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MOMO TRADERS

Tips, Tricks, and Strategies from Ten Top Traders

Brady Dahl

with

Nathan Michaud

miltona

Miltona Publishing

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Some names in tins book have been chanced to protect the privacy of the individuals involved.

Cover design: Josh Andrews

Copyright © 2015 by Brady Dahl. All rights reserved.

Published by Miltona Publishing LLC.

No part of this publication may be reproduced, distributed, stored in a retrieval system, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the ease of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.

For permission requests, contact the publisher at

www.MiltonaPublishing.com.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate.

Neither the publisher nor the author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Orders by U.S. trade bookstores and wholesalers, please visit www.MiltonaPublishing.com. Special discounts are available on quantity purchases by corporations, associations, and others.

Printed in the United States of America Also available as e-book at www.MomoTraders.com

ISBN 978-0-692-51080-3

First Edition

10987654321

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For Sonny, Sawyer, and Marlo May you always dance like nobody's watching. .

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Contents

Foreword...........................................................................................ix

Preface............................................................................................xiii

Acknowledgments............................................................................xv

Note From Nate.............................................................................xvii

The Storyteller....................................................................................3

The Gambler....................................................................................39

The Youngster..................................................................................63

The Scanner......................................................................................89

The Rock........................................................................................115

The Tape Reader............................................................................147

The Student....................................................................................171

The Steadfast..................................................................................199

The Resilient..................................................................................227

The Swing Trader...........................................................................263

Afterword.......................................................................................285

About the Author............................................................................287

Traders4ACause.............................................................................289

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Foreword

Brett N. Steenbarger, Ph.D.

It’s an honor to be able to write the foreword for one of the most practical and real trading books I’ve encountered in a long time. In these pages, you’ll read about real people and their all-too-real trading: the blow-ups, the big wins, and everything in between. Most of all, you’ll gain a window on some very dedicated and successful traders that I’ve had the pleasure to meet thanks to Traders4ACause. In a world full of promotions and self-hype, it’s refreshing to hear real traders talk candidly about their paths to success.

As a psychologist who works with traders on their performance, I’ve had the privilege of working full time with day traders at Kingstree Trading in Chicago and then with portfolio managers at Tudor Investment Corp. in Greenwich, Connecticut. Along the way, I’ve gained experience in both prop shops and hedge funds, seeing the many ways in which money is made and lost.

One thing that experience has taught me is that trading is different from portfolio management. The trader who is scalping individual names from a Level II display plays a different game from the manager who holds many positions for weeks and balances those exposures in a portfolio. For the trader, the name of the game is pattern recognition and the ability to see situations develop in real time and then act ix

decisively. It’s all fast thinking and quick information processing the portfolio manager, it’s much more about slow, deep thinking, macroeconomic analysis, and detailed portfolio construction.

These are very different skill sets, and the market participant who shines at one is not necessarily going to succeed at the other. Indeed, I would argue that many problems for traders occur when they get away from their cognitive strengths. When the fast thinker slows down and overanalyzes, it usually leads to trouble. When the deeper thinker starts staring at screens and reacting to price movement, bad things happen.

In the pages that follow, you’ll meet a number of traders who epitomize fast thinking and rapid information processing. You’ll get a sense for both the personality traits and the cognitive skills that contribute to successful day trading.

For me, five themes cut across the interviews and are hugely valuable takeaways:

1) The importance of early blowups — An unusually high proportion of the interviewees started their careers by going through difficult periods of loss. Typically they bet big and lost. Their success came, in no small measure, from learning from those losses and becoming more disciplined and focused as traders.

2) The importance of risk-taking — The traders interviewed are willing to take significant risk when the factors that define a good trade line up. They’ve learned to not bet the farm on any single opportunity, but they aren’t afraid to aggressively pursue opportunity. This risk-taking quality means that they have to have the mental and emotional fortitude to weather P&L volatility.

3) The importance of being well-capitalized — A number of the traders pointed out that you need to start with money to make meaningful money. One reason for this is that, without some financial cushion, it is difficult to truly trade aggressively when the edge is present.

4) The importance of independent thinking — A common theme among the interviewees is the importance of trading your ideas and not those borrowed from others. With Twitter and chat rooms going non-stop, it’s easy to get caught up chasing other people’s trades. The successful traders can take meaningful risk, because they’re able to own their trades.

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5) The importance of intrinsic motivation — To a person, the traders interviewed don't trade for a job, and they don’t even trade as a career. Tor them, trading is a calling — a fundamental part of who they are. It is precisely because of this intrinsic motivation that they are able to sit in front of screens for hours a day, day in and day out, and internalize trading patterns.

This last point is extremely important. There’s a myth in trading psychology that success is a function of finding your edge and trading it with discipline. The reality of both trading and portfolio management is that markets are ever-changing. What worked in 2000 is not what is working in 2015; OTC microcaps may make great trading vehicles during one period and then die out in another. The truly successful trader is the adaptive trader. Yes, that means trading your edge with conviction and discipline, but it also means looking at markets through fresh eyes and finding new sources of edge.

So allow me to offer a somewhat novel interpretation of trader success: The traders you’re going to read about find their ultimate edge in perceptual creativity. Their cardinal strength is the ability to see new tilings in old data. Yes, discipline is important. Yes, money management is essential. Yes, risk-taking is necessary. At the end of the day, however, what sustains trading over the long haul is the capacity to see what the herd does not. That perceptual creativity is the ultimate source of edge — and what turns a trading gig into a lifelong source of income and fulfillment.

Day trading may or may not be your path. After reading these interviews, you’ll probably find yourself either inspired or appalled. It’s all good—you’ll only find your own success by immersing yourself in a field that speaks to your greatest strengths. At the very least, the following pages will open your eyes to a unique niche in the world of creativity: one that, for the right people, can be rewarding in more ways than one.

I wish you the best of luck in your performance journey!

Brett

@steenbab

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Preface

So why the book? I asked myself that same question after spending the better part of a year arranging, transcribing, and editing over 30 hours of interviews. Why? Why! But there’s a good reason —

I’m a day trader. I have been more or less since 2008. I’ve had good years and I’ve had bad. I’ve read dozens of books and hundreds of articles about the biggest, most famous traders in the world. Most of them use some kind of a system and trade commodities or futures.

They hold trades for months or years. They have dozens of assistants.

They’re on TV regularly. None of it was relatable to my situation.

I wanted to know more about traders who were successful at what I did — sitting in a home office, alone in front of the monitors, trying to eke out a living trading stocks. I wanted to know how the elite day traders I knew from social media got to be so successful. Fortunately for me, the 10 interviewed here are such charitable people, after learning a portion of the proceeds would go to Traders4ACause, they readily agreed to my prodding.

Some of them have been successful for more than a decade, others for only a few years, but they have all somehow accomplished what the rest of us strive to do each day — trade for a living. They wake xiii

up with a desire to seek out momentum — stocks about to momentum, stocks currently with momentum, or stocks where momentum has recently died. These traders know how to take advantage of, and profit handsomely from, “momo” in a myriad of ways. So in an effort to find out how they did it, I pried into as many aspects of their trading as they would allow before being respectfully told to get lost.

I asked how they were raised, why they got interested in the market, how they got started trading, what strategies they use, which of their setups are the most profitable, how they enter trades, how they exit, how they protect their capital and minimize risk, how they prepare, how they approach each open, and how they plan to stay so successful. I even wanted the mundane details of what their trade desks look like, what tools they use, which accounts and which platforms, because like a carpenter wouldn’t show up without a hammer, you shouldn’t trade without the right tools.

We sometimes fall into the fallacy that people who are great at what they do somehow had a leg up or were given a head start, but most of the time that’s just untrue. Each trader in this book has had a journey that is different yet completely normal enough to be replicated by you. Believe it or not, their origins and subsequent successes are within your realm of attainability.

So every time you nod your head in agreement, every time you come to a personal realization, every time you learn something new from these great traders, dog-ear the page, highlight the words, and scribble in the margins. It’s time to deface the hell out of this book in your pursuit of becoming a better trader…

Brady Dahl

@MiltonaTrades

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Acknowledgments

Thank you — First, to the ten charitable traders featured in these pages, for answering all my questions openly, honestly, and without expectation.

To Sarah Michaud, for pouring over the pages.

To Brett Steenbarger, for writing the foreword and providing insight into the whole process.

To my beautiful wife, Charlynn, for somehow managing to remain sane and actually thrive while raising three kids alongside an obsessive writer/trader.

To Nathan Michaud, without whom this book wouldn’t have been possible, for his support, collaboration, generosity (Psst! He’s giving all of his proceeds from this book to charity!), and friendship, which is easily the best return I’ve gotten in my eight years of trading.

And finally to you, the reader, for buying our book and helping support Traders4ACause!

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Note From Nate

Let’s start with the facts: I probably have the worst form of ADHD known to man when it comes to reading, especially geography and history. It’s not that I don’t care or want to know, it’s just that after a few pages I get bored — fast. There’s absolutely no comprehension going on and I end up giving up (unless I need to cram for something, of course).

I find this to be true for just about everything, unless it has to do with cars or stocks! Put an interesting book about a Ferrari in front of me and I can regurgitate the exact horsepower, how quickly it accelerates from 0 to 60 MPH, and a whole lot more a week after I’ve read it. Different topics store differently for me.

Books about trading? I had always wondered what trader in their right mind would write a book? Every book I’d ever seen was about multi-hundred millionaires or billionaires—which was fascinating in and of itself—but let’s be honest, how many of us are going to manage a $500 million dollar fund? Or even want to for that matter?

But at our inaugural Traders4ACause event in 2014, we had psychologist Brett Steenbarger present because Gregg Sciabica (who you’ll meet in the coming pages) had read his book and couldn't recommend it highly enough. Although I had my doubts, we all agreed xvii

to have Brett speak — why not? Well I was absolutely blown away —

not only by the speech Brett gave but also, most importantly, by his ability to relate to each and every trading mistake I’ve ever made! I could not put his book down. Chapter after chapter, I realized he was right — “Why did I sell there?” or “Why did I cover there when the trade was working?"

I started to realize just how much we can learn from others. As hill time traders, we NEVER stop learning. We must ALWAYS adapt.

