With an extended holiday weekend approaching, it’s the perfect time to pause and reflect on not only your performance, but also your process.

So let’s head to the proverbial locker room and examine how the first half has played out.  Doing so will enable us to properly prepare for the 2nd half and finish strong the way every winner should.

First 6: Something for Everyone

2009 has been an interesting year already.  January began with some real promise as the market sprinted higher for a whopping 3 days before turning south and stomping on the gas.  We headed lower into mid-March, when a meaningful upside reversal brought about significant gains - and virtually in a straight line for some 9 weeks before pausing.  Since then, we’ve climbed incrementally higher, and currently stand somewhat range-bound with traders waiting for momentum to return.

That means that to date, we’ve had several kinds of price action with the market throwing the kitchen sink at traders.  Downtrends, reversals, rip-roaring rallies, and even a few trading ranges have been seen.

The way I see it, that’s a little something for everyone.  Including you.  So if I were to ask you how you’d grade your performance during your favorite stretch, what would you say?

And more importantly, where do you see room for improvement?

Right now’s the time when brutal honesty can bring big benefits - if you’re brave enough to bear it.  Sure it’s more fun to reminisce about the best trades we’ve made, but the failed trades and the missed opportunities hold within them perhaps the greatest promise - the chance to learn and apply, and with it, the chance to rise above our previous best.

I don’t know about you, but that fires me up.

I’m always looking to gain an edge, and I love working toward continual improvement.  Growth and sharpened skills do much more than pay the bills - they motivate and reward me.  The thought of getting better gives me some momentum, particularly in my mindset.  Trading is such a mind game that having an edge there means more to the bottom line - which is nice, because I do not like to lose.

New Year’s is Coming

Here in Texas right now, we’re seeing triple digit temps daily and it’s quickly becoming the Great Yard Bake of 2009 with the heat wave we’re in.  Summer is in full swing, but you know what?  Winter will come.

When you stop to think about December 31st, it probably seems forever away.  But put yourself there mentally for a moment, and think about how you want your 2009 to finish.

Will the halftime checkup prove to be a turning point for you, or will you have squandered an opportunity to grow in the 2nd half?

My hope is that the former will be true for you.  Right now, you might be fed up with the current trading ranges and lack of momentum.  You might hate the summer doldrums and just want a break from it all.  And truthfully, now’s not a bad time for that if so (I just spent 10 days in the Caribbean).

But if you’re driven to grow and improve and make this the year you actually make some real strides - both in your account and in your mindset, then right now is the perfect opportunity to pause and pay attention to your process.

Spend some time crunching the numbers.  Put in a few hours to review - truly review - your trades from the first half, and be honest and see what you learn.  Some of them you nailed…congrats!  But others you knew you should have taken and didn’t.  Find out why.  Some of them you bailed out of too quickly, micromanaging them by undermining your original plan.  Figure out what happened.  And yes, a few of them you got blindsided by.  It happens, but really do your best to determine whether the fault was your own and something you can avoid in the future.

The Moment of Truth

Here’s the thing… the future arrives daily, and either you’re prepared for it or you aren’t.  Either you want success bad enough to find it, or you’re satisfied enough with mediocrity to keep enduring it.

Get honest with yourself, and before you head out for the 2nd half, decide how you want to feel the next time you walk off the field.  The first half is over, and only you can determine what happens in the 2nd half.  Get clear on what you want.

I want to win.

Trade Like a Bandit!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

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Perhaps you’ve been there before.  The market shifts from not doing anything to suddenly gaining momentum, leaving you with zero positions on.  Quickly, the fear suddenly strikes you that you’re getting left behind.

Yes, the summertime can be known for that, but it can happen anytime.  And it’s quite irritating to get caught feeling flat footed when the market bolts.

My Solution

I kept feeling like I needed a way to manage my favorite setups, but I didn’t quite know the best way to accomplish it.  I’ve maintained bullish and bearish watch lists for years, but they were always separated and it was tedious to add and remove stocks to the respective list.

If you’re anything like me, “tedious” diminishes the likelihood of that getting done regularly, because let’s face it - we’re all pressed for time these days.

