Month in Review (Feb/Mar 2014)

Whether you’re a member here at the site or not, I want to be in a better habit of looking in the rearview mirror together at some of the trades which have been shared of late with Bandit members.  There are always lessons to be learned when you see which kinds of plays have worked best, which kinds of trades failed, and which were the better movers you may have missed out on.

Because I recently covered the swing performance for this same period, I wanted to go back and review the charts which yielded some of the better single-day moves for me.  I prefer to trade on both the day and swing timeframe, and I view these single-day setups as the cashflow trades to get me through the week, particularly when swing setups are less plentiful.

I’m not a hyper-scalper darting in and out of trades, because these days you can’t compete on speed.  However, these setups look good on the daily charts to me but for a variety of reasons I don’t take them for swings.  Being able to grab these for anywhere from a few minutes to a few hours offers plenty of opportunity to capture as they cross key levels or break out of bases.

I always set these up & share them the night before as single-day plays where I’m only looking to participate in the initial move out of the patterns.  These plays are set up when I don’t trust the chart or the market for a lasting move, or when the bases are too loose to justify a much wider swing stop.

Understand that although the charts below highlight winners, I do take plenty of losing trades.  Those of you who read my posts know the importance I place on losing properly, as losing trades are part of trading.  As per my day trading strategy though, I limit losses on single-day trades to 1% from entry, so the losing trades are extremely small and therefore it’s easy to cover multiple losses with a single decent trade.  My hope in sharing these charts is to share which kinds of plays have generated the best moves for me of late.

Also, the list below does not include all of the winning trades, as there were many others in the 1-3% range which added up nicely.  But this is a snapshot of the kinds of plays I take for the single-day timeframe.

I like to take these for cash-flow trades with a 1% initial stop from entry and aim to ride whatever momentum is present for the day by monitoring the intraday chart.

February:

DDD-feb

Why I Use TC2000

 

TSL-feb

 

MU-feb

 

NQ-feb

 

SHLD-feb

 

MNST-feb

 

YRCW-feb

List: here is a list of many of the single-day movers from Feb. 2014:

feb-list-2014


 

March:

CTSH-mar2

Why I Use TC2000

 

NUS-mar

 

RAX-mar

 

YPF-mar

 

CSIQ-mar

 

PETM-mar

 

AAL-mar

 

FANG-mar

List: here is a list of many of the single-day movers from Mar. 2014:

mar-list-2014

The best plays lately have been trend line breaks after pullbacks, followed by lateral level breaks and compression patterns.

You could be making more from your trading.  If these are the kinds of plays you like to take, now you know where to find them.

I dig out the best setups in the market each day, structure my trading plan for the following session, then share those trades with members via the nightly report.  They include swing trades and single-day trades like those above.  Not only am I explaining where I’m looking to trade them, but I also explain why I’m looking to trade them.

If you’re not a member, why not give it a try today?

Trade Like a Bandit!

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

Reading the Intraday Chart

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

Chart 1:

chart1-04162014

Chart 2:

chart2-04162014

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

Turbulent – Blueprint 4-15-2014

Good evening StockBandits!

Last night I discussed the NAZ in particular as suspect when it came to more upside until we got at test of 3966.  We had a light-volume bounce yesterday, and it just appeared as though we’d have to get down to test and validate the big level which had served as both resistance and support going back to last October.  Today we got that test [Read more...]

Percentage of Portfolio Per Trade?

A trader named Thomas recently asked the following:

Jeff, What percentage of your trading portfolio do you put on one trade?

howidecidepercentageThis was my reply:

Rather than designate x% of my funds (ex: 10% of account) to each trade or a set amount of money per trade (ex: $20,000 per stock), I take a different approach.  I will typically designate an amount that I’m willing to lose in any given trade should it happen to fail.

The difference is that I’m weighing my actual risk, not the capital required to put on a position.

That amount for me is usually in the neighborhood of .5% (1/2 of 1%) of my account.  For a round-number example, on a $100,000 account that would equate to a max loss in any trade of $500 (.5%).  That amount will change periodically based on a few factors, including:

  • My confidence in the setup.  If the play looks exceptional, the risk/reward is better than usual, and the overall market conditions are particularly conducive for the play, I may be a bit more aggressive than if it were simply a clean pattern which looks to have some potential.
  • The way I’ve been trading.  If I’ve been trading well, then I need to scale up my size and take advantage of that so that I’m pressing only when I’m ahead.  I want to be more aggressive when I’m trading well and back off when I’m not.  If I’ve been off my game, then I’ll put less on the line until I start to find my groove again. Therefore, my recent performance always has a direct influence on my size.
  • The personality of the stock.  A wild stock with big fluctuations is going to get less of my money than one that moves slower, which is directly correlated to the width of the stop and therefore the size of the position.  How a stock behaves should always play a role in ‘how much.’
  • How many other positions I’m expecting to have.  If there are quite a few plays surfacing, I want to be getting positioned in several of them.  Often that will mean I’m splitting funds a little more thinly across the larger number of plays.  But if there isn’t much happening and I can devote more of my attention to just a couple of positions, then I just stick with full-sized positions based on the % of risk I’m currently accepting.