When I first approached Brady with the idea for this book, we discussed different trading books we had read. I said, they’re great, but how many normal guys who pick up this book are going to be trading hundreds of millions of dollars? What if we put something together with guys who came from nothing and made it work? What was it that helped them succeed? How many times did they fail? How did they get back on their feet?

Brady has done a wonderful job speaking to each and every one of these inspiring traders and putting this book together. I’m so incredibly excited to launch Momo Traders, the first of (hopefully) many books that will instruct and inspire traders of every skill level. And the best part? Yes, my portion of the proceeds goes to chanty!

Enjoy!

Nathan Michaud

@InvestorsLive

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MOMO TRADERS

3 The Storyteller

The Storyteller

“The correct decision to make at any point in time on a trade has nothing to do with my profit or loss.”

Gregg Sciabica (@

l x21) is a Tucson, Arizona trader who has been the #1 trader on profit.ly for several years and has quickly grown to be one of the most well-respected traders on Twitter.

Both his parents worked as computer programmers at Bethlehem Steel in Bethlehem, Pennsylvania and passed that passion for numbers on to their son. As a child, he reverse engineered formulas like the NFL QB passer rating and knew one day he wanted to make a living betting on football games while trading stocks during the off-season.

An extremely thoughtful trader, he considers everything from the psychology of other market participants to the ergonomics of his desk. He believes in taking full advantage of trading opportunities and even traded with cash advances from credit cards during the Internet bubble. His method of compounding profits has served him well, resulting in profits of over $5 million in each of the last two years.

What first got you interested in trading?

Well I was always into numbers, even as a child. I had this naive idea that I could figure out a pattern or some kind of method for picking

4 The Storyteller

the right stocks. In 8th or 9th grade our school ran a 10-week market competition where you started with $100K in paper money. I knew I wasn’t going to win making a 5 percent gain on IBM in l0 weeks. I had to pick low-priced stocks which would make the biggest percentage moves. Well that put me at odds with my teammates, who thought investing in Playboy was the coolest thing in the World. Needless to say we didn’t win with their strategy. I wanted to win, so for the next year’s competition I found two people who didn’t care.

That’s great.

The rules called for a 3-person team, so I found some complacent people who let me do whatever I wanted. And then over the first six weeks everything I did backfired. I was dead last in the regional competition of hundreds of teams. My strategy was backfiring. My account went from $100K to $60K before I found a new pattern with four weeks to go. I started using it, and by the last week I took first place in our school and was within $1K or $2K from winning the whole region. If I had one more week I would have done it.

Your second strategy was a hit...

I learned that my naive idea of finding a pattern and playing it over and over again could really be done, because I had just done it! With hypothetical money, of course. But my interest in trading really comes from this experience. Plus I was always into numbers. And really into football. I would memori2e statistics and spend hours pouring over the numbers doing my own calculations on them.

Like what?

I wanted to know how they calculated the quarterback passer rating, so I reverse engineered it and figured out the formula. Unfortunately these days I could just get it on the Internet, but back then I couldn’t find it anywhere.

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I like how you think it’s unfortunate they give it away for free on the Internet now…

Well, I went through all that work.

But it’s things like that which led you to where you are today...

Yes, you train from a very young age. One of the common themes in self-improvement and performance enhancement books is how society likes to believe that some of the most successful people are prodigies with a magic gift. But when you dig more deeply you find that the most successful people have usually just worked the most. Everyone loves to say Mozart wrote his first symphony at 5 years old, but people don’t realize he was being groomed to be a musician ever since he could hit a piano key. It’s not a genetic gift where somebody sits down one day and realizes they’re amazing.

You’re speaking to the debate over whether or not trading is an innate skill or learned…

Personally, I see the evolution of how the brain develops over time to get good at something. To me there’s a strong connection. Reverse engineering formulas as a kid ties right into trading with figuring out risk/reward ratios and things like that. Although if I had been using that talent in an academic way, instead of for football statistics, I probably could have had a nice career.

Or you could have been a great NFL analyst…

(laughs) Well, maybe. But later on I came back almost full circle to where that passion became relevant to stocks. Around 15 or 16 years old, they asked us what we wanted to be when we grew up and I actually had an answer. I wanted to make a living betting on football games while trading stocks in the off-season.

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Trading was only for the off-season…

(laughs) Well, I was young. There was no online trading at the time I didn’t really know how I would do it. I just knew I wanted to do it.

But in reality you ended up doing a few other things first, including a stint building swing sets, right?

Yes. I’ve always had the entrepreneurial urge. I like to get my hands dirty and make creative things. So when I saw an ad looking for contractors to build high-end swings sets, it wasn’t completely out of character to give it a shot. They teased something like $300 to $500 a day, so I was skeptical, but I thought if I could even make half of that, I’d be happy. I was supposed to be a contractor with a truck, insurance, workman’s comp, and all those things. I was 23 years old, so I just gave them the answers they wanted: Yes, I’m covered. Then I actually went out and became a contractor with legitimate workman’s comp, insurance, and everything.

So how do you go from swing sets to swing trades?

There were several key influences that brought me to remember my earlier dream of trading stocks. It was 1998, during the early stages of the Internet bubble, and another contractor that worked for the swing set company would talk about online trading and making $1K a day if you picked the right stock. I didn’t actually believe it was that easy, but it got me thinking. Day trading was also starting to be talked about in the media quite a bit. There was even an article in my local paper about a day trader making $250K a year. Meanwhile summer had turned to fall and I was looking at some downtime because there aren’t a lot of people building swing sets in the snow. I had been saving a good portion of my income in the bank in order to pay taxes in April so I realized I had a few months to possibly give this stock trading thing a try.

7 The Storyteller

Yes, why not risk your payment to Uncle Sam.

Well, at first it was just an idea. But then it sort of snowballed. I started going to the library, reading the Wall Street Journal, and researching on the Internet, although there was so much less information for trading back then. But I got the bug and soon I was using every spare moment I had to research. At times I was putting in close to 40 hours a week. I didn’t want to place a trade until I knew what I was doing. I wanted to find a pattern again, like I had in school, and trade it for two or three months, pay the taxes in April, and then go back to work. It was late December before I eventually discovered something.

A new pattern?

Essentially it was a variation of a parabolic short. My own version. I also found two other patterns I played back then. One of them was buying these big parabolic charts after they returned to Earth. There was just so much hype back then I could pretty much count the days until they would repeat. I’d be long a stock that looked like it was dead, and then it would just rocket up again out of nowhere one day.

Did you start trading this new pattern as soon as you found it?

I wanted to play it the very next day, but I had to work. Eventually I just told them I needed some time off. I had already opened a trading account, so in early January 1999,1 logged on and it only took a day or two before I spotted the pattern.

How did that first trade go?

It worked. In researching that pattern, I had found approximately 80

instances of it over the course of a year, which was all done by hand, by the way, since I couldn’t just download the data. But it showed that two days after entry the average return was 17 percent per trade, while three days after entry the average return was 21 percent. Give it additional time and the percentage return kind of tapered off, so the

8 The Storyteller

pages from 8 to 21 are missed in original scan

22 The Storyteller

to break it up. When I put on my first position, I start to get a different sense of how it’s trading just because now I'm involved, now I’m a participant in the market. I can see how quickly my order gets executed, how the price reacts to my liquidity being added market, and things like that. I also like to set the last one or two orders at a slightly higher price, just in case. Then, as the stock continues trade and I have confirmation that the setup is working, I might lower those last two orders to increase the odds of a fill or even convert them to a marketable limit order if the price starts to crack. I also feel like it’s difficult to hit a precise price on any stock. So if I think stock will hit a high of $10 and I’m trying to short it, I’ll have a few orders at $9.89, $9.92, $9.95 and so on. That way if it peaks out penny below $10,1 still get filled some shares.

What about exits? You might not set strict targets, but you definitely must have a sense for where you feel these large swing short stocks are more appropriately valued…

A simplified version of the answer is that targets are a function of time and price. It’s not strictly price, nor strictly time. I’m looking to see how far the price goes and how quickly. There are plenty of times I think a stock is such garbage I expect it to drop 50 percent in one day (laughs), but that’s not usually how it works. If I give it three days and it still hasn’t moved as far as I expected, I must adjust my expectations.

Volatility is disappearing, the initial catalyst is getting stale, and now other risks may pop up, like a secondary catalyst that will push it back up, or borrows becoming scarce, or buy-ins. The best way to think about all these different things, like entries, exits, stops, profit targets, etc, is as long as the thesis for the trade remains intact, I want to stay in the trade. As soon as the thesis for the trade starts to deteriorate, I want to get out of the trade. Setting a price where I’m just going to execute a stop order is very arbitrary. It has nothing to do with whether or not the trade is working. If I short a stock expecting it to fade following the catalyst, but it just dips and then resume it’s momentum, I will stop out. But that stop is not based on price, stop is based on the fact that my thesis for the trade is not holding.

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Conditions constantly change and you must change with them…

Yes, exactly. And the same goes for taking profits. If I’m short a stock and expecting an extended fade as people slowly lose interest, but the stock instantly craters instead, my thesis is gone and I’m just going to get out. Maybe it didn’t go as far as I thought, but my thesis is gone because it didn’t do what I expected. It no longer fits the whole setup I had in mind. So I’m not predicting what the stock will do. I think predictions are a big mistake. With nearly infinite outcomes, accurate predictions are next to impossible.

So if you’re not predicting, what are you doing then?

Reacting. As a trader, I find the best state of mind to be in is always one of reacting. So I set up the story, I have my thesis, and then I react to the trade. If it doesn’t do what I expect, I adapt accordingly.

So risk management is really governed by your trade thesis. In other words, you don’t have rules about what percentage of your account you’ll risk, etc…

Yes, I don’t believe in that approach. For the way I trade, it feels too arbitrary. That doesn’t mean it’s not necessary for some traders, especially those with smaller accounts because it might improve their odds of not blowing up, but it does not work for me.

And you let winners run until they no longer hold to your thesis?

Yes. If I had the potential to make $10K in a trade but I had a personal rule where I took profits at $5K, I just left $5K on the table.

It doesn’t make sense to me. Why would I do that?