Well, thanks to the folks at Worden who made this possible, StockFinder’s Flag Column feature provided the perfect solution.  I set up multiple flag columns tied to new watch lists, and I’ve been absolutely thrilled at what it’s done for me.

With ease, I can now add and subtract stocks from various watch lists with a quick double-click, which means there’s virtually no time involved, and more importantly, I am staying organized.

When the market moves now, I have a go-to list of names for the appropriate scenario that I can immediately turn my attention to.  It’s made a HUGE difference in my decision-making, and it didn’t require that I turn into a super-organized person (that probably wasn’t going to happen!).

Show & Tell

Instead of writing a 2000 word essay on how to do this, I’ve created a quick tutorial to show you how to build a layout exactly like I use. I posted this same clip over on the Trading Videos site and perhaps you’ve seen it there, but in case you didn’t, I wanted to put it here on the blog.

Let me highly suggest viewing the HD version and going full-screen. You’ll want to see the detail.

Oh and if you aren’t already using this software, you can give it a try for 30 days free.  I use it every day and can’t imagine trading without it, so I can’t endorse it highly enough.

Here’s the link to download the 30 day trial - I’m guessing you’ll keep it like I did!

Thanks for stopping by and I’ll see you here soon with more.  Until then…

Trade Like a Bandit!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

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Many of you have mentioned though that you were unable to attend for various reasons, so I wanted to be sure to let you know that the archived recording is now available.

Here is the link to the recorded webinar.
(Right-click the link, ‘Save Link or Target As’ to desktop)

Even viewing this after the fact should still offer some insights on the kinds of setups you can locate with a good charting program, as well as what to watch for when seeking out plays.

Stated otherwise, some of the stocks we looked at during the webinar have already moved, but you’ll find them to be good examples as you continue to hone your charting skills.

Enjoy the show (it runs an hour) and see you back here soon with more!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

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Chart Reading with TheStockBandit

I’m excited to run through a number of interesting chart setups, from both the bullish and bearish sides, in order to teach you some concepts and of course put some quality plays on your radar.

The webinar is scheduled to run 45 minutes, with 15 of those minutes set aside at the end for Q&A and a look at your favorite charts.

Visit this link for registration to the 8pm ET webinar:

Chart Reading with TheStockBandit

See you tonight!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

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Chart Reading with TheStockBandit

It’s scheduled to be a 45 minute webinar and for the first 30 minutes I’m going to be working through quite a few stocks of interest, pointing out to you what I’m seeing in the charts for both bullish and bearish candidates.

The final 15 minutes is going to be Q&A time where you might want to bring forth your favorite stock and we can take a look at those too.

I certainly do not have all the answers, but it’s going to be a chance for me to convey what I’m seeing out there and hopefully not only teach you a few things, but also put many stocks on your radar which you might find interesting.

Oh, and the best part about it is that this event will be FREE, so be sure to register at this link for details:

Chart Reading with TheStockBandit

Remember, free webinar this Tuesday night, 45 minutes of charting reading with you and me - I can’t wait!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

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It’s a pretty simple process, although certainly not always an easy one.

Steps 2 & 3 are pretty self-explanatory, so let’s explore the first step in the process a little further.  Hopefully you’ll gain some insights or gather some resources for ways to increase your learning and progress as a trader.

A Common Question

Rather frequently, I’m asked by traders how to build their trading knowledge.  Many are familiar on some level with various aspects of trading, but feel there are still some missing links before they get to Step 2 (practicing).

Here’s an example of one trader’s inquiry:

I have read several books that you have recommended, have gone to several seminars ( some good, some a way to spend 10k) have gone to local investor group meetings etc…..I guess my question is, when did you feel as a trader that you were getting some quality trading education?

My response is usually along these lines:

Every one of us should be in continual-learning mode. I have been at it for a decade now and still am learning lessons…some are new, others are “refresher courses.” All kidding aside though, I truly think the market evolves over time and it naturally requires that we adapt to it - hence the continual learning.

