Some traders spend every day on Twitter, posting dozens of trades and conversing nonstop.  It can be a lot to keep up with!

I try not to clutter the feed with non-pertinent info, unless it’s the evening or weekend when I might do a little more.  Regarding my market thoughts, however, I’ve put out some useful ideas recently which you stood to benefit from if you’re following.

For example, on May 22nd at 10:01AM, I posted the following:

That proved to be timely, as it’s currently standing as the market top.

This week, I shared some additional thoughts on the eve of the FOMC announcement.

 

 

 

Note that I didn’t predict anything, as that’s just not my style.  But I did point out the possibility for a downside reversal post-FOMC, as well as provide some reasons behind it.

Remaining a student of the recent price action will keep you on track.  If you’re listening to other opinions, be sure they’re objective and not of the crystal-ball variety.

Trade Like a Bandit!

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

Follow @TheStockBandit

There are many ways to classify traders, but one such way to describe styles would be that of an anticipatory approach vs. waiting for confirmation.

Not every trader will fall into a single category, and in fact you’ll find that experienced traders will at times do some of both.  There’s nothing wrong with that, and shifting with the tide of the market is always wise and beneficial.

However, I wanted to discuss some of the pros and cons of these two approaches and then share with you some situations where I’ll employ them (because at times I’ll use them both).

Anticipatory Trading

The anticipatory trader is one who takes a position and then waits for a move to begin.  The trader who anticipates is often thought of as a contrarian.  The contrarian typically does have an anticipatory style by building a position against a key level and then looking for a reversal to begin.  However, some breakout traders anticipate.  Rather than waiting for the breakout, they might establish their position while the stock itself remains in a trading range or base.

Contrarian

The contrarian anticipates by establishing positions usually against a key level or into a pullback (whether a dip within an uptrend or a bounce within a downtrend).  The advantage is that they can enter with better pricing than they would get by waiting for the reversal to begin.  The disadvantage is that they might be early and therefore wrong (at least temporarily).

An example is RCII, which has continued to respect this nearly $6 wide trading range since the fall of 2011. Anticipating reversals away from support (any entry south of $33 has paid off well with limited risk) or away from resistance (any entry north of $37.75 has paid off well with limited risk) continues to work in this stock. This is a contrarian trader’s dream stock.

Why I Use TC2000

 

Breakout

The anticipatory breakout trader is expecting continuation of the existing trend, but typically is entering a position in expectation of that trend resuming before it has actually happened.  It might be a high channel pattern after a significant rally, which is a healthy base, and this trader expects it to be resumed to the upside.  Instead of waiting for a new high, they get long within the channel in hopes of seeing price push through resistance sooner than later.  As an advantage, it offers them better entry prices.  The disadvantage is that price might continue to stagnate (thus exposing them to risk without reward) or even fail the pattern, in which case they end up with a loss.

Here’s a look at ABBV, which had been on my radar in recent days with a bullish pattern in development.  Resistance had been established, and rising support was beginning to create a tightening base.  I’ve been looking to possibly get long if it could make a new high in the $46.40 area.  On Thursday, price broke down from the base.  Anticipating a move here would have resulted in a quick loss by not waiting for confirmation of the pattern.

Why I Use TC2000

 

Confirmation Trading

The confirmation trader waits for price to clear a key level or a reversal to begin before establishing a position.  Waiting for this confirmation brings with it inferior prices compared to an anticipatory approach, but can also mean higher probabilities associated with the trades due to fewer pattern failures.  This approach also tends to result in fewer trades since it’s based on price exiting a base rather than simply identifying a base as a means of entry.

An example of a trade I’m currently in is VCLK, which I entered on 4/17 after price cleared the descending trend line at $28.85.  This gave confirmation that price was back on the move to resume the longer-term uptrend.  it also meant I paid a higher price for entry, but since then price has steadily risen and currently is up more than 7% since my entry.  As I’ve shared with members, earnings are due out next week so I’ve been tightening my stop aggressively behind this trade due to it running out of time.  Either way, this has been a nice steady move to participate in and it was worth paying up a bit on the confirmatory move through the descending trend line.