Again, it’s arbitrary…

Yes, I don’t believe in arbitrary rules. The laws of mathematics, probabilities, maximum potentials have nothing to do with arbitrary rules. Mv theoretical outcome without them is actually much better.

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The best possible decision at any given moment in a trade has nothing to do with how much money I have in it, how much profit I’m currently holding, how much I’m willing to risk, or how much I’m trying to gain. They’re all arbitrary items completely unrelated to the chart itself, the stock itself, and what the price is actually going to do.

How much does the overall market play into your trading?

If I could make a list of, say, 30 potential variables on any given trade, usually only one to maybe five of them ate going to be highly relevant.

Occasionally the overall market is one of those variables. Other times the market is completely irrelevant, zero, doesn’t matter. An extreme example of when the market was relevant is the flash crash in May 2010. When that happened, the overall market was the most important variable in most trades by a huge magnitude. I don’t care what catalyst my stock had, it became almost irrelevant in comparison. Traders must recognize when the market is becoming an influence on their stocks.

What’s your biggest loss?

I had a really good year in 2005 and made over $2 million in profits. It was my best year up to that point. So heading into 2006, I was very motivated. And I’ve always been into different types of self-improvement, trying to find ways to enhance my own performance and achieve greater results. As a self-taught trader it takes a certain level of focus on self, because I don’t have a mentor or boss to hold me accountable. So I have to find ways to bring out improvement from within. I learned one way to elevate my performance is to create goals, so I set a goal for 2006 to make $3 million, about another million per year than the last. It was a conscious effort to trade a little bit more size and be a little bit more aggressive. The profits were decent until April, when along came FMXIQ, a penny stock on the pink sheets that started making a parabolic move. And in 2006, I was still heavily technically based, looking at the chart and playing of the patterns, and FMXIQ was a really attractive setup. I have a personal ranking system for setups. And it’s not highly scientific. It’s actually a pretty simple 1 to 5 rating. There’s no magic formula behind it.

25 The Storyteller

So it’s no quarterback rating…

(laughs) Yes, a little more simple than that. But this trade was a 5 out of 5. A golden setup. When I first started to short into the setup, I was not overly aggressive. But as the stock started to accelerate I got more aggressive and more aggressive, and it kept going. Not to say there weren’t any pullbacks, there were some. I wasn’t looking to just short it and hold it forever. I was going to take a profit and move on. But this is kind of one of those unfortunate rules of trading. . If I ever short a stock, then tell myself I’ll cover into the first pullback, but then miss my exit on that pullback by the narrowest of margins, like by a penny or something ridiculous, it’s a sign I’m about to get screwed. I’ve had it happen enough times to know.

Why do you think that is?

Well there are many times in trading when it seems like the market is out to get you, but it’s just bad luck, coincidence, or what I think is a form of groupthink. I don’t believe it’s actually some market maker or HFT who’s actually looking to screw you. Other traders who are similar to you are looking at the exact same thing. You’re looking at the same chart, the same news, the same information, and you all come across the idea simultaneously. But when everyone has the same idea, that’s when you have the pullback that doesn’t quite get to your order, because it’s crowded. Yes, the market is corrupt. Yes, there are a lot of bad players out there. And yes, sometimes they do screw you, but much less than you think. You’re not even on their radars.

Where did you start shorting FMXIQ?

It came up from $0.25 where it had been in a dead pattern with not much volatility or volume. I started shorting at $1.26 per share. Within days I was adding larger size. Remember, it was a conscious effort in 2006 to increase size in order to step up my game and elevate myself.

By the time it hit $2.50 per share I had 251,500 shares at about a $1.55

average. I kept wiring in money from other accounts to avoid the margin call. I was getting carried away, but then again so is the stock.

26 The Storyteller

The broker I was using to short FMX1Q was a small firm who knew me by name, and the guy who usually helped me knew I had a reputation for calling and getting large locates. Unfortunately he kind of fed into my ego, my weakness, and what should have been avoided when he said, “Well let’s just ask for a million shares.” I should have been more cautious, but he was feeding the mentality I was already in.

Here l am holding a quarter million shares at a dollar loss per share. It was definitely bad, but I had been through far worse drawdowns even up to that point in my life, so it was not yet a disaster. It was still within the realms of manageable, and I still expected to turn it around and make a profit.

So he gets you an enormous locate and what did you do?

I shorted away. By the end of that day, I had shorted another 300K

shares. So now, after four days, I had 551,500 shares with an average of $2.02, and the stock closed around $2.50. At that point I recognized I the danger and went into a mode of risk minimization. I needed a pullback to get the position size down quickly, even if it was for a loss.

I really wasn’t expecting the stock to collapse, but based on the chart it still looked like a great setup. I was simply way too early. I had done it before and survived. In fact, I had profited. So my confidence wasn’t destroyed, but I recognized the need to minimize my exposure to the risk. Day six the nightmare intensified. Against my own expectations, the stock started going up more. If I hadn’t been already in the stock, I would have be shorting it then, but now I was being forced to trade it based on risk exposure, so I was essentially doing the opposite of what I would have been doing — I was covering. And there was really no choice. The broker was starting to get scared, even though I continue to wire in money from every account I had. My policy was always to be proactive with margin calls as a trader, so I always stayed ahead of them with wires. But one of the wires got screwed up and delayed, so the broker started to panic and put pressure on me to cover. The stock was at $3.38 per share and I was in the hole $700K to $800K. I had on outsized position with concentrated risk, and brokers are allowed to force you out even if there is no margin call. It’s actually legal. I ended up covering some to pull off some risk, but the next day it got worse.

The broker went into complete panic. Their branch office in New

27 The Storyteller

York actually had a conference call with their parent office in Los Angeles because of me. (laughs) But the really frustrating part is that they were in a panic even though there was no margin call. I avoided it.

They said if the stock goes up another dollar or two you’ll be below zero, and my reply was, but it isn’t already up another dollar or two.

If, if, if…

Yes, the hypothetical “ifs” can happen to anyone, but it didn’t happen yet, so let’s not do this! But he was covering anyway and some of that covering was. . at.. the. . top! My account was part of the short squeeze. At one point I was down $1.3 million, and my broker was making the situation worse by forcing my covers and driving the price even higher. I did end up holding a decent amount for several more weeks and covered the last small piece in August.

All said and done, how much did you lose?

$772K on that trade. And this was supposed to be the year I was going to up my game, apply all this self-improvement and development, but it completely backfired. It completely shattered my confidence. I was honestly ready to quit. We talked about if you have a $10K account, it’s worth it to risk the whole thing to try to make a million, but when you have a million and you risk it all, die question becomes “why?” In my case I probably had about $2.5 million in the bank at that point. Why would I risk it when my life is already forever changed because of what I’ve achieved. In pursuit of more money? I’ve never felt like I’m highly driven by money. $2.5 million was already phenomenal. At what point do I turn that risk down?

Were you ever able to answer the question of why you’re still risking the millions?

Well, it was a tremendous struggle. One of those monumental moments in life. Mow do you process it? It’s like a divorce or a career change. I really struggled with it. I scaled way back and had to do some self-assessment and confidence building. Am 1 still capable of trading?

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Was this just luck all along? Was the risk of losing on a big one higher than I thought all along?

Effectively meaning your strategy is worthless. The outlier is bigger than you thought…

Yes. I really grappled with it. I very seriously thought about quitting And when you experience something in life that’s so psychologically traumatic, you don’t associate good feeling with it. It’s hard after something like that to say, “I like trading.” I have mixed feelings about it. A lot of your self-definition is based on what you do in life, and if you’re no longer successful at that thing, it’s almost like your entire definition of who you are is…

... called into question.

Yes, on so many levels. Now I’m calling into question all the things I’ve known about trading, so maybe I need to find a new strategy. In fact, moments like this would motivate me to research even more. I had already been interested in futures trading for a couple years, and this experience really gave me the kick in the pants to look into that more deeply. Systems trading in futures is actually very popular, and I was always into systems. Shorty after that is when I launched a commodities fund because I was looking for ways to diversify since I wasn’t really sure if I was cut out for day trading anymore.

Did you think commodities would be less stressful because the system would handle itself and basically just print money?

Yes. For many years I was always in pursuit of the right system, the holy grail of trading. I really pursued it with a lot of passion. I believed if there was a formula out there, it could be cracked. And it’s not a matter of “if ’ but a matter of how much effort it’s going to take. If I’m more determined than the next guy, I’ll do it. Like an athlete, if I train harder, I’ll win. That was the mentality I had as I spent years testing systems and looking for new ideas.

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How did the fund do?

We actually got off to a great start. I still spent a lot of time trading stocks and wondering if it was right for me, but I think perhaps the distraction of having another project that was successful helped carry me through. The fund made money right from the beginning. It’s a long story, but when oil prices peaked all the commodities hit a bubble at the same time. Once the bubble popped volatility went to nothing and our fund just kind of churned. There were several reasons why but after three years we pulled the plug.

Meanwhile you were trying to push through your biggest drawdown to date day trading...

Yes, I just kept plugging along, and my performance the next year, in 2007, was decent. It was by no means spectacular, but my expectations were much lower. I was still just trying to prove to myself that I could do it. I was researching ideas, working on systems, trying to figure out how I could implement all the different strategies I had used over the years, but with lower risk. I would say the turning point in this process, the “aha” moment, came late in the summer of 2007. It was a slow day, so I was taking care of things around the house and had my laptop in the kitchen just to keep an eye on it. The mortgage stocks had already had a horrendous drop, and something popped up on

briefing.com regarding the sector. I don’t remember what it was exactly, but it listed like five or six related stock symbols. All I did was glance at it and say, “Oh, that’s a buy.” And I walked away. Then a few hours later I came back and those stocks had jumped like 15 or 25

percent. Huge moves. And something clicked in me. I wasn’t the kind of trader to look at something and just call it a buy or sell, that’s not something I would normally do. But I just knew. On a sector I didn’t even follow that much. After eight years of trading, I suddenly realized I now had enough experience to actually have an intuition related to fading that actually meant something. That’s when it clicked for me.

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Your defining moment in trading happened when you weren’t even trading...

