FYI, there is now a sample lesson available for the new IRA course.

If you’ve been wondering what it’s about and whether or not you’ll be able to learn something repeatable, this clip will give you a better sense of what the end result can look like.

What I teach in the course is ideal for IRA’s since they are already tax-advantaged and are typically comprised of holdings on the intermediate to long-term timeframes. However, it is not IRA-specific and can therefore be applied in any type of account.

The entire premise is to blend stocks with options for better returns. The course is video-based and can be completed in under 3 hours.

Here’s a direct link to the sample.

Jeff

Each of us, when faced with the choice of how much we’d like to get out of something we’re paying for, would like to say we want some multiple in value above and beyond the price tag. But in order to do that, some effort may be required.

Take for example your smartphone. There are lots of bells and whistles you might or might not be using. Maybe it’s the camera or the calendar or an app you could install for free that could be a big difference-maker, but you just haven’t explored it to see how many ways it might make your life easier. If all you ever use it for are checking email and making calls, there’s a lot of untapped potential right there in your hands. You could do so much more with it, but it’s going to take a little effort on your part to maximize (and fully realize) the value.

Or take the service or the trading courses provided here. The prices are clearly stated, yet there’s a tremendous multiple in value offered in exchange. And while the nightly ideas from the service and a shortened learning curve from the courses are in themselves well worth the price, that’s only superficial. Under the surface exists the potential to realize far greater value – you just have to want it.

A 2-Way Street

To explain what I’m talking about, let me mention a couple of Bandits and show you how they maximize the value here. (And yes, the names have been changed to protect the innocent!)

There’s Dave. He’s retired and has several decades of trading experience. He knows his strengths and his weaknesses. And while that previous sentence may sound overly simple, there’s a LOT to it. Dave has the humility to admit his weaknesses, which also means he has the guts to work on those weaknesses. I love that! He emails me 2-3 times each week, asking questions ranging from how he executed his trade plan to how I manage certain aspects of my own trading. Iron sharpens iron.

Or there’s Stephen. Over the past month alone, he’s emailed me 9 times. Each one is concise, so it’s very easy for me to respond to. And yet each one contains some thoughtful questions about his trading habits and how he can modify them to see better results as he hones his skill through the courses he’s enrolled in here.

Both of these traders benefit from the “features” of the respective products they were willing to pay for, but both are finding value beyond the price tag.

They each identified opportunities to realize even greater value here, and as a result of their added effort they’re tapping into my experience and improving their process.

They’re not just equipped with more or better plays each day when the opening bell rings. They’re not just passively accepting the info I send their way. They view it as a 2-way street, and that makes a huge difference. As a result, they’re backed up by a veteran trader who cares about their improvement and works with them to help ensure progress is made to match the effort they’re putting forth.

I love the opportunity to discuss trading with these guys and others to help them grow and improve. I wouldn’t offer it otherwise. The two mentioned above each happen to have more years in the market than I do (I began in ’98), yet they’re both teachable and have a burning desire to learn and make better progress in this passion called trading. I share that same desire, and I’m honored to get to be part of their journey. They inspire me to continue working on my own trading skills, reminding me to ask myself the hard questions for the sake of continual progress toward long-term success.

Is there any other way?

It’s Up to You

If you’re a Bandit member and you’re not reaching out to me when you have questions or trading situations where another view might help, then you’re not maximizing your investment here. I’m available, and you know where to reach me! I’m willing and able to help you – all you have to do is ask.

If you’re not yet a Bandit, then by now you should be seeing that there’s much more available here than what you see on the surface. There’s tremendous value available beyond some great trades or instruction, so if you’re wanting some assistance with your own process, this is one place you can expect to find it.

Trade Like a Bandit!

Jeff White
Enroll in my trading courses to shorten your learning curve or subscribe to my Stock Pick Service for my trades (and much more).

Recently I was standing out front of my house talking to my parents who were over visiting. A car drove by and I casually mentioned “they’re lost.” That prompted the question, “how do you know?”

I told them that I knew because I’ve lived on this street for a few years. It’s not that I know the cars (I’m no stalker!), but rather that I’m just familiar with the neighborhood. There are efficient ways in and out, and those who live here know that. So, when cars drive right past the nearest side street, it’s clear to me that they aren’t familiar with the area and therefore don’t know exactly where they’re going.