Why I Use TC2000

Anticipatory trading is tricky, and you need to know when to make anticipatory trades if that’s your primary approach.  Whichever route you go, it really boils down to personal preference since both approaches have benefits and drawbacks.  The bulk of the trades I’m putting on and sharing with members here are confirmation plays, simply because that’s my style.

One other thing I should mention that I’m asked about frequently is whether I prefer to wait for a close above a level on breakout plays to further validate or confirm the move, or wait on volume expansion to confirm the move.  The answer to that is no.  Here again, it’s a tradeoff as it can result in more headfakes, but it also means I don’t miss out on any trades.

Waiting for a close beyond the breakout zone with intentions of entering the next day can in some cases leave you behind if price thrusts through the level decisively.  It can leave you chasing a move with and entry farther away from an appropriate stop (greater risk), which is why I prefer to take trades as they push through the levels (tighter risk).  It’s a matter of personal preference, but whichever route you go the key is to be consistent.

If this is over your head and you need the 101 on technical analysis, don’t worry. That is the kind of thing we teach in our Basic Course, and you need to be in that course if you need more help understanding the charts or the fundamentals of trading.

Trade Like a Bandit!

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

Follow @TheStockBandit

During a recent conversation with a trader, I was asked how I handle the pressure of making a living trading when I have not just the standard monthly expenses but a family as well.  As I relayed my answer and spoke honestly about what it was, it hit me that I needed to share this with you, because for whatever reason I just don’t think I’ve done so before.

But first, I’ll introduce another element to this concept to add validity to my point:  a long-time trading friend.

Months ago, I had traveled to a different part of the country to speak at a trading event.  In planning for that travel, I made plans with this friend who lived near the city I was flying into.  He invited me to come stay with him for a few days to discuss trading and life, to play golf, and just enjoy some down time.  It was a wonderful time and he and his wife were phenomenal hosts.  I was so glad I went.

This is a trader who has been full-time even longer than me, and he’s been highly successful.  His annual income would impress many, but he doesn’t live an extravagant lifestyle compared to his income.  His home is well-furnished and certainly very nice, but not ostentatious.  He drives nice cars, but they’re affordable – and paid for.  And he likes discounts (he even had a coupon we used for a discount on a round of golf).  He could be living much bigger.  He could be driving a 6-figure car.  He could live in a house several times larger than he does, or even maintain multiple nice homes in different parts of the country, but instead, he and his wife choose to live well within their means.

Imagine that!  Imagine what that one thing could allow you to do and the freedoms that single mindset could bring you.

As simple as it is, this notion of spending far less than you make can be absolutely magical.  It’s not a ground-moving principle;  I certainly am not the first to discuss it.  But living it can relieve you of tremendous pressure as a trader.  This is a wonderful concept for anyone to adopt, and in doing so, much frustration can be avoided.  But for the trader who desperately wants fewer emotional ups & downs and less pressure, it’s absolutely necessary.

So, back to the conversation…  I told the trader I was talking with that my wife and I are both frugal people.  We’ve both been savers our whole lives.  The fact that we see eye to eye on expenditures makes this far easier.  (If you’re single, keep this in mind when that dating relationship gets more serious!)  And if you’re already married, have an honest discussion with your spouse to find some ways you can cut back on your monthly expenses – thereby making it that much less difficult to extract what you need each month from the market.  But it’s important to understand that we aren’t in the habit of living the jet-setter lifestyle based on some good trading.

The fact is that going up in lifestyle is far easier to do than to go down a step or two.  Stay where you are as long as possible, and think very carefully before expanding your lifestyle to fit your income!

Traders often have a great year and are quick to live up to it by purchasing a new ride or taking a big vacation or buying whatever they want just because money is suddenly more available.  But spending what you make, paying the tax bill, and then getting off to a poor start the following year brings a harsh reality with it.  All of a sudden, the expectation has been set for more and more stuff, but the market will at some point put you on your heels.  That’s pressure, and it can be avoided.

So take it not just from me as a full-time trader since 2000, but also from my friend who has been at it since 1999:  living within your means is the simplest way to reduce the pressures on your trading.  Doing so lets you pick and choose your spots with greater ease, grow your account faster, and stress less when the rough patches come.