Yes. That was a big turning point in my confidence because I realized it was no longer just looking at patterns, it was no longer just technical analysis, and it was no longer developing a system. . I was part of the system, my ability to interpret stocks. This was the very first step in the evolution of becoming what I like to call, an event-driven analyst. The trading world always talks about technical analysis versus fundamental analysis, but when looking at short squeezes, margin calls, promotions and stuff we trade, neither of those definitions fit. I’d like to introduce a new term like catalyst analysis, something that’s more focused on event-driven trades. In fact, had I applied the event-driven analysis to FMXIQ a year prior, I may have avoided that disaster completely.

Unfortunately, by basing the trade purely off the chart, I didn’t realize that certain chart patterns need to be interpreted differently based on why they’re moving. Under certain circumstances the chart pattern I was looking at was a five-star, once-in-a-lifetime opportunity, but under its actual circumstances it wasn’t. Chart patterns cannot be looked at in a vacuum. It can be interpreted different ways depending on the context of the catalyst, the market environment, and all these different factors…

It speaks to the story of the trade we’ve discussed, the 30 things you have to take into account...

Yes, this “aha” moment was the birth of that, the start of my greater understanding of trading. Up to that point I was looking for the holy grail of mechanical systems, but now I believe the human mind is a better trader than a computer. The human mind can take into account far more variables and process far more information than any computer. My transformation was realizing that I could be the system.

I understand all the patterns and now can pull in all these other variables that are so difficult to program into a computer. In a way it’s a more advanced system where I rely far more on intuition. The backtesting is a mental library of patterns and information. When I see this pattern in this type of environment with this context and this catalyst, the stock typically moves X percentage over the next day or

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two. It becomes far more abstract and elusive as far as trying to define these things in a quantitative fashion, but it’s still there at some level.

After years of experience, intuition now plays a big role in your trading...

I think a lot of technical analysis and chart reading is an art. And because I think it’s an art form, I feel like I’m indirectly saying trading is intuition. But that doesn’t mean it can’t be taught. Anybody that’s good at anything still has an enormous amount of training and education to get to that point. But chicken and the egg, right? As a youth I spent an inordinate amount of time playing with statistics, so obviously I had some inclination towards trading, and yet I still built it up through time and practice, so it kind of goes both ways.

Developing as a human being is similar to the way we’ve been discussing how a trade setup develops. There are so many variables involved, all combining to create the person or trade present before us today.

Yes. And I firmly believe that anyone who is good at anything would similarly find all kinds of things speckled throughout their life that contributed to that success. Whether or not genetics play a part of it, it’s nearly impossible to find someone at the top of their game who did not have an enormous amount of training leading up to that point.

Society loves to hold these prodigies up and say, “Oh, they’re just naturally gifted.” We love to do that. But when we pull back the hood and look underneath, it’s not the truth.

So how did your trading change after you realized you are the system...

2007 continued to get a little better. I started to trust more and more in my intuition and pay more attention to actual news. I subscribed to more news feeds, realizing this information could a) have prevented my near blowup, and b) open doors to new opportunities. But it was still a process. It’s not like I started hitting home runs immediately. But

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I was building confidence. By the fall of 2008, I was really firing on all cylinders with this new event-driven analysis, and it was perfect timing The financial crisis and crash provided all these different events to trade off of. I remember nailing a six-figure profit in one day, which was monumental for me because it proved that it was possible and that perhaps I could be good at it. But by January of 2009, I had to take some time off, which is something I had previously never done. I always drove myself to work very hard. I was always afraid of missing an opportunity, but the stress and pressure was really adding up. I needed to really just turn it off and walk away for a true mental vacation.

And that was a crazy time to do it…

Yes, I was fully aware that it wasn’t a good time to walk away from trading, but sometimes you get to that point where you just know what you need I was finally trading well again, I had a good year in 2008, topping a million in profits again finally after a few years, but I had to pull it together and kind of strike some balance in my life. The idea in my mind was once I felt better, I’d return to trading. During the time off, I would think to myself, do you want to go back to trading soon?

And the answer was always no. I don’t know if it’s a coincidence or not, but the process took nine months, before I finally returned to trading in the fall of 2009.

So you gave birth to your resurrection?

(laughs) Yes, it felt like a rebirth. On vacation I had listened to Tim Sykes’ audio book, An American Hedge Fund, because the description looked interesting. I had no idea who he was, and that was my introduction to him. But hearing someone else talk about trading made me feel more inspired and motivated. When I returned to trading I really felt like my trades were clean and solid. I was avoiding errors and nailing executions. What 1 had tried to do in 2006, ramping it up and elevating my game, is what finally happened in 2009. It was still a process, but the profits kept going up and up. My performance was brought to a new level, trading more setups than ever before,

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understanding the catalysts and information far better than ever before, and really transforming this purely technical based trading to—

no better way to describe it—an art form. I finally gave up on the holy grail system and began to trust in myself as a trader.

And your P&L from 2009 until now reflects that trust…

Definitely. I topped $5 million in annual profits each of the last two years. And remember, in 2006, the goal was only $3 million.

Took a few more years than you thought, but you surpassed it…

Well it also took a different approach. I had to finally accept the fact that I couldn’t just self-improve to do it. Just reading books and willing it to happen was not going to work. I had to embrace the whole process of improvement and realize I needed balance in life to avoid burnout, especially as I get older with a family and more responsibilities. I love the reputation of being the hard worker who’s always trading the markets, but learning how to shut that off was a lesson. Taking a step back from trading in 2009 really completed the whole transformation process. Ever since then I have taken true, tum-everything-off vacations in the summer. Usually for two or three months. Even if I love trading, I need to do other things in life. I can’t just be a trader. I need to be a father. I need to be a husband. I need to have other interests.

I’ve had this conversation with my wife…

You’re allowed to pursue your own self interests, if you want to call it that, but I think the key is balance. I don’t want to be like these famous entrepreneur guys who get loads of respect in public but then we learn about how they’re strangers to their family because they were never there. I don’t want to be that guy. I love the idea of accomplishing something big, important, meaningful to the world and to yourself, making your imprint on society in some way, but I don’t think you should do it at the expense of everything else.

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What’s your proudest moment in trading?

I think it’s the start I had. The ability to trade well in 1999. I took a $25K account and made over $700K in my first year.

Not too shabby.

It just never occurred to me to think the way I see a lot of traders start today, where they want to make a set amount per day. My approach was always a system where you compound profits. If the system has the potential to make $2 million but I make only $700K, there should be some disappointment there. Not to say I’m disconnected from reality and not happy with that kind of money, but…

...if it was simply a game and you were supposed to make 2

million points but only made 700K, you’d be disappointed.

Yes.

It’s difficult for people to conceptualize that in terms of dollars because we attach so much baggage to money...

For years and years I had few reference points in my life for what a trader should earn. Traders in books I had read made hundreds of millions of dollars or at least tens of millions. Another guy I met before I started trading claimed to make $10K a day from day trading.

My perception of what a trader should earn was very high. But when Tim Sykes launched Profitly in 2009 or 2010, it was a real awakening for me because I used to think all these other people were making so much more than me. I didn’t realize even $2 million a year would put me at number one. I never would have guessed that. That being said, I’m not naive to the point that I don’t think there are other traders better than me. I’m positive they are out there. But as far as this community, I never would have expected to hit the number one spot.

The reason I bring this up is because I think expectations can have a huge impact on how well you do trading. Someone who thinks a good trader makes tens of million dollars a year is less likely to struggle with

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the concept of increasing size, because his expectations are already set that high. $10K a day is $2.5 million a year and that was my expectation when I started. That was my idea of what a day trader should make, but I wasn’t making that, so in my mind I was nothing special. Don’t get me wrong, I knew it was good money. I’ve worked in the real world where $50K a year was good money. But for the profession, it’s kind of like going into the NFL where the average quarterback is earning $10 million a year, but I sign for $700K. That’s awesome money, but I’m going to be bummed.

What advice would you give traders who want to increase size?

If I can already make $1K on a trade, theoretically I should be able to trade double the size and make $2K. If I can make $10K, I should be able to make $20K. But we all have those mental feelings where it’s really hard to push past a certain size because we become uncomfortable. It might be when the dollar amount represents a week’s salary, or a year’s, or the value of a car, but there’s something about it where it becomes nerve-wracking on a different level. The best way I know for a trader to push past that is to stop defining success compared to the real world. Think of it in terms of trading.

Think of it as poker chips…

Yes, the more you can stop thinking of it as money, the better. Think of it as a game or sport. If your P&L were literally points and not dollars, you wouldn’t have nearly the same mental hang-ups. In trading, the objective is to score the most points possible. And yet we have trouble because those points translate into real dollars which buy things and sell things and pay the bills.

After the phenomenal run you’ve had since 2009, do you still worry about blowing up?

I’m no longer worried about blowing up, but I still sometimes have moments of low confidence, (laughs) If you ask me how much money I expect to make from now until the end of the year, my gut feeling is

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zero. That’s the absolute truth. I’m not exaggerating to make a point.

It’s just a gut feeling. I can’t make a rational, logical argument that it’s true, but I’m telling you in my subconscious mind the answer is zero.

That’s my insecurity, the same insecurity that drove me for years and years to figure out the next pattern.

What’s something new traders should know?

I feel like one of the biggest, most important concepts to understand as a trader is that we don’t get paid for working. This is one of the few jobs in the world where we can show up, work 10 hours and make nothing, or even worse, lose money. We don’t get paid for sitting in front of the screen, no matter how long we do it. We get paid by waiting for opportunities and then capitalizing on them. A trader is opportunity driven. And no matter how hard we work, we cannot create an opportunity. Working harder will not make an opportunity appear. It’s either there to be found or it doesn’t exist. We all have this mentality that we want to get paid, but trading when there is no good opportunity is a great way to lose money. I see newer traders doing this all the time.

So be selective. That’s great advice for traders, new and old…

Be selective, and only trade when you have an edge. If you don’t have a tested, proven edge, and you’re just throwing money at stocks, you have to wait until you have a strategy. People come into the market and think they can buy breakouts and make money because they read it in a book, but what makes them think it’s going to work? If you don’t have a positive expectancy to your trading, you are not going to make money. You need to have a proven strategy.

How do you define success in trading? In life?