So at times I’ll have more on the line than at others, but usually it’s between .5% and 1% of my account at risk of loss in any given trade.

Trade Like a Bandit!

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

Review of the Indexes 4-13-2014

Snapback attempts failed spectacularly last week as the Thursday/Friday selling pressure easily erased the upside of Tuesday/Wednesday.  Lower highs have been established, and the bulls are behaving as if they have no intention of providing support.  Momentum has shifted and it’s good to have cash on hand as the correction continues.

As we head into a new week of trading, it’s time once again to take a look at the indexes and the key levels they’re dealing with. This will impact how individual names move, so it’s where every new trading week should begin.

NAZ – The NAZ now has 3 confirmed lower highs since topping in March, and now it’s coming into a major level of 3966.  We’ve seen a couple of triple-digit declines here though, which is to say it’s an emotional tape and not necessarily one which will show respect for key levels.  The outlier factor is that it’s short-term stretched on the downside as it comes into this key area, which may allow for a bounce.

NAZ-4-13-2014

Why I Use TC2000

 

SP500 – The S&P decisively broke 1850 last week and then 1823 by Friday’s close.  The failed bounce mid-week created a lower high and now prices are hitting the dirt quickly as more retracement of the February lift unfolds.

SP500-4-13-2014

Why I Use TC2000

 

RUT – The RUT is hitting the dirt hard here and also has 3 confirmed lower highs in place.  Next potential area of support is 1079, and at the pace it’s moving, that’s not too far away.

RUT-4-13-2014

Why I Use TC2000

 

DJIA – The DJIA failed its breakout attempt, fell back into the range, bounced to a lower high, and now is trying to break down from the range.  If it’s successful, there’s no nearby support zone to watch and we could see the selling pressure intensify quickly.

DJIA-4-13-2014

Why I Use TC2000

 

Trade Like a Bandit!

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

How Many Trading Positions is Too Many?

Plans, if drawn up correctly, can give a man direction.
Poorly-formed plans, however, can lead to ruin.

toomanyposRecently I heard from a reader who had been doing some calculating.  That potentially dangerous activity had led him to set up a plan for earning his income through trading.  No problem there, but he wanted to invest a couple hundred thousand dollars into as many as 80 active positions with a holding time of 2-5 days each.  He was having trouble getting up to that many positions.

How many positions is too many?

To start with, it would become a full-time job continually managing 80 positions.  But aside from the time commitment, let’s examine the logic here and determine if there’s any merit to this approach.  Here’s a very short list of the first items that come to mind which I see as problematic:

  • Diluted position size.  Assuming $200k on full margin ($400k buying power), max size per trade is $5,000. Non-margin would be $2,500 per position.
  • High rate of churn means tons of time spent entering/closing positions + considerable operating costs via commissions.
  • Index correlation – any portfolio beyond around 20 positions will closely resemble an ETF

Attempting to run that many positions is essentially a small fund.  Although $200,000 is no small sum, it would certainly be so in the fund world.  Anytime your portfolio starts to resemble the broad market, just go with SPY or something reflective of whatever it is you’re holding (ex: QQQ for heavy tech exposure).  There’s no benefit to trying to spin all those plates of staying on top of earnings announcements and darting in and out when all you’re doing is trying to run a miniature fund.  Abort that plan and simplify with an ETF if you want that much diversification.

My personal style is such that I take fewer trades, but that has some big advantages.  It reduces churn on my account, which not only frees me up to seek out other plays or tend to other matters, but it also saves me a ton in transaction costs.  Additionally, limiting my activity exposes me only to the best setups, so that I focus on the prime opportunities at any given point in time.  I can maintain tight stops, but because my positions are relatively larger, I still benefit from them nicely when they make good moves.

If you’re looking to be more active in the markets, fewer trading positions will likely serve you better.  Each might entail a bit more risk, but if you’re active, then you’re keeping close tabs on them anyway and maintaining resting orders.  Managing them will be nowhere as stressful and hectic as attempting to manage several dozen at a time on an account that size.  Big funds might do that, but they’re running so much money that they essentially have to.  You and I are more nimble than they are, and we should continually embrace that advantage.  You don’t have to be hyper-active to do well trading.

One last note on number of positions.  Keep a good handle on what your risk tolerance is on a trade-by-trade basis, AND on a portfolio basis.  If at any time you have your hands too full (whether it’s an inability to manage them all or an inability to stomach the risk), it’s too many positions.

Why behave like a tanker when you’re built like a speed boat?

Trade Like a Bandit!

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