Trading is tough enough already without adding more pressure to the equation.  Your ability to remain level-headed and calm during times of elation or desperation will help you make better decisions, thereby keeping you in this game for the long haul.  Stepping away from the market periodically for some down time is refreshing and it should be done, but living within your means on an ongoing basis can bring you stress reduction that lasts.

Trade Like a Bandit!

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

Follow @TheStockBandit

On Sunday evening, I was reminded of a dream I used to feed.

There was a kid, probably about 14, walking down the fairway of the golf course I live on. The sun was low in the sky, and the shadows were growing longer by the minute.  Green grass was just starting to poke through the ground, as the first signs of color are starting to emerge from the trees. He was alone with the place to himself, and was focused on each shot. It was right where he wanted to be, probably having spent most of the day practicing while the course was full of players. He was carrying his school team bag and I suspect he walked with a dream propelling him with purpose toward the next shot.

I used to have the very same dream, so it’s not difficult to recognize in someone else even from a distance.  It took me to some really neat places. I met some wonderful people and enjoyed every experience. Along the way, the highs of achievement and the lows of disappointment both drove me. It works that way, because when you have a dream, each end of the spectrum has a way of pushing you to keep working hard.

And so in the light of trading, I ask you…do you have dreams that are compelling?

Not just “I wanna make $1M” but a clear, vivid dream getting you out of bed every day, keeping you up late when there’s work to be done? Where have you come from in your trading, and where do you want to be?  Is every position you put on not just an opportunity to profit but a learning experience that has the potential to make you better?

I’ve had clear dreams and I’ve been without, and by far I would prefer to have something driving me, lighting a fire under me to stir me to action, to nudge me beyond my comfort zone, and to inspire me to learn and grow and get better.  But I’ve definitely been in that place where I’ve lost sight of my dream due to hard times and struggle and frustration.  If you’re there now, it’s important that you know that you can use it to strengthen you rather than let it extinguish your fire.  If you’re down or discouraged, stop and think about how you can reignite that passion, and what’ll happen if you don’t.  And ask yourself…what’s the worst that can happen if you take that next step of commitment and truly pursue that dream with every single resource you have?

Let me be clear though:  life shouldn’t be about reaching a financial milestone. Read that one more time. Because once you get there, you’ll almost immediately set another one. Its an endless pursuit, and when it’s all said and done, you can’t take it with you anyway.  A coaching client of mine was recently relaying to me why he wants trading success, and it’s for a much higher purpose than buying a hot car or taking big vacations.  He’ll get there, because he wants to leave a legacy that’s more than money.

A legacy isn’t a fortune, so I think it’s critical that we know what it is we want to leave behind when we leave this world.  Money might open some doors, but it’s too hollow to be the only thing that you’re trading for.  Truly tough times come for every trader, and dollars won’t be the driving force that pushes you through the pain.

The real sweet spot comes when you find satisfaction from not just the results but the process – from the work. Its about having that understanding that you’re blessed to even have the opportunity to pursue a dream – as many are not.

What’s your motivation for doing this? What’s your why?  Do you trade for the result, or for the satisfaction of progression?  Is there something you recognize as an opportunity to impact the world around you with those trading profits?  Whatever it is that you trade for, you’d better know it.

So as you face the day, keep your dream fresh.  Feed it and nurture it.  Chase it. Remind yourself of it often.  Because at the end of the day, you’ll want that satisfaction of knowing you gave your best effort today and made some headway toward it.  And if you’re lucky, you’ll have another chance to improve tomorrow.

Trade Like a Bandit!

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

Follow @TheStockBandit

As a kid, I’d get on any ride. No roller coaster intimidated me, I was game for anything. But then something happened, and I’m not sure what it was. Some kind of mental obstacle just appeared, and I’m not sure why. All I know is that in recent years, I backed away from the big rides. I got on some of them, but I didn’t like them! Why?

It wasn’t the speed, it was about control. Going fast doesn’t spook me, I’ve driven 150mph too many times. But in those cases, I’ve been the one choosing the speed, having control.

On a flight last fall, however, I was reminded just how little is within my control. It was at night leaving Philly in a nasty thunderstorm – the kind which paints the radar red. Why we took off, I have no idea, but it certainly got my attention. That plane got tossed all over the sky, and at one point I’d swear we dropped 2,000 feet in a couple of seconds. I was honestly terrified, but the Lord got me through it!