I think it’s important not to judge the success of an individual trade on the profit and loss, but on whether or not I traded it properly. It] is possible to trade something well and still lose money. If I have a setup that has an 80 percent chance of success when traded perfectly, 20

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percent of the time I’m going to lose money on it, and yet I still made the right trade. And vice versa it’s possible to make money on a trade that, if done over and over, I’d lose 80 percent of the time. I also need to maximize my opportunities to be a successful trader. If I had the opportunity to make $1K on a trade but I end up taking a $250 profit because it felt good or I just wanted to lock some up, that might be well and fine, but I wouldn’t call that a successful trade. If I’m not maximizing opportunities, it’s going to be a lot more difficult to overcome the losses and the bad days. So it’s necessary to judge trading success much more critically than just whether or not I’m making money. Long term success in trading really should be measured more on the level of success as a person. I think sometimes traders can lose focus on the fact that there’s far more to life than just how much money you’re making. If someone were to ask me, “Would you rather be rich and miserable or poor and happy? —I don’t know about you, but any day of the week I’d rather be poor and happy. To me happiness is far more important by many magnitudes than wealth.

Sure, it’s true that wealth can help you attain happiness. Studies have even shown that, to a point, money does help you achieve happiness, but the interesting thing is that above a certain threshold, around $75K

a year, it doesn’t contribute to happiness at all.

The benefit becomes marginal…

Yes, it plateaus. Because at that point you have all your major concerns taken care of. So I think success as a trader needs to be thought of in terms of success as a person. Am I enjoying my process as a trader?

Am I enjoying my life outside of trading? If I’m consumed by researching and sitting indoors in front of a computer screen for 12

hours a day, I might not be enjoying my life very much, even if I’m making a lot of money. There comes a point where I no longer call that success. I’ve struggled with that kind of balance, but I’m aware of it and working on those aspects of my life. I will tell you for a fact—

and it’s always easy to say when you’re the one who has it—but I’m not happier today with more money than I was three years ago with less. Zero improvement in happiness. That doesn’t mean there isn’t fulfillment in achieving big things in life. Making a million dollars is a

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tangible goal which may bring a feeling of fulfillment, but it s not the ownership of the actual cash that brings you happiness.

It’s the journey and the satisfaction in achieving your goals...

Yes, it’s the process. Very much like a sports team winning a championship.

Who cares about the trophy...

Right. It’s about the process of getting there and the accomplishment, fulfillment, and memories it brings.

Dare I say... it’s about the story?

Sure, you could say that.

39 The Gambler

The Gambler

“I have the idea that every trade is going to pay me forever.”

Eric Wood (@elkwood66) is a 48-year-old trader born and raised in northeastern Florida who didn’t place his first trade until he was in his 30s.

His mother was a school teacher and his father a bar owner, which he says combined for a very middle-class upbringing. But his father was also a bookmaker, perpetually chasing a fast and easy buck, a pursuit not unfamiliar to Eric, who has spent the better part of his life finding the quickest ways to earn a living.

His trading vasdy improved in just the last few years, and that success has garnered him attention on social media, where he’s often found offering positive reinforcement to newer traders. He’s an eternal optimist, although not when it comes to the prospects of companies he’s short selling, and admits to having a “very large gamble” in him.

He’s on pace to earn over $1 million in trading profits this year.

What first got you interested in trading?

During the 1997 to 2000 dot-com craze, when things were getting a bit nutty, I was amazed people could actually make money trading. Of course, I didn’t have a damn clue, but I took a shot here and there. I

40 The Gambler

made a few, lost a few, but eventually strayed away from it because it was too scary for me. Too scary to give up a steady paycheck and rely solely on trading with 8- and 9-year-old children at home.

What did you do for money in the meantime?

I bartended the whole time. At rave clubs. I’d work from 9 or 10 p.m.

until 5 a.m. and make $300 to $400 a night. In a weekend I could make $1,000 to $1,200 for three nights worth of work. I was a hard-working bartender. I wasn’t the guy in Vegas flipping bottles and putting on a show, but I would put out numbers, selling $2,000 in liquor a night. I certainly didn’t want to be the guy who worked on the corner at a Cheers type bar making 80 bucks a shift. For me it was always about spending minimal time making maximum money.

So when did you come back to the market and become the trader we’ve come to know?

Well from ‘02 to ‘08 I was in property investment with a partner I met through a fellow bartender. I was always careful with money and had a pretty penny saved up. Long story short, we killed it for six or seven years. I mean, we weren’t big players, but we were each making anywhere from $70K to $120K a year. You can live like a king in Florida on that kind of money. But around ‘06 and ‘07, I could see things topping out. Everybody and their brother was either a realtor, flipping houses, or a mortgage broker. My partner, who was extremely well educated, asked me to join him on a new business venture, but it would require 60 to 70 hours a week. Well I was having major problems in my marriage at that time, looking after my kids nearly full-time, so I wasn’t willing to put in those hours. I turned toward the market looking for a way to make money and sort of fell back into trading. I started dabbling in my E*Trade account playing penny stocks and thought maybe I’d get lucky, maybe I’d be able to make trading a life for myself. Which was a ridiculous thought at the time, of course, but that’s what I was thinking.

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What year was this?

Around 07 to 08. I got boiler room calls and mailers sent to me pumping penny stocks, and I bought some! Here I was, a middle class guy who had saved up about $200K, busy looking after his kids, and decides to put $50K into a very illiquid penny stock, TSHO. I bought 200K shares at 25 cents a share, then went and played some golf and looked at investment properties. Soon the stock was trading at 75 cents and I was up $100K. I thought, wow, this isn’t rocket science, not knowing that it could crash at any moment, of course. So around $1.01 per share, I liquidated half my position for $75K profit. It kept climbing to around $1.50 a share, where I could have sold the other half for another $50K, but I didn’t. It crashed for the next three days, and I liquidated all the way down to 51 cents while it was trading very thin, making it difficult to fill orders. I was very naïve at the time and wanted to understand what just happened. That’s when I stumbled upon Tim Sykes on the Yahoo! message boards. He was explaining the short side of pump and dumps. I signed up for his service and realized there was a way to make money on the downside of these plays and actually understand them.

And you’ve been trading successfully ever since?

Yep, since ‘07. And I’ve never been unprofitable. But I attribute at least the first two years when I was longing stocks to luck. When the market came apart in '09,1 bought Ford at $2 and LVS at $7.

Great buys. So you were buying more than just penny stocks at the time…

Absolutely. I would hold positions for longer, too. I sold LVS in the high $20s and it went to $60 the next year. I scaled out of Ford in the $7s and $8s. I wouldn’t even consider holding positions like that today.

But back then it was part of my repertoire because I was so naïve, so green. It just felt like the right thing to do because these huge companies were so cheap. And it worked.

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From such a naive start how did you transform into the trader you are today? How did you educate yourself ?

Mostly the Internet and chat rooms. And within those chat rooms I found a few good friends who became mentors. People that didn’t even know how much they were schooling me. And I also sat in front of the computer for eight hours a day learning charts, watching Level II, and not knowing how to pull the trigger. I was basically lost for a few years vet somehow profitable, believe it or not.

It is amazing that you were profitable through all that. Most people naively buying pump and dumps don’t come out ahead.

I don’t want new traders to be discouraged if they don’t have a lot of money, but I think the key to my profitability in the beginning was that I did have money. It was never scary for me to risk some downside.

So would you advise new traders to save up a large chunk of capital before they start?

Yes, because I see it happen all the tune. Guys message me who have doubled their $5K account to $10K in seven or eight successful trades but wipe it all out with one bad trade. I can’t believe how hard it must be to start with $5K. Not everyone can be Tim Grittani. As a matter of fact, I would say it must be damn near impossible. Why not build a base of $25K to $40K before jumping in? And begin with some serious rules about your money. But if you absolutely can’t help yourself and you want to start with a small amount, you should swing trade with traders like Michelle Koenig in Investors Underground chat.

Build slowly.

Do you trade alone?

I traded with someone on Skype for about six months He constantly yelled at me: you’re too aggressive, you have too much size, you’re not paying yourself on dips. It was a nightmare.

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Your approaches were different…

Our styles were very different. He seemed very pessimistic, whereas I m very optimistic. Not to mention I have a very large gamble in me. If I get upside down in a trade, the last thing I want to hear is “eat the loss. WTiat I want is helpful guidance, someone to help me make a better decision based on my rules, someone to help get my head back in the game, not someone to tell me exactly what to do. I love to trade alone. You’ll never find another person who trades exactly like you.

But you do have trading friends who you interact with daily?

Absolutely. When that person is struggling in a trade, you want to pick them up. Because we all know what it feels like to crash emotionally when it comes to trading. It’s very heavy. But if you can deal with those moments and push through, it will bring you to where you need to be. That pain is growth, unless you let that pain bury you.

Learn from your mistakes…

Yeah. But the pain is so overwhelming I have sat on my bed after trading, head in my hands, thinking, I’m going to ruin my family, I’m going to ruin it all. It’s a scary, scary place to be, but that pain is what you need in order to understand the mistakes you’ve made.

I’ve been there. I share the gambling tendencies you speak of…

And we’ll never lose those tendencies. I’m a gambler by nature. Even when I know I have the second-best hand, I’ll still give action. We can’t stop it. It’s very, very difficult for a gambler to eat a loss. And of course that’s when losses compound, which is terrible, but it’s also that gambling nature that allows me to tackle trading again the next day.

Get right back on the horse…

You’re damn right.

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Do you handle anyone else’s money?

Absolutely not. I wouldn’t manage one dollar of another human being’s money for fear of losing 50 cents of it.

What’s your daily routine while trading?

At night I go through Nate’s scan and Michelle’s scan, both from Investors Underground. Then I look at other stocks that aren’t as liquid or stocks that Nate just doesn’t bother with. So now I have a watchlist prepared. By 7 a.m. the next day I’m already checking to see if there’s any activity in those stock. I’m ready to trade. I also look for stocks moving on earnings or any other news. I want to trade at 7 a.m.

By 9:30 a.m. I’ve drank a pot of coffee and smoked six or seven cigarettes out on the porch, and I’m ready to go. Although I wear my bathrobe until noon, (laughs) But by the time the opening bell rings, I probably know at what price I’m going to pull the trigger on a few different trades.

Can you give an example?