Looking Outward

Quality trading education comes in many forms. It can come from interacting with other traders (in places like Twitter).  Reading good books and visualizing ways to implement the lessons into your own trading is an excellent way to grow.

Taking a stock trading course for some training, or watching trading videos or even attending a seminar here or there definitely will speed up the process.  And of course there is no substitute for experience, so our daily trading activities certainly contribute a lot to our learning as traders.

Those are the external ways to learn, all of which are valid and I highly recommend them.  But don’t neglect the internal ways to learn.

Looking Inward

I’ve always felt that if I’m objective about my own trading strengths and weaknesses, then I know exactly which parts of my trading need improvement. If you are able to determine that, congratulations and you are on your way to finding what you’re missing.

Many traders won’t be honest enough with themselves to see what they need to “fix” or adjust, so they keep on searching for something. Some of us need discipline on cutting losses, some need help holding onto good trades longer (ME!), some need to find a method for locating trade ideas, etc. The list of potential missing links is long, but you only need find 1 or 2 to see a huge difference in your results.

Evaluating it All

Once you are aware of what you need to work on, you can evaluate every piece of info (other traders, seminars, books, etc.) and know quickly if it addresses your specific need.

So if you get some piece of info which helps you to accomplish your goal of improvement in that key area, then you’re getting quality trading education.

Maybe it’s expensive, maybe it’s free, but the deciding factor is whether it’s useful.

I do my best to offer quality free education here on the blog and the trading videos site, but the spectrum of traders here is wide when it comes to experience level.  Some have been at it for a long time, while others are seeking more basic information as they build their trading plans from the ground up.

In the premium nightly newsletter over at TheStockBandit.com, the education provided there fits a narrower audience of traders who want a few trade setups to evaluate and some understanding behind those plays.  They’re still learning, but on a more experienced level.

Whatever route you choose to build your trading knowledge, be certain that you’re comparing the info to your own situation and constantly figuring out how it applies to you.  That will bring more value whether you’re getting free or premium info.

And of course, let me encourage you to keep learning regardless of your experience level.  There’s always room to improve.

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

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But in order to recognize and appreciate the good times, one must also go through some periods of poor performance.  You have to struggle, and fight through the pain.  Expensive lessons get learned, and thank goodness, they can stay with you for a while.

That’s what I’m here to tell you about in this post.

I want to show you some lessons I learned from the biggest trading loss I ever took, and hopefully you’ll benefit from my mistakes.  After all, standing on someone else’s shoulders is the best way to look forward.

Setting the Scene

With summertime having arrived in 2004, the usual conditions were present.  That means lighter trading volume - and whenever that’s the case, I tend to prefer short selling over buying.  (I view volume as the fuel needed to propel a stock higher, so when it’s present, I realize bidders can simply disappear and the stock can slide without needing high activity.)

Having noticed a deep correction in NVTL which shaved off about 1/2 its value in just a few weeks, I had the stock on the radar and was waiting for a good setup.  No harm so far.

It had begun a lazy, light-volume bounce off its correction low, which of course left me skeptical.  I watched for the pace of the bounce to slow, and once it did, I started a position.  That was on June 1 as it attemped to roll over slightly, but it was merely an attempt.

The following day, NVTL made a new recovery high, but I stayed in the position.  Mistake #1. As soon as the bounce resumed, that was grounds for dismissal, but I stuck around in a stubborn fashion.  A week later, NVTL was again on the move, and I found my P&L turning deeper red by the day.

I was wrong, and it hurt.  So I did what any trader in the midst of breaking trading rules would do - I added to my position.  Mistake #2. Now I’m in a bad trade and I have too much of it.  Why?  Because I needed to be right.  Mistake #3.

StockFinder Chart courtesy of Worden

Long story short, after adding a couple of times on the way up to improve my basis, I ultimately drew a line in the sand which was crossed 3 weeks after my entry.  I blew out of the trade… stunned, bruised, and yet relieved.

Ultimately NVTL corrected, but I would have had to hold the position for another month and endure another 10% against me before that happened.  Even then, I only would have been able to exit at breakeven.