Who cares!? And what does all of this have to do with trading, you ask?

A lot, actually.

Insignificant as it may seem, I learned what I just explained about my street from spending time outside and casually observing it while playing with our kids. Now, I trust my intuition when I see a car go by that doesn’t conform to the norm.

In the market, it works the same way.

You put in time, you develop some gut feel, some intuition, and you have a little more to base a decision off of than had you not developed that feel. You may not always be right, but you have something extra to rely upon when making decisions and it comes from the time you’ve spent observing and participating.

Here’s a relevant side note.  Just this week, I had a conversation along these lines with a Bandit member. He had recognized that he was not relying on himself enough and the work he was putting in each day for his trading plan. He is not at all new to the market, but had been struggling to take some of his plays alongside those of mine he liked.

I told this trader a couple of things…

First, the nightly service provided here is my trading plan for tomorrow, and it’s intended to supplement the work he is already doing – not replace it. When he wanted some additional ideas to add to his own, they’re readily available nightly. There’s a lot of value in not only having some additional ideas like that to turn to, but also noticing what kinds of plays are working best right now.

And second, he has been putting in the work to develop his trading plan and needs to rely on his work and trust that it will also produce.  His intuition of what comprises a quality pattern by now is absolutely valid, so that ought to carry some weight in his trade selection process.

Back to this idea of gut feel, it’s interesting that newer traders love to act on hunches when in reality they have so little to base those hunches on. Experienced traders don’t force opinions, they just pay attention to their intuition when it comes calling and they factor it in.  There’s no magical belly-rubbing involved (thank goodness)!

The more time you spend observing the market and trading, the more reason you will then have to trust your own gut feel and intuition. But it won’t happen overnight, so put in the hours if you want to have it.

Trade Like a Bandit!

Jeff White
Follow @TheStockBandit

P.S. Through the nightly service, I share swing trade setups with members here including my planned entry, stop, and target levels. Check it out today.

A little while back, I sort of went M.I.A. on the public posts here, and it’s time that you find out why.

All along, I’ve published the Members-only updates, but I’ve cut back on the public/free posts because I’ve been hard at work on something else. Something that’s going to deliver serious value to those who take me up on it.

First, a little background…

TheStockBandit is a stock site – hence the name! I’ve been a stock trader since 1998, and if you’ve been around here awhile, you probably knew that. You also know that I became a full-time trader in 2000, and that through this site, I have trading courses and a nightly stock pick service available where I share my trading plan because they’re the best stock setups I can find. Both have helped many traders around the globe, which has been really rewarding for them and for me.

Somewhere around 2002, I started trading some options as well. It started out with really simple stuff, and over the years became more involved, yet always remained in the background of my stock trading. So, I’ve traded options for quite a while.

Over the past several years (8?), there has been one options strategy which has consistently added to my accounts, particularly in my IRA’s.  I say that because those are the accounts where I’m much less active and tend to have a much longer timeframe for my positions.

Having been asked many times about my longer-term accounts in particular, and about options, I decided to put together a brand new resource with specialized training on what it is and exactly how I do it. I finally realized what works best for me over a period of several years (not a passing fad), and there are a few reasons why it’s perfect for sharing with you. That’s because:

• it’s extremely easy
• it works
• it’s an add-on to ANY trading or investment style (no overhaul required)

That means that for you to benefit from it, you don’t need to learn a zillion options strategies or change your approach.  Whether you like technical patterns, fundamentals, or something else, you can stick with it.  This is just an enhancement to your stocks, without added risk.  The fact is, you don’t even have to pick better stocks to see way better performance (which I realize sounds kinda weird).

I’ve set up a separate resource specifically for this.  Do yourself a favor and spend 1 minute and 51 seconds to find out more about it here.

I wouldn’t send you there if I weren’t completely certain it’s worth your time.

Jeff

Trading volume is a key element to any technical trader, so for me it’s no different.  Paired with price, everything I need to know about a chart is right there in front of me.

It’s true that volume is usually needed to propel stocks higher for lasting moves.  I tend to think of volume as fuel – when there’s little of it left in the tank, it’s tough to get very far.

When stocks are on the decline, the same requirement is not in effect.  Downside volume is different.