Say AAL is up 50 cents in pre-market trading, but the market itself is pretty flat, I might bet on a sharp pull back at the open and try to scalp a quick $1K there. After the open I’m popping off on three or four stocks and adding or covering by 9:45 a.m.

So some of the trades are quick scalps but others you might add into. How do you determine which is which?

It’s kind of a feel thing for me. Remember MNKD when it was running? Every morning it would gap up and steadily grind higher the rest of the day. It all seemed very orderly. Well on the morning it tanked, the price action was all over the chart. It felt very unstable. I took a huge short position right at open and added as it tanked. Guys ask me what my trigger was or where the trend broke, but it’s more of a feeling. I don’t know. I don’t mean to be vague, but that’s what it is.

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When the market closes, are you done trading?

I can be done when the market closes about three days a week, which are the days I go to the gym. But usually I’ll make at least one mistake each day, a trade that I’ll fight all day long that I didn’t take off at 3:59

p.m. because I want to fight it again the next day. And that’s only if I don’t fear a catalyst moving the stock overnight. But when I hold something over I’ll stay at the computer until 4:30 or 4:45 p.m. just to make sure there’s no unusual activity.

What’s your trading desk look like?

I have three 30” monitors and about to have more soon. But I’m a litde old school when it comes to Level II and charts, because I still use Power E*Trade Pro. It’s free since I have a healthy account with them, although I never trade there anymore. But on the left-hand screen, I have Pro open with Level II and 1-min charts for about 10

different stocks. On the middle screen I have position summaries, orders, and where to place orders for my Centerpoint Securities (ETC

and Wedbush), Interactive Brokers, and E*Trade accounts. On the right-hand screen, I have chatrooms, and—don’t laugh—Yahoo!

message boards, (laughs) I still do it. I know. I can’t help it. And I also have my email and maybe a couple other 1-min charts on that screen.

Do you pick your trades solely based on technical analysis or are some based on fundamentals/news?

I’m 50/50. I’m a fundamental news guys who uses charts. Whereas Nate might stop a short position because it’s breaking key levels to the upside, I’ll say, trash equals trash. If the fundamentals are trash, even if the stock is running, it’s still trash in the end. Now that doesn’t mean you add and add to a losing position, but you look for that top and a trend break to the downside. Then you double down. Yeah, there might be some pain involved, but what’s the endgame? Put everything in perspective. What’s my timeframe? How long can I hold a good, solid short? What’s my maximum drawdown? Should I even be short right now? But for me, trash equals trash, watch me in the end.

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In the end you’ll be right, but you must be willing and able to hold short through large drawdowns or even possible buy-ins…

Yeah, you have to be able to get to the Promised Land. And that can be quite a ride. But I think fundamentals will get you there 90 percent of the time if—and that’s a big “if ’ —you manage it properly. That’s the hard part.

When you do use charts, are you using technical indicators?

I do. But for me, more than anything, it’s just trend break. I know where support and resistance are, and I know where the breakout is, but all I need to see is a couple trend breaks, some bearish activity.

Most guys won’t start in short because the stock is still pressing upwards, but as soon as I see the first bearish bar, I’m taking a chance on a short. And not just based on the chart. I also like to see some funny activity in the Level II montage. Some hocus pocus like bid propping and the like. I’m always speculating as to what that action means, but I think they’re maneuvering and trying to manipulate the weak retail trader’s mind. I too can be fooled, but I want to be on the side of the professional, don’t you? That’s when I start taking real risk.

Can you give an example of the “hocus pocus”?

JRJC had a big run up to $11.90 before Citron Research hit the stock with a negative article and it dumped down to around $10.40s by the end of the day. The next morning, when it ramped back up again to around $10.80, there was wild activity in the quotes on Level II. There was a massive offer of 300K to 400K shares at $10.80 or $10.81. But right below, at $10.79, there was a steady bid eating everything that was thrown at it. I was talking with another trader at the time and told him someone was taking a massive short position at 10.80, we should get in front of their short and fill everything we can at $10.79. He wasn’t so sure, but I filled about 75K short at $10.79 before, all of a sudden, there was a giant red bar in my favor.

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How did you know the 400K at $10.80 wasn’t fake, a desperate short trying to show size to scare longs into selling?

The offer was real. They were on both sides in my opinion. They knew they couldn’t fill a short position of that magnitude without “buying their own short.” They supported the bid until they had the size short they wanted, knowing that after they sold that long, taking a little loss on it, the price would crash and they’d make it up 10-fold on the short side. As soon as that 400K filled on JRJC, they pulled the steady bid and market sold the whole long position and it dropped from $10.80

to like $10.28 in one candle. The rest of the day the price trickled down to about $9.30. I made a small fortune.

Market selling the giant long drove price down so far so quickly, it probably broke through a few key technical levels, too…

Exactly. If they ended up with 400K long at $10.79 and sold it all by $10.30, then covered the 400K $10.80 short under $9.50, did they lose? No sir. I’m telling you, I see it all the time. Clearly it’s not retail supporting the bid/ask in those moments. It’s pros taking a position.

Massive volume in a one penny range when normally the stock price fluctuates all over the map—that’s real money taking a position. They can’t fill that short unless they fill it themselves. Am I crazy?

Probably not.

I know I’m not.

You were slamming the bid in that trade, but how do you normally fill orders? Do you always remove liquidity?

I usually remove liquidity because I’m very impatient. I’m always hitting the bid or ask to fill, which costs me money. Typically if I want to short a stock that is already starting to dump a little bit, I’m slamming the bid, because how else are you going to be in the trade?

But I will do the opposite and add liquidity if the stock is moving up and I’m building a position. Like if a stock is at $5.20 and I’m looking

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to short a parabolic move into the $5.50s, 111 place a bunch of orders in the $5.50s looking to get hit. Or when I’m covering—and I’m religious about this—I’ll have cover orders in below the crack I’m looking for. So say I’m short at $10, and $9.50 is where I think support will crack, I’ll have covers in at $9.41, $9.32, $9.26, etc. I’ve got them already laid out there because I want to get paid on the flush.

But you don’t cover your whole position on that flush, do you?

No, just a piece. I always hold some in case it keeps going lower. Then I “hand fill” what’s left, meaning I enter orders in at the time I want to cover. And I always hide my size, too. If I want to cover 47,000 shares, I might show 1200 or something.

What increments do you use when you scale entries?

It depends on liquidity, volume, and the size of the stock. Say PLUG

trades 12 million shares a day, it's currently topping out around $7.12, and I think it could go back to $6.70s. . I’ll take 4K shares short at $7.04 just to get my feet wet. Then say it pops up again and hangs a bit at $7.12. I’ll double to 8K shares short. Now say it ramps up to $7.25

or $7.30. I’m probably teasing and adding up to 15K or 16K shares total. Now I have a quarter of the 50K share position I’m ultimately looking for at a $7.14 average, so I go on hold there. I go on hold and watch for a stall on the chart, a little l־min breakdown. If I start to see that, now I love the trade. Once it cracks through that 7.14 area and starts to look heavy, I short three cents below the bid with the full amount I m currently holding, so I go from 16K shares short to 32K.

And why pick $7.14 to double down? Is there a technical reason?

That’s where I’m now moving to green on the trade. Fm famous for slamming the bid to get a heavier position when the trade goes green for me. I always double down. And I’m still not afraid to chase it even more. Let’s say it starts to crack that huge number at $7.00 flat. I’ll add another 18K shares to get to a full size of 50K. But immediately I’ll have covers in at $6.81, $6.72, etc. But yeah, I add to winners all day.

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So while most traders talk about getting short when the stock moves from green to red intraday, you’re slamming the bid when the trade goes red to green in your account…

Exactly. If you’re going to get another 20 cents to the downside, you better double your position right there, right now. That’s what I think.

That’s also why I slam stocks so hard when they break trend to the downside, even if they’re still green.

What happens if that stock, instead of cracking thru $7.00 to the downside, decides to bounce instead?

Perfect question. This is what costs me money. The stock doesn’t crack and my average is now something like $7.1127, and it’s bounces off that damn $7.03 back to $7.13…

And you’re in full size now…

Right. If it moves 20 cents against me, I’m down 10 or 11 grand.

That’s when it’s an immediate decision for me. I either take 25K

shares off the table by removing liquidity—which is not cheap but allows me to get my head right and wait for the next move—or I just know it’s going to crack soon and I hold the full position. Truth is, that’s a tough one. If it doesn’t crack and I don’t trust it, I lighten up.

It’s the worst thing in the world when you pile in short and then it moves against you.

If you do decide to lighten up, do you always take half off ?

No, I might only take a fourth off.

At what price? Even?

No, it’s at a little bit of a loss at that point. Very rarely would I ever cut a full-size position until it went against me. I only lighten up when I Have pain. So typically I’d wait five to 10 cents before taking some off.

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What do you think about suggestions from social media?

I think it’s nice but they’re not actionable alerts. Some pumper might put out a Tweet at 8 a.m. saving PLUG has a new contract, etc, but it’s all horseshit. He’s pumping it. But at the very least it’s information you can take and make your judgment from there. Basically social media provides you with more stocks to look at.

What’s your most reliable trade setup? Or most profitable?

Without fail, there’s one setup I love. Over-extended trend break. It’s a momentum stock that has just run 200 or 300 percent, and it s finally topping out. It’s the first time it’s making a substantial move from green to red, and it’s ready to fade. It’s breaking trend. I am mauling that stock with everything I have. I’m piling in on the red move.

Do you cover intraday on those large over-extended shorts or look to hold overnight?

It’s intraday, but I’ll swing part of it. And if the wheels come off the stock the next day, I’m usually wishing I had my full position still.

How many trades do you typically realize per day?

I probably trade six to 10 stocks a day, but probably make a hundred entries and exits per day because of scaling.

Are you comfortable being in six to 10 trades at once?

Yeah, but I get confused and start taking the winners off for profit.

I would think you should do the opposite and take losers off…

Yeah, because the winners usually get better and the losers usually get worse, don’t they? (laughs). But a guy like me, with a gambling nature, I don’t want to eat a $900 loss or a $2,700 loss. I’d rather cash in a few winners and then battle the losers.

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How much capital do you keep in accounts?

