As part of its recently launched "Stockpickr Interview Series," the Stocktickr.com blog has posted its inaugural interview with well-known stock trader Jeffrey White, a.k.a. The Stock Bandit. On his Stock Bandit blog, White has written recently about why it's risky to invest in low volume stocks
and how the twin emotions of fear and greed can impact trading
strategy. In the interview, The Stock Bandit shares some ideas about
his approach to trading and offers some practical advice for the
beginning
trader.
After summarizing his basic trading strategy and things to watch out
for in the marketplace, Jeff emphasizes the importance of trading real
money in real accounts for beginning traders, rather than just setting up a fake account using a
"demo" mode to get a feel for the market. Another key point for beginning traders, says Jeff, is being able to tap into a supportive community of fellow traders:
“The other thing I’d encourage a beginning trader to do is to get some
help. It’s important to have some kind of a support system in place
where you’re learning, getting encouragement, and letting others notice
your progress. I learned to trade in that kind of environment, so now I
try to run my service this way, offering email support to members.
Sometimes other traders are able to point out our blind spots, which is
a huge help. Plus, you can learn a lot from other traders and their
mistakes as well as their successes. Lots of beginners want to know how
to make money right this second, but there are also powerful lessons to
be learned in knowing what ISN’T working right now. To me that
information is every bit as valuable.”
The Stock Bandit also offers some insights into trading options:
“I will occasionally trade options, but only on the most liquid issues.
Probably 75% of my option trades are in the ETF’s, simply because I
feel like the gap risk is basically non-existent, and they move slow
enough that I’d be tying up a lot of capital in them to try to catch a
good move in the QQQQ’s or SPY. So in those cases, I’ll trade options.
If there’s a wild stock that I still have a strong opinion on but the
stock’s volatility makes me think it will shake me out of a position in
the stock, I’ll trade the options instead. That way I’m defining my
risk and I find it’s easier to stick with the trade than if I owned the
stock (like GOOG). I don’t do complicated option strategies, just
directional plays like buying calls or puts, and occasionally I’ll
short puts in ETF’s when I think the premium is there to bleed off in
the final 2 or 3 weeks prior to expiration. Most of the time, I find
that I’d rather trade the individual stock than the option.”
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