A major reason this is the case is because buyers have bids placed in stocks at various levels below current prices at all times. If the stock begins to weaken, those buyers will often choose to simply cancel their bids.

This is in effect stepping out of the way to let the stock continue falling to lower prices where they can presumably buy it later.  When price accelerates lower, this creates a bit of an “air pocket” effect and we see price skipping levels on the way down.  As this occurs, price can continue lower without heavy downside volume.

On the upside, sellers might occasionally cancel their offers in a similar fashion, but usually there are greater motivations to sell than to buy, since most traders and investors buy stocks as their entry and sell as their exit (they don’t short sell).  The way I view it is that those traders who do intend to sell are more prone to leave a sell order in place – without cancelling it – which price can hit on the way up.

This is very different from the skittish behavior that would-be buyers exhibit when a stock is acting pretty weak.  It’s something to keep in mind the next time price rolls over and the volume doesn’t appear to be very threatening.

Trade Like a Bandit!

Jeff White
Take a trial to the Stock Pick Service to get my trades.

Follow @TheStockBandit

Years ago when I was in college on a golf scholarship, I read the book Golf is Not a Game of Perfect by Dr. Bob Rotella. I had heard a number of Tour players refer to him as their sports psychologist, and his previous book had gone out of print, so I was eager to devour this book when it came out.

Replace the word ‘golf’ with ‘trading’ and you will find a ton of useful concepts in it.

One of the ideas he introduced (which I also covered in my Trading and Golf series) was that one should have a “conservative strategy and a cocky swing.” By that, he means don’t take unnecessary risks with your style of play that can lead to big blowups.  Choose to take the percentage shot and then execute that shot with confidence.

Every trader must also do this. Pulling the proverbial trigger on a trade requires a certain level of confidence to begin with. Once that has been done, the next goal is to stay in that position while the trade runs its course. This second step requires conviction.

Conviction in Your Strategy

It can be a fine line to walk between confidence and cockiness, or between conviction and stupidity, so it must be done with care.

As traders, it’s imperative that we continue to set aside our motives and ensure that the price action takes precedence in our decision-making.

Erring too much on the side of caution leaves us sidelined indefinitely, unwilling to venture out into the market waters where both opportunity and danger reside. Likewise, erring too much on the side of conviction can end in disaster when we decide the market must be wrong to disagree with our assumptions and opt to stay in a losing position despite opposing price momentum.

In my experience as a trader, here is what conviction in a strategy looks like:

There’s a strong belief in the overall method, paired with an understanding that a safety net must be in place. There’s acknowledgement that conditions need to be suitable for the strategy in order to give it the best chance at working.

Amend Your Method

There’s nothing wrong with having a strong belief in your overall trading method, and I’d argue that that can be among the best traits a trader can have.

It’s important, though, to work hard regularly to identify and plug any holes in your method so that when it’s off, it doesn’t cause irreparable damage. Objectively review your trades in search of outstanding flaws or common themes among those which worked or failed.

Granted, it’s an ongoing balancing act to continually seek out ways to improve while still trusting in your method.  This part isn’t easy, so it’s somewhat of an art.  The key is to stick with what works until evidence surfaces which warrants an amendment to your method.

One last note. Anytime you miss an opportunity but followed your strategy, don’t beat yourself up over it.  This will happen! But stay alert for the next trade instead of constantly hawking the one that got away.

What keeps you on track in your trading? Leave a comment below if you have something to add.

Trade Like a Bandit!

Jeff White
Take a trial to the Stock Pick Service to get my trades.

Follow @TheStockBandit

When it comes to intraday trades (or single-day trades), traders have a tendency to think differently.

Maybe it’s the more-frequent painting of bars on the chart that affects them, or they’re jumping to conclusions based on the moment by moment price quotes, or that time-and-sales window is humming along so fast that some focus gets lost.

Whatever it may be, it can lead to mistakes – particularly in terms of what’s being risked and what’s being expected on the profit side – a.k.a. the risk-to-reward ratio.

Risk vs. Reward

Let’s take a step back for just a moment. If I’m risking $1 to make $1, that’s an even risk:reward ratio. It’s an even-money bet. So in order to turn a profit with that approach, what absolutely must happen?

Answer: I have to be accurate.