ETC has $250K, Wedbush has S250K, IB has $100K, and E*Trade has $100K. Anything above those figures at the end of the month, I wire out. However, if they drop below those figures, I don’t add funds.

How big are your positions generally?

Typically a stock priced at $100 or more, I won’t have more than 5K

to 6K shares short. Stocks from $10 to $60, I’m not afraid to get 10K

to 20K. Stocks under $10, if the liquidity is amazing, trading five million shares or more a day, I’ll take 80K to 100K shares, no problem. But it really depends on the action and how I feel that day.

Why do you think you’re so biased to the short side?

Well, let me tell you what’s wrong with the long side. If I’m short at $5

and the stock goes to $5.20, I still know I’m right in the trade. The price action may not agree with me for the moment, but I know fundamentally that stock is still trash. But if I’m long a stock at $5 and it drops to $4.80, I have zero faith in that trade. I’m not exactly sure why. Maybe it’s a character flaw. But I can’t buy more. I can’t do anything. I just hate that trade now. I’ll dump that stock at $4.80 all day long, yet I’d add to my short position at $5.20.

Are you typically flat at night?

I’m probably flat three nights a week with a minimal position the other two nights. Usually I only hold something overnight that I feel might gap down the next morning. If I cover it all intraday and then that stock gaps down too much the next morning, I just can’t chase it. Or worse, I might lose the borrows overnight. Basically I hold overnight for fear of missing out on more downside.

When you are in a trade, are you analyzing every tick?

Every tick. Every print. Every piece of the chart. I’m totally engulfed.

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Do you look at your P&L?

I do. Because when a trade ramps against me, I like to know what my patience just cost me. I get disgusted with myself. I’m analyzing everything else in a trade and my P&L is no different.

Do you set a target before you place a trade?

Nope. If I’m in a great short, there is no target. I’m going to pay myself all the way down until I have maybe a quarter of the position left. I’ll let that ride until I feel like the price has based a little bit, even if I end up giving some money back. I don’t have targets, because I’m so optimistic. I think the end game for every short trade is zero. I never think it can’t fall through the previous support level. I have the idea that every trade is going to pay me forever.

In what increments do you scale out?

There’s no exact figure, but at minimum, I’ll take profits in fifths or quarters, just to get paid. And I pick random cover prices, usually before support levels. Like if support is $5.50, I’ll take $5.52.

What if the trade goes against you? Do you set stops?

Not hard stops. Never. I don’t even know how to place that order. But I have an idea of where I’ll stop, which is usually if the price busts through a whole dollar or high of day or maybe a 52-week breakout.

There are 10 or 15 reasons why I might want to stop a trade, but if it gets through that point, I’ll take it off myself. And the fills are always a little worse than what I wanted.

But it is usually a chart dictated stop?

Yes. But it’s also how I feel, how much pain I’m in.

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You seem like a very play-it-by־feel type of trader…

Absolutely. 1 lard stops are probably a good thing for most traders, but it would have taken me out of a ton of trades that 1 ended up succeeding in.

How do you manage risk with such flexible stops? Do you have a set percentage of your account you’re willing to risk per trade?

No, but 1 have a dollar amount I’m willing to risk. In a trade that’s not too important to me, something I don’t have a lot of faith in, I’ll only be short maybe 5K shares. If it goes against me for 30 cents, I’ll eat the $1,500 loss right then and there. It’s just a day trade that didn’t work out, so I’m agitated but move on. On the other hand, in a trade where I have a ton of conviction, something I can’t wait to nail, I’ll risk much more. Usually I’ve been fighting it day in and day out, trying to get to that magical spot where the trend breaks. In those cases I’ll risk around $20K.

How long do you typically hold a trade?

I can hold from 9:30 a.m. to 3:59 p.m. if necessary. Not a full position but pieces. I do it every day, and I love it. I know some guys take off their positions into the lull midday and say they’ll re-address the trade later at 2 or 3 p.m., but then around 2 or 3 p.m. there really is no re-address because it’s lower.

It’s gone in your favor and now they don’t want to chase it…

Correct.

So you really let your winners run. What advice do you have for other traders who want to improve that part of their game?

Once a trade starts to go green, a lot of traders want to pull the trigger and start paying themselves, but you have to remember one thing: longs are going to panic. You have to look at the big picture and

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understand that when a stock fails, people are ready to bail, especially if the stock is trash to begin with. I don’t want to cheat myself out of money. If it bounces, who cares, you only gave some of the money back. I want to ride that short to the Promised Land.

I remember one day NQ cracked and I started covering into the first wash before I noticed not only were you not covering, you were adding to your short…

That’s the double down, my man. What’s the worst that’s going to happen if you add? Give back the money you’ve already made in the trade? Fine. I’d rather double down on a winner than do what most traders do and double down on a loser, compounding their losses.

Do you have a set amount of profit you’d like to make each day?

No, I’d be happy to make $500 or $50K. I’m just glad to walk away a winner. I let it trade out the way it trades out and try not to come to the market with expectations.

What’s the largest profit you’ve made in a day?

$131K. I made good money trading ISNS that day but more on APT, which was running with LAKE and the Ebola stocks. It had risen from $3.50 range up into the $8s, and I had been fighting it. One day I ended up short 100K shares with a $6.20 average. It started to ramp and do that nut-job, end-of-day squeeze we’ve become familiar with lately, and I lost $30K by the time I covered. But it gapped up the next day and I started shorting it immediately, building some decent size again. You could already see massive problems with the whole move into close the previous day, it had just been shorts panicking. By the time the market opened I already had 90K shares short. My profits started rolling quickly when it failed green to red that day, even though I started covering too early. But that whole move up the previous end of day was the final squeeze.

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And the next day it gaps and craps…

Exactly. All the momentum stocks run and run and run, and you can’t tell it it’s a squeeze or not, until that last day. The last 15 minutes where all the shorts shit themselves is where the move becomes unnatural, even more unnatural than the momo move before it.

Did you celebrate the win, or just another day at the office?

I think I drove up to the golf course, grabbed a beer, came home, and ordered some pizza for me and my daughter.

On the flip side, what’s your biggest loss?

VSR. Which was also an Ebola play. It was up like 100 percent when I started piling in short. It started showing weakness, so I added even more before it ramped toward the end of the day. I panicked and ate the loss at negative $92K. Worst part is I wasn’t even sure how I let it get that bad. Usually on my bigger losses, the stock ramps quickly against me, but VSR was a slow grind. I just froze.

Do you remember your emotions at the time?

Yeah, I was physically ill. But my daughter lives with me, so I have to be careful not to let her see that side of it. It’s scary because you’re so damn overwhelmed with the loss that it’s hard to emotionally pull yourself together for the people around you. Or to even fake it.

Doubts creep up, thoughts about going broke or blowing up…

In that moment, they do. And there’s a little piece somewhere in the back of my mind that knows tomorrow could be my last day trading if I’m a real moron and don’t respect my rules. But it s highly unlikely because I am so money-conscious, so scared of losing. That fear is what keeps me in check.

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You’re confident you can be profitable in any market conditions?

I’m positive I can. Every market that presents itself will be dealt with under those market’s terms. I will make money. What scares me is that I may not have years like I have been lately. It s just been crazy good.

How do you get back on the horse after a huge loss like that?

The emotions pass naturally. I used to be frozen for days after a huge loss. Now I can walk in the next day, spot the moves, and go to work.

Fear is something you overcome daily. Imagining all the bad things that could happen to you is an illusion. Reality is sitting right in front of you, making trades like you normally would.

Have you had unprofitable years or months?

I’ve never had an unprofitable year, but I have had years where I went sideways. I might have made $50K, and I guess it was enough to support my family, but barely. There wasn’t a single week out of the 52

where I didn’t think, man, what am I going to really do for a job? It didn’t feel like I would be able to sustain it. It didn’t feel like the results were repeatable.

How did you push through those feeling of doubt?

I pushed through it by learning. I slowly got more knowledgeable about trading. Back then I didn’t even know what to trade each day. I feel like a damn genius now in comparison. I understand trading on a completely different level. But I know I still have more to learn.

And you never gave up on trading or thought seriously about giving up?

No, for me I would be deprived without trading, without looking at the charts or Level II. When I’m away, I go through withdrawals.

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So vacations are no fun with you?

It’s very hard. Very hard. The time I am able to get away the best is when I’m with my daughter. Maybe we go up to New Hampshire to ski or go to New York and just walk the streets. Then I’m able to step away. Maybe it’s because she demands it. (laughs) Do you work on the weekends?

I do. Til get bored before college football on Saturday and immediately go to the charts and look at some of the stocks I’m thinking about for Monday. And I do it Sunday, too.

Do you consider yourself an addict?

Full-blown. Degenerate, full-blown addict. But a winner.

What do you consider your defining moment in trading?

It happened in late 2010, early 2011 when I realized I could actually see the trades lining up myself. I was following and learning from good traders, making money off what they were doing, but suddenly I started beating people to the trades. I understood it in a way I hadn’t before. The other traders are probably still more skilled than I am, but in many cases I figured out how to make more money from the same trades. The loose gamble in me can actually lead to far bigger profits when I’m in the right trade at the right time.

Because you let it ride…

Absolutely.

What’s your biggest disappointment?

That I didn’t find trading much earlier in life. I should have known because I liked numbers and was a math major at Florida State, but I didn’t graduate. I drank myself into oblivion and tried to get as much

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ass as possible because I was a moron. But I m the guy who can stare at Level II for 20 hours straight and enjoy it. It seems obvious now.

What’s your proudest moment in trading?

When I knew I could do this for a living. I knew this was it. They say 90 percent of traders fail and 10 percent succeed, right? Well about two years ago I had really kicked it up a notch, crossed seven figures in total profits, and I realized I am one of the 10 percent. I finally felt like I had all the equipment necessary to be included in that small minority.

It’s such an exclusive minority, people question whether trading can be learned at all, that perhaps it’s an innate skill…

It is an innate skill. But I think it can be learned if you generally enjoy numbers, charts, geometry, and everything involved with it.