Following that gut check, I went to Disney World with my family. After the thunderstorm flight, no roller coaster held sway over me. I pushed the pictured 458 Italia to its limits around the track, but more importantly I rode every coaster and thrill ride in every park, without fear, because my perspective had shifted. Just like as a kid, I knew I wouldn’t die! That sounds ridiculous, but my fear was removed and I was released to have fun again. I had overcome my worry through reason and as a by-product of some circumstances (US Scareways).

So what does this all have to do with trading?

In trading, we have the ongoing opportunity to push ourselves, to confront fears, and to reason our way beyond obstacles which have simply appeared. But it’s not as if we can just push through and ignore it. Fear is our mind’s way of warning us of danger, right? So it isn’t wise to just ignore it, nor is it easy.  I hear from traders almost every day who are too afraid to trade.  They’re handcuffed and simply cannot pull the trigger no matter how pretty a setup happens to be.  It’s overwhelming to them to just enter a position.

Getting beyond those mental hurdles takes a shift in perspective. It takes reasoning, and it takes some adjustments. Whereas that extremely turbulent flight happened by chance, in trading we have to create some of those new circumstances in order to train our minds to think differently again.  That takes intentional effort, not sitting back and hoping things will suddenly feel different.

Maybe it means temporarily eliminating certain types of plays which have harmed you in the past. Or maybe it means you still step out in the way of some (assessed) risk, but you do so with extremely small positions. You know they can’t destroy you, and the aim is to get back in the saddle – not to immediately make money. That can happen later.

If you find yourself shell-shocked in the markets, for whatever reason, start creating a different reality, somehow. Find a way and be creative if you need to. Take baby steps until your confidence returns. Learn some new techniques, and only size up when you’re emotionally stable again. But you have to find a way to limit your risk and get beyond the worry of ruin. It’s the only way you’ll return to profitability and start having some fun again in the markets.

Trade Like a Bandit!

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

Follow @TheStockBandit

Just a heads-up to those of you located in Arizona (and specifically the Phoenix area), I’ll be presenting LIVE on Tuesday evening to the Scottsdale/Phoenix Traders and Investors Group from 6-8pm.  If you’re in that area and you can make it, I’d love to see you there!  Walk-in attendees are welcome, although it helps them if you’ll pre-register.  Details are available at this link.

I’ll be covering a number of topics to teach some key concepts, and I’ll also be sharing what has been working best for me so far in 2013.  I’m excited to go and hope you can make it!

Trade Like a Bandit!

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

Follow @TheStockBandit

I just received in the mail my copy of Traders at Work:  How the World’s Most Successful Traders Make Their Living in the Markets.

And I’m very proud to be Chapter 10!

The number of trading books I’ve read over the years must exceed 200 by now, but among them my favorites have always been interview-style.  Jack Schwager’s Market Wizards series has been the most popular, and I’ve loved reading those books repeatedly over the years to gain (and be reminded of) insights from highly successful traders.

In Traders at Work, there are 16 chapters of interviews (including one with Market Wizard Linda Raschke).  Thanks to Tim Bourquin for the invitation to be a part of this.  It’s an absolute honor to be included in this book, and I know you’ll learn a lot from it.

In my interview in Chapter 10, you’ll learn about my early exposure to the markets, my progression as a trader, my strengths & weaknesses, what I’m working to improve right now, and much more.

There are many great traders included in this book and I’m excited to dive in and absorb what they have to say.  This is mandatory trader reading!

Pick up a copy today, it’ll be the best $13 you ever spent.  Mark it up with a highlighter, underline parts which stand out, take notes in the margin, and keep it handy because it’s full of great info you’ll want to read again.

Trade Like a Bandit!

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

Follow @TheStockBandit

Those of you who are TC2000 users will love this, as I’m now one of their Third-Party Research contributors.  This is a tremendous honor to me, as there are only 4 of us and one of the others is none other than Peter Worden.

I had the wonderful opportunity to participate in a number of their TC2000 Conferences during 2011 and 2012 in various parts of the country, and it was a lot of fun to meet other users of this phenomenal software.  I’ve used it since 1999 for all my daily charting, scans, and watchlists, and don’t intend to stop anytime soon – they just keep making it better!

