elements from it to improve your next trade.
That’s what customized application looks like.
The whole idea of putting knowledge into practice is being in the habit of taking what you’re learning and then putting in the mental effort to decide how it fits with what you’re currently doing. It’s about considering ways to implement the new info rather than simply storing it away for a rainy day.
So by all means, keep learning, but only if you’re willing to apply it. Otherwise, spend your valuable time on something else.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
3 Signs You Have a Home Run Trade
September 7, 2011 at 10:21 am
Here’s 3 signs you have a home-run trade on your hands:
* Your initial target gets reached faster than expected. Ideally, this is also accompanied by heavy volume to confirm the move. Either way, this is a stock that’s getting quickly on the move, and you’re participating – congrats.
* You get runaway gaps in your favor. A runaway gap is an indication that emotions are heating up and traders are becoming impatient. With prices moving in your favor, you’re in good shape to capture additional momentum and be able to offer out stock at higher levels.
* Your stock has a historical propensity to make big moves. This factor alone isn’t enough to produce a home-run, but with either (or both) of the previous two at work, it only adds to the likelihood that the move getting underway is going to pay you well.
Momentum trading requires a different mindset, and momentum arrives when there’s more emotion present than logic. Keep this in mind the next time you have a trade performing better than expected, and see how much you can get out of it.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
The Key to Trade Selection
September 1, 2011 at 9:45 am
There’s always a move you’re missing. It might be in the overall market (ETF’s), or it might be a sector or individual stock that’s making the move of the day.
As traders, we all dream of being involved in those names on a regular basis. And while you can focus your entire day on monitoring the news and the stocks which are jumping on headlines (some do and are highly successful), the fact of the matter is that those plays might not be best-suited for you. And that’s perfectly fine.
You’re unique, and your approach should be as well. Some traders are tuned-in enough to dedicate their attention to the headline stocks, but many are not. It’s important to accept that and go the best way for you.
Choose Wisely
In my experience, the important aspect of trade selection is founded in the ability to narrow a list of trading prospects to just a few actual candidates. The aim is to get your watchlist down to a select few which really “fit” you best.
Here are a few things to consider when doing this…
* Are there specific setups or chart patterns which have performed best for you in the past?
* What’s your preferred price range or volume minimum?
* Do you have a directional bias?
* Which type of play do you prefer… breakouts, reversals, pullbacks?
Hopefully you’re seeing some ways to start reducing that list of the cleanest 20 patterns and derive from it an actual trading list. This way, you can ignore what’s left and stick with only the ones which are most suitable for your style of trading.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Don’t Discount Daily Charts When Day Trading
August 31, 2011 at 9:16 am
The daily charts are where nearly all my trades originate. Whether I’m looking for a single-day move or one that lasts several weeks, I always at least take the daily chart into consideration.
Day traders often forget the value that the daily chart can bring. The conclusion is that it’s only suitable for swing trading or position trading, but the truth is that the daily chart can offer some good signals for entry and exit as levels are cleared or reached. Even better, those same levels can often add to your confidence in a day trade and help you stay in it.
Let me offer 3 examples from Tuesday’s session where the daily charts played important roles. On Monday night in the member area, I listed only 3 plays for Tuesday’s session, with each of them being day trade candidates. I’ll break them down one at a time with the initial setup, and then a look at Tuesday’s intraday chart where the daily level played a significant role.
First up was QIHU, which looked poised for a push higher after establishing both a higher low and a higher high in recent weeks. The pullback over the previous several sessions provided a clean descending trend line which I used as a pivot for getting long at $23.60. Here was the original setup:
QIHU pushed past that trend line and never dealt with it again, running initially almost 3% higher before pulling back but still holding above that same trend line:
Next up was GLNG, which had corrected and then settled into a multi-week narrowing consolidation pattern in the form of a symmetrical triangle. These patterns can break either way, and with a strong market and the upper trend line being challenged, I was looking long on a trend line break through $32.15:
GLNG triggered an entry as it cleared the $32.15 level, showing a nice initial pop followed by a pullback to test the breakout zone. To heighten the validity of the $32.15 level, the low of the pullback was $32.18, just 3 cents above it. From there, it ran again in the afternoon to clear the morning highs and get 4% beyond the morning trigger. Not bad for a few hours and no pain:
Last but not least was FSL, a little stock which had huge potential. It had just pulled back to test and hold the early-August closing low, and in recent days had stabilized just above that level. On Monday it saw expanding volume but only minimal progress as it edged past a descending trend line. I set a trigger for $11.25, which would be a multi-day high, to get long. Here’s a look at the pre-trade setup:
FSL triggered late in the day with a massive thrust higher once it cleared the $11.25 level, vaulting straight up to $12 to offer a very fast 6.6%. The move was fast and furious, but a quick payoff once the level was cleared:
A couple lessons from these trades…
A level is a level. Doesn’t matter if you found it on the daily chart or some other timeframe, the odds are it’s going to be evident across multiple timeframes. Recognize and respect that, because it could pay quite well. All 3 of these trades were winners, and each of them respected the level originally found on the daily chart.
Keep an open mind. Perhaps your preference for day trades is a 15-minute chart or a 30 or a 5-minute chart. That’s great. But keep an open mind about how trades might originate. Don’t resign the daily charts to something only multi-day traders consider. You’re missing out on several great opportunities per day by ignoring the daily charts.
Hopefully you found this walk-through helpful. If you want to know what I’m trading tomorrow, stop by the site and begin your trial to our stock pick service.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Intelligence is Only Part of Trading Success
August 24, 2011 at 10:46 am
In a recent conversation with a trader who had just accepted some small but frequent losses, it came to light that his emotions were flaring. Taking a small loss here or there doesn’t affect him, but taking a few in a row does.
What’s interesting though, is that it wasn’t the money that bothered him so much. It was the fact that he came to doubt his intelligence after a string of losses.
Every one of us has been there, and it’s no fun. Losing is a part of trading, and each of us knows that, but how we cope with those losses will determine how quickly we rebound from those hits that inevitably come.
Here are 3 steps I suggested he take…
1. Trade smaller. If you’re getting frustrated and angry, it’s a sign you’re placing too much importance on each trade. The way to diminish that is by reducing your size for a little while so that trades take on much less importance and you’re simply focusing on managing them properly.
2. View losses differently. Losses aren’t fun, but when viewed in a different light, they can be seen as helpful. They will make you better, because you scrutinize your mistakes and either learn something new or get reminded of a lesson you’ve previously learned. Losses also free up your capital and attention to shift toward another trade which may quickly overcome that loss.
3. Expect losses to happen. This isn’t negative thinking, but rational thinking. Begin each day knowing you might take several trades, and some might be losses. That makes it easier to accept them when they happen and it allows you to keep moving without letting emotions take over. Expect winning trades as well. And be sure you’re stopping out for smaller losses than the winning trades are providing. That will keep you net profitable and that’s the aim.
Remember, being right every time is not the aim of trading, so get out of that mindset as soon as you find yourself in it. Intelligence is only a small part of trading. Trading is a numbers game, and it’s one that requires you to deal with emotions rather than allow them to flare. Those who have an edge and who can manage emotions (tied to both losses and gains) are the ones who will succeed in trading.
What else would you tell this trader?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