It was a nasty loss, and it angered me to have allowed it.  Now 5 years later, I still shake my head at the series of mistakes I made, but it’s a great reminder to me of what can happen when I allow myself to break my rules.

Reminders & Takeaways

• “Paper” losses are very real. Many try to fool themselves into thinking that because a gain or loss hasn’t been realized, that it should be viewed differently.  Wrong.  If you’re underwater in a position, you’re losing whether it’s a closed or open position.
• Adding to losing trades is a recipe for pain. If you’re already in the hole and you’re already in the size of position you originally intended to be in, you stand to dig a deeper hole and cloud your judgment even more.  Don’t add to a losing position when it’s a hail-mary effort at escaping a bad trade.
• Accepting a big loss can bring about some needed relief. For one, you’re ending the loss - it can get no worse.  That’s a big reduction of stress and distractions from your other trading efforts, which is a huge benefit.  You’re also accepting that you were wrong, and creating some closure which mentally helps you move on.  There’s no substitute for a clear head when trading, so take it.  Further, there are few things worse than logging into your trading platform and staring at a giant loser day after day.
• Being early = being wrong. This trade ultimately moved back in the direction I thought it would, but not until it had far exceeded my “uncle” point.  Just goes to show that the market can continue moving against you for longer than you can handle it sometimes, so it’s never worth arguing with.

If I could get away with only talking about my great trades here, it might be more enjoyable for me, but you’d take less away from it as a reader.

And the reality is that I lose on plenty of trades.  But there is much to be gleaned from glancing in that rearview mirror, both for me and for you.  That’s how we get better!

Sometimes it comes with a grin and sometimes with a grimace, but it always offers valuable lessons to gain from.  I hope you’re willing to do the same with your own trades.

Are you watching the Trading Videos over at TheStockBandit.TV?

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

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That’s the million-dollar question right now for many, so why don’t we examine a few clues to watch for just in case.  After all, there could be some hints provided by the market before the heavy selling hits - that is, if it’s coming.

Here are 3 technical considerations I’m going to be on the lookout for…

1. Weak closes. These tend to signal that some distribution is taking place. We’re all familiar with the phrase “amateurs open the market and pro’s close it,” but I think there really is something to the way in which the market closes. If it’s limping across the finish line with any regularity, it’s usually a sign of at least some short-term fatigue and therefore ripe for some selling.
2. Watch key support and resistance levels. If key resistance is turning the averages away or if support levels are breaking, that’s ample proof of some underlying selling. (I highlight these weekly in the Market View videos over at TheStockBandit.TV.)
3. Watch for potential lower highs and/or lower lows to be created. While these may take some time to actually confirm, keeping tabs on stalling rallies and areas where bounces look to be failing is a telltale sign that the buyers aren’t in charge.

There are probably several more, but those are the ways I tend to gauge the underlying market strength and weakness. Some traders prefer to watch indicators or sentiment readings, but monitoring the price action and the character of market moves tends to provide enough clues for me.

One other thought… I do flip through several hundred individual stock charts nightly, and that also helps me gauge whether more stocks are acting strong, weak, or are just lethargic. It also helps me determine when to curb my buying.  So if you don’t currently use a charting program that enables you to keep watch lists, make notes, and draw trend lines, then get one!

And you know, even if this market does end up correcting a bit, what would be so bad about that?

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

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And although a 3-day losing streak is far from the worst thing this market could see, it begs the question of whether or not it’s the beginning of, um… a change of character.

A short-term turnaround.

Ok, a reversal, to put it bluntly.

After all, a pullback is going to happen eventually which lasts for a few weeks - not just a few days, and now might be just as good a time as any for that to happen.

No Crystal Ball

Now, I’m not one to make big bold predictions, but some of you might recall that on the day of the low in March - yes, 9 weeks ago - I showed you right here the “technical threat of a short-term reversal.” I wasn’t going out on a limb, just calling it as I saw it.

It turned out pretty well.

So here I am again, simply pointing out what I see.