Back to the Third-Party Research, this is just a way for me to share with TC users my charts and notes throughout the week.  I’m sharing insights, notable charts, and some market views, so check it out!  It’s free for TC users, and here’s how to access it.

First, click Notes & News and go down to Search TC2000 Users:

Once you click Search TC2000 Users, type in TheStockBandit in the search box:

Beside the listed notes in the upper right portion of the next window is a Follow link.  Click that, and then you’ll be able to see my charts and notes in your ‘following’ stream.

Hope to see you on TC2000 soon!

Trade Like a Bandit!

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

Follow @TheStockBandit

Before you read any further, let me be clear that this is NOT a post of my predictions for 2013!  Those of you who have read me over the years know that I’m a trader, which means I operate on if/then scenarios and therefore I do not make big bets based on what I think or hope will happen in the market.  This post is also not influenced by the first few days of strength we’ve seen or the so-called ‘January indicator.’

That said, I wanted to touch on something I discussed in that radio show Friday regarding the outlook for 2013.  The previous guest on the show was Jeffrey Hirsch, who with his father Yale puts out the Stock Trader’s Almanac each year.  That’s a great publication and a nice tool to have at your disposal.  It lays out tons of seasonal data and seeks to point out similarities between current conditions and how the market has responded in the past, among other things.

Anyway, Hirsch had apparently laid out a case for a big bear market this year before I came on the show (according to the show’s host).  And maybe that’s true and we get one.  Maybe his data backs that up, in which case I respect him for following his process.  I’ll follow mine, and you should follow yours.  Maybe this year we do see a significant decline and the headlines become headwinds for the market.  I’m not here to dispute that notion.  The charts will tell me when it’s time to be bearish (lower highs, lower lows), and I’ll trade accordingly.

What I do want to mention though is the flip side of that coin.  Isn’t it possible we see a huge year for the markets?  Currently, it’s widely known that sentiment across the investor landscape is horrendous.  Wall St. scandals, dark pools, HFT’s, flash crashes, government intervention, etc. have driven many retail traders and investors away from the market.  They don’t feel like it’s a fair game, so why even play?

And yet, what else can draw them back into the game like some stellar market performance?  People can’t resist a huge rally, and we all know there’s nowhere else to park money right now for those seeking a decent return.  It’s something to think about.

Toss into the mix that virtually any exodus from bonds provides a ton of fuel to propel stocks higher, and a case could easily be made for the bulls to have their time in the sun again.  With the RUT small-cap index hitting all-time highs just this week, it’s hard to argue against the growing appetite for risk.

Again, this isn’t a prediction of what I think or hope will happen.  Just an exercise in looking at the flip side and being objective.  It’s a good habit for every trader to be in.

Trade Like a Bandit!

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

Follow @TheStockBandit

I’m often asked whether I’m an anticipatory trader or a trader who acts upon confirmation of a pattern, and the answer is that I’m the latter.

Why?  Because I’m willing to enter at a slight worse level (as compared to an anticipatory entry prior to confirmation) in order to have a little higher confidence in the trade working.  It also prevents my capital from being put to work before the stock is on the move, which is nice.

The past few days, I’ve been watching NTES for a continuation play on the short side.  Here’s what it looked like 2 bars ago, and note it had not yet started to break down, hence no position for me.

Why I Use TC2000

Good thing I waited for a breakdown, because look at the stock today….

Why I Use TC2000

This 2-day lift has negated the bearish pattern which had been building (but which never confirmed with a break of the lower trend line).  Today you could say we even saw a short squeeze with the accelerated move higher, but thankfully I wasn’t on the painful end of that.

Perhaps price is heading back up for a test of the $43 area where it broke down in early December, I don’t know.  I don’t see a bullish play here, and with the wedge now resolved to the upside, I don’t see a bearish setup either.  It needs more time to develop before I’ll become interested either way.

I prefer to wait for pattern confirmation before entering positions, and in cases like this, I’m certainly glad.  But even if your approach differs, just be sure you’re consistent in your efforts.

Trade Like a Bandit!

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

Follow @TheStockBandit