I don’t know about you, but there are just times in my trading when I’m anything but accurate. Sure, there are times when I get hot and trade after trade goes my way. But there are also times when I zig and the market zags – that’s part of trading, too.  It’s how I deal with those times that will determine how deep my account drawdowns are. The cold hard truth is that those times are very costly for those 1:1 traders.

So, since I know I won’t nail every move, the adjustment I have to make is to my risk:reward relationship. If my accuracy is closer to 50-50 (and often it is), then I need to be making more when I’m right than I’m giving back when I’m wrong. I need to book larger profits and smaller losses.

Intraday Trading

Ok, let’s get back to day trades.  Just like on any other timeframe, we absolutely have to think in terms of risk vs. reward on day trades. The chart is simply zoomed in a bit and the window of opportunity (prior to the closing bell) is approaching faster, but aside from that nothing else has changed. We’re still putting capital at work in hopes of turning a profit in some multiple of what’s being risked.

My own approach is rooted in the fact that many stocks may only move 3-4% on a given day. By trading those stocks, there’s plenty of movement to grab some profit and I don’t have to expect an outsized move.  I’ve found that in these cases, a 1% stop from entry is usually adequate.

In doing this, I’m allowing the trade enough freedom of movement that I’m not choking it off, and by the time that stop is reached I am usually going to have enough evidence that I’m positioned poorly and price is not moving my way.

I’m also going to be able to capture a multiple of what I’m risking if that trade does go my way to the tune of 2-4%.

There are exceptions, of course.  For example, some lower-priced stocks may require a little more room (ex: $0.05 isn’t much even on a $5 stock).  And there are highly volatile names where it’s not uncommon to see 6-10% moves, in which case I’m willing to offer them a bit more breathing room.  Those might warrant a 2% stop from entry.  But in every case, I still need to aim for that relationship of aiming for a bigger move in my favor than I’m willing to give it against me.

Consult the Chart

If you’re lacking years of experience and familiarity with the more active stocks, then one way to gauge how much room to give a position is simply by eyeballing the chart.  Look at the most recent days and weeks, and see how wide the range is for a typical bar.

You can also add ATR (Average True Range) to your chart to see what size bars you might expect.  For example, a $10 stock with an ATR of 1.07 means that it sees daily ranges (high-low=range) in excess of 10%, so a 2-3% stop on that kind of stock is most likely more appropriate than 1%.

Here’s what that might look like.  Here’s a chart with both price and ATR plotted in the same pane, showing the Average True Range of the most recent 14 bars:

Why I Use TC2000

 

Exit Stage Right

No risk/reward discussion would be complete without an exit.  So when it comes to closing out a position, there are two ways I do it.  The first is if I simply get stopped out, in which case I’m out all in one piece.  I’m wrong, it’s time to move on.

But the second way I close out a position is if I’m right, in which case I want to be out in a couple of pieces.  This is referred to as “scaling out” of a trade, and it looks like this.  Price makes a favorable move from entry, momentum on the intraday chart runs a little bit hot after that nice move, and I take off half.  I then adjust my stop for remaining shares, and wait.  I need to see if price can digest that move and potentially reset for continuation.  If it does, I’m still on for the ride, even though my position is now smaller.

By peeling off pieces of the trade, I can use that strength to my advantage and get smaller as the move gets longer in the tooth.  Don’t forget the closing bell, either, which is when I want to be completely out of my day trade.  But partial exits also enable me to keep participating if the move continues.

Considering these things has prompted many traders I work with to abandon their former “all in or all out” approach in favor of scaling.  Taking partial profits has several advantages, and can actually improve the risk:reward relationship of the trade by the time the position is entirely closed out.

Any other methods or thoughts on this from you?

Trade Like a Bandit!

Jeff White
Take a trial to our Stock Pick Service to get our trades.

Follow @TheStockBandit

Those of you who have kids know the feeling.

I’m an assistant coach for my son’s little league game and he’s playing 3rd base the other day in a game.  A shallow pop fly is hit his direction.

The moment I realize it’s his play, I hold my breath and eagerly await the outcome.  I want so badly for him to catch it.  I want him to get that boost and hear the cheers for the play that he made.  The few seconds felt like forever, giving me more than enough time to wonder… have we practiced those enough?