And if this does prove to be the early portion of the first meaningful pullback we’ve seen since early March, it’s important to first recognize that it would be a healthy event.  The strongest markets do have pullbacks along the way, and that actually can help to perpetuate a trend.

Think of it like a rest - nobody can run nonstop forever, and the market is the same way.  Some time on the bench can be a good thing.

Winds of Short-Term Change

This question of whether conditions are shifting or not is at the forefront of the discussion right now.  Most individual stocks will take their cues from “the market,” which is developing a bit of a rolled-over appearance on the daily charts here, I might add.  Stated otherwise, it might play out to be more than merely a 3-day dip, with a pretty big if.  (See the caption on the chart below.)

StockFinder Chart courtesy of Worden

3 Positives of a Pullback

And so it may very well be that a decent correction is finally starting here, which if it does, could serve to do a number of things - all of which are good.  Assuming we don’t go straight back to the March low, that is.  Here they are:

1. The widespread overbought conditions we’ve seen for the past several weeks can finally go away. That means when a bullish setup appears, it’s less likely to need a “stay away” sign in front of it for those of us who prefer to manage our risk accordingly.

2. Stocks should (once a good pullback is completed) be able to set up some new bases, patterns, and support zones for trading. While this might take more than just a few days, it’s ultimately great news - especially if your preferred timeframe is swing trading.  The stocks which have produced nothing but steady climbs without rest can finally pull back and establish some new support - like a higher low.  Combined with the higher highs we’ve already seen in recent weeks, that would keep the uptrend intact.

3. A meaningful pullback is going to help separate the men from the boys. During this run from the March lows, few stocks have failed to participate.  It’s almost like everybody’s doing it.  It seems virtually everything has joined in the rally, making it difficult to determine which stocks are merely being squeezed higher and which ones are developing into true, lasting leaders.  Separating the also-rans from real leadership should help to narrow our focus as traders, and give us higher quality plays on both sides of the tape.  That’s something we all stand to benefit from, whether bull or bear.

So in closing, let me just say I’m no perma-bear.  But don’t hate me if I’m rooting for a little more of a correction here.  It sure doesn’t have to last forever, and I think it’ll lead to much better things for those of us trading this market.

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

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If you were told that a diet pill would have you in that beach body by June, you’d probably be skeptical.  But given enough evidence, you just might try it.  Tentatively.

We’re no different in our trading.  Those of us who trade daily, who observe the price action and who are truly students of the market will on a regular basis run across something of interest.  Maybe it’s a routine in the overall market (such as early strength or late-day weakness) that seems to provide an opportunity.  Or perhaps it’s a setup that’s been producing some phenomenal moves.

Whatever ‘it’ happens to be, the odds are that you’re initially intrigued by it but yet reluctant to really go for it and trust it.

Why that is, I don’t know.  Human nature I suppose.  But regardless, when we do identify that anomoly which could quickly prove profitable for us as traders, we have to find out if it’s legit.

Enter: the test.

Let’s suppose your standard trade size is, oh, 1000 shares.  Or maybe it’s $20,000 per position.  However you define your standard position size, throw that out the window when it comes to testing a brand new trade idea.

Because the first time you do it, even the 5th time you do it, it’s not about making money.  It’s all about gaining some insights into how that idea plays out.  It’s about getting a feel for how it acts.  It’s about building a little confidence in that setup before you go for it for realz.

So cut that size down by, oh…90%.  I’m saying take 10% of your standard size and give that trade a shot.

Trade it so small that you won’t feel it - win or lose.  Because remember, the point is to start getting a feel for how it might go.  Removing the risk we all feel which is tied to performance is crucial in the testing phase, so that’s a necessity.  Trade tiny and see what happens.

As you start to gather a little data and see some ways you might improve on entry, exit, or timing, then you’re getting closer.  And again, you most likely haven’t made or lost much at all during this test process - because that isn’t the point.  Just feel it out, evaluate the info which comes back to you, and adjust.

Then, once you’ve got it down and have developed a more sound methodology for putting on and taking off that trade, only then is it time to step up the size.  And then have at it, because that’s the point at which it’s about making money.

Anything prior to that is merely a test.

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

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