Thoomp!  He caught it!  My hope immediately turned into excitement and I WHOOHOO’d in celebration.  Lots of fun!

Those of you who trade also know the feeling.

You’re in a position and you can’t wait for the outcome.  The anticipation of potential gains or losses is killing you as the stock upticks and downticks, taking your emotions with it on every move.

Just like my son’s game and that pop fly was out of my control, so is your trade.  All I can do to help my son is to prepare with him ahead of the games, just as you must prepare your trade before you put it on.

Have a plan and stick with it today!

Trade Like a Bandit!

Jeff White
Take a trial to the Stock Pick Service to get my trades.
Follow @TheStockBandit on Twitter

Let’s do an exercise here called spot the difference in these two charts.

Chart 1:

Chart 2:

Did you see the difference?  If you said no, that’s because there is none.

Sure, the price action varies slightly, but that’s not the takeaway here.  What I really want you to realize is that bars are bars (or candles are candles), and price patterns are price patterns – regardless of the timeframe you’re looking at.

In full disclosure, Chart 1 is a daily chart and Chart 2 is an intraday chart.  But that’s the only real difference.

Yet so many traders try to read Chart 2 differently.  Why is this?

On any timeframe, a chart is simply a snapshot in time of the price action.  Maybe it’s displaying monthly, weekly, daily, hourly, or 5-minute bars.   Chart patterns carry with them the same implications across timeframes.  Continuation patterns should be considered for follow-through.  Reversal situations are still valid.  Trading ranges should be noted.  Price compression can still lead to expansion once the lid gets blown off.

The key is this:  don’t treat intraday charts as if they’re special.  Read them just like you would the daily chart.  Note the higher highs or lower lows to spot trends, be aware of emerging levels, and consider whether price is poised for continuation, a retracement, or stagnation.

For me, here’s what this looks like.  Setups that I like for single-day plays are usually found on the daily chart.  That’s where I do most of my nightly work and research, just digging through my watchlists.  So I’ll identify a pattern or level through which I want to place a trade.  But once I’m in the trade, I shift to the intraday chart and use what I find there to manage the trade.  If I see a trend developing, I do my best to stick with it.  If I see momentum start to run too hot, I lighten up in expectation of a snapback/reversal (since sharper moves are more reversal-prone).  Even though I locate the trade on one timeframe, I can manage it via another.

By the way, it’s OK if your expectation for the move is still tied to that same timeframe, because it’s all relative.  Just don’t switch gears when you switch timeframes because a chart is a chart and a level is a level.

Trade Like a Bandit!

Jeff White
Take a trial to the Stock Pick Service to get my trades.
Follow @TheStockBandit on Twitter

I’m asked often about my win rate, to which I always respond the same way.  I’m proud to say that it usually hovers around 50/50, which I realize won’t impress anyone who only cares about a high win rate.

But to those who care about making money and being profitable in their trading, they know the importance behind the 50/50:  the size of wins vs. the size of losses.

2014 has so far been an excercise in risk management for me in that I only took a dozen swing trades in the first quarter.  That’s light, yes, but with a fickle, stagnating market, selectivity has been critical.  Many have been spinning their wheels in 2014, getting whipsawed with the moves we’ve seen so far.

Back to that dozen trades, here’s the breakdown of how they’ve worked:
6 Wins
6 Losses

Exciting, huh?  But let’s get to what matters:  the size of the wins vs. the size of the losses.

Of the 6 losses I took, 4 of them were less than 3% each.  Small losses are easy to recover from.

Of the 6 winners I booked, 4 of them were greater than 6% each.  Big wins easily cover multiple small losses.

Here’s the breakdown by trade as found on the Recent Picks page:

Aside from the takeaway that you don’t have to be hyper-active to trade well, there’s a major point you don’t want to miss…

Aim for tiny drawdowns, and shoot to make more in your typical winning trade than you give back in your typical losing trade.

High accuracy rates aren’t inherently better, as by their definition they usually entail some catastrophic losses when they happen.  No thanks!  As for me, I prefer the smaller hits even if a little more frequent.  After all, the whole point is to be net profitable, isn’t it?

If you need some help, I’d love to show you what I’m doing.

Trade Like a Bandit!

Jeff White
Take a trial to the Stock Pick Service to get my trades.
Follow @TheStockBandit on Twitter