But you think you need to be born with something…

Absolutely. I think part of it is ingrained. At one point, I thought about introducing trading to someone close to me, but the more we talked, the more I realized it just wasn’t a good fit for that person. It just wasn’t. But for me, I no longer consider it work. I put 50 hours in a week but this is living. I have my wonderful family and I’m so dedicated to them, but trading is what makes me feel alive. I love it.

What are you doing to make yourself a better trader?

I m never satisfied. Every day I try to stay on top of what’s current. I follow everyone I find pertinent. Adapt with the market and learn.

What’s something you do that you don’t think other traders do?

I think other traders do the basics. They follow the leaders but they don't learn to be the leaders. They show up to the market and think, oh boy, where do we go today? They don’t take charge of their own trading. I’m in charge. I know where I’m going at market open.

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You take responsibility for your trades…

Absolutely. If Nate throws a curveball stock at 8:30 a.m., I’ll take a look at it, but I m in charge, man. I know what stocks are on my list, and 1 usually know what I’m going to do with them and when. I’m in charge after 19 cups of coffee, (laughs)

What do you do well and what do you do poorly?

Like a lot of traders, cutting my losers is a weakness. Simple. But what I do very well is add to winners. I think I’m one of the best when it comes to that.

What are traits of a successful trader?

First and foremost, he’s prepared. He loves his work. All day long. He pays himself along the way by taking profits, he cuts losers, and he’s a leader. He trades what he sets out to trade.

What’s the most important advice you can give to new traders?

Reign in your losses. Be schooled. Get educated. Find traders who are successful and very patiently learn from them. Don’t jump right in, overzealous and foolish. Just like any other occupation, find experienced people to flat out leam from.

How do you judge success in trading? In life?

Success in life is simple. Are you managing your monthly nut, taking care of your family, and have some comfort? Are you in a place of peace and happiness? Are you still growing as a person? Success in trading I suppose is whether or not you’re profitable. But also are you putting yourself in scary, stressful situations with wild swings every day? Going nuts and scaring yourself certainly isn’t success. You must be very peaceful in what you do. Even though I’m profitable, I would like to end some of that scariness. That stress takes a toll. I could stand to take that stress level down a notch to improve my health.

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Sounds like you’re far from the emotionless robot everyone thinks traders need to be, yet you still make great money…

Yeah, I celebrate the wins and stress over the losers. But do you think trading would be any fun if I couldn’t be a little enthusiastic about being up $70K in a trade? You must celebrate a little. But when you’re down $51K and doubled over with heartburn, that’s not healthy either.

So find the happy medium.

What do your friends and family think of your trading career?

They couldn’t care any less, quite frankly.

What is the public’s biggest misconception about trading?

They don’t believe any trader can really know what they’re doing or figure out how to consistently make money in the market. They think it’s gambling. What they don’t realize is that good trading, getting into a great trade, is like holding pocket aces against deuce-seven off-suit.

The odds are in your favor…

Exactly.

If you could change one thing about trading, the market, or its participants, what would that be?

I wouldn’t change anything. I believe all the things traders fight, bitch, and moan about, like the short sale restriction or funds manipulating stocks, are at some point everything the market needs to sustain itself.

Just face it The bulls run the market. They all have an agenda, and that agenda is their money, period. I say you have to play off of every bit of that. You have to adjust and use it to your advantage.

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Where do you see yourself in five to 10 years?

I just hope my brain is as sharp as it is today, because if it is, I’ll have the same smile on my face. It’s a wonderful life.

Do you want to ramp it up? Get into eight- figure territory?

Oh yeah, I’m trying to ramp it up, absolutely. But more importantly, I want to be constantly growing, learning, and becoming more successful. I’m trying to build something. A legacy, maybe, I don’t know. Don’t think for one moment that where I’m at is where I need to be. I have profits of $960K right now for the year. My best year prior was about $810K. I’m on the cusp of making a million bucks, but I wouldn’t even know what to do with that kind of money if I tried. It’s more about getting better as a trader.

And money happens to be the measure when it comes to trading…

I guess so. But I just hate to lose. I want to win.

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63 The Youngster

The Youngster

“In the end, you’re fighting to take each other’s money.”

Derrick Leon (@DerrickJLeon) is a 23-year-old trader from Colorado who placed his first trade at age 17 after opening a guardian account under his uncle’s name.

His immediate family didn’t support his quest to make a career out of trading, but if that has been a chip on his shoulder, it seems to have only served as an impetus for him to strive harder. He’s the youngest trader interviewed here and perhaps the least experienced, but that has not stopped him from quickly becoming a consistent professional.

After having to mooch food from his aunt just a few short years ago to now earning more in a week than the average American does in a year, his life has changed dramatically. Even so, Derrick would be the first to admit that he’s still figuring it all out and that this is only the beginning.

What brought you to making your first trade at 17?

During my sophomore year in high school my parents decided it was time to get divorced. And it wasn’t an ordinary divorce. It was family against family. It totally messed with my mind, and I dropped right out

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of school, even though I had a 3.8 or 3.9 grade-point average. I dropped out and started gaming.

Gaming?

Yeah, for about a year straight I played Call of Duty. Every morning I’d wake up and just start playing. I didn’t know what I wanted to do with my life. And then something happened that I tell people about all the time yet they don’t believe me. An E*Trade baby commercial came on TV, advertising $10 per ticket to trade stocks, and I decided to open an account and start trading.

Because of a baby commercial…

Yeah. It’s crazy. My uncle had done a few things in the market as an investor, but I’m the first person in my family to trade. I still have that E*Trade account, too. There’s like 100 bucks sitting in there.

Do you remember any of your first trades?

I just remember one of them was gaming.

Makes sense.

Yeah. It was an online gaming company, something to do with poker or casinos. It was a pump and dump scam of course, but back then I thought it was legit. I ended up buying 25K shares and being up $7,500 after the first day. It gapped up huge the next morning putting me up something like $15K. Then it tanked. I went from being up $15K to down $15K within minutes. Of course now I know you should sell that gap up, but I didn’t at the time and took the loss. That was one of my first trades.

Did that hook you? The rush of being up so much?

It hooked me, yeah. But it was a bad couple weeks after that, (laughs)

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How did you get out of that hole? How did you gather the courage and start again?

I didn’t. I stopped trading. I only traded for about two or three weeks and ended up losing half my account. It was money that had been set aside for college, but my parents said I could do whatever I wanted with it. Of course after they learned about those first few losses, they didn’t want me trading ever again. I took their advice and went back to high school.

But you did eventually come back to trading…

Yeah, I was in some sort of business class where they gave us $100K

in fake paper trading money to invest. Whoever made the most profit won first place and some sort of prize. I remember thinking, “I’ve tried trading already, I could win this.” I turned the $100K into around $600K. Of course I was doing some pretty stupid stuff to get those results, but I ended up doing pretty well, well enough to decide it was time to get back to really trading.

And that was three or four years ago?

Maybe three years ago. I don’t remember exacdy. It was right around the time the promoter Awesome Penny Stocks was huge. I don’t remember if it was PTOG, NSRS, or SNPK, but I just bought and held and ended up turning a small account into a $55K account. And that was my re-introduction to stocks.

Some of those pumps were insane. But now you primarily trade Nasdaq stocks?

Well, I started in a well-known penny stock chat room when PTOG, NSRS, SNPK happened. But those trades seemed like once-in-a-lifetime opportunities. You don’t see those kind of moves anymore.

And I suck at OTC. It’s not my forte. But I knew people were shorting these big moves on the way down, and I asked a moderator in chat,

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how do you short stocks? He satd you hit the “short” button on .

montage and then the “cover” button. (laughs) But you couldn’t short penny stocks in your E*Trade account…

Right. That’s when I decided to put some money into a prop account at SureTrader. My first short trade was HEA , think. I shorted loo shares and didn’t cover for a couple of days. I made two or three hundred bucks on the trade and thought I could get used to that! So I started messing with shorts and quickly blew up my account on SGOC

and GTIM. That’s when someone mentioned Nate and the chat room at Investors Underground. I’ve been with his service ever since.

And doing well, too. What made you believe that trading could be your full-time gig?

I was becoming more consistent. What used to be five red days was now four green days and one red day. When I had a month where I had 17 green days and only three red days, I knew I was getting better.

Although I did have some “oh shit״ moments along the way: FNMA, FSLR, and KATE. Those three trades combined for losses of about $75K. But besides those, the consistency made me realize I might be able to make this work.

What’s your daily routine when trading?

It s 7.30 a.m. here when the market opens. I wake up anywhere from 5.00 to 5:45 a.m. I go to the gym and run to get my mind focused.

Then I come back, eat breakfast, and develop a new trading plan for the day because last night’s plan might not look quite the same when stocks have gapped up, gapped down, had news, etc. Then I trade the market open. Usually that’s when most of my money is made, at the open or in the late afternoons. I try to take lunch hours off because that’s when most of my losses happen. Trying to predict where trades go during the chop or the lull is just a mess.

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Do you stay at your desk or do you literally leave?

Sometimes I take off. I’ll go have lunch and leave completely. Other times I’ll just go upstairs and take a nap, come back, have some lunch, and get back at it for afternoon trading. Unless there’s a really hot stock moving like one of the low float stocks currently. In that case I’ll stay at my desk the entire day. Then during late day trading, I see if I want to take any gappers. I hardly ever hold stocks overnight, but if I do, I make sure they’re awesome.

And how do you make sure of that?

I’m looking for good news released near the close, not earlier in the day. Or maybe it’s a stock breaking out on the daily chart. Or if I think the trade just has a great risk to reward ratio left to play out.

What do you do after the market closes?

I’ll have a little snack and then go to the gym for my main workout.

Cardio in the morning, weights in the afternoon. Forget about the market until I do my nightly scans. Trading is stressful and you need to get away from it to have a free and clear mind.

Do you review your trades or keep a trader’s journal?

Unless I really mess up on a trade, I don’t review my trades that much.

It’s not a rule of mine, I just don’t do it. Some say the more you review your trades, the better you can get, but at the same time it can sort of mess with you a bit. The stock market changes on a daily basis, and you have to change with it. If you keep taking the same trades or only looking for the exact same setups, it may not work in the exact same way again.

So you have to be flexible…

Right.

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What does your trading desk look like? Platforms, monitors, etc?

Macbook Pro for the Investors Underground chatroom. Then on my four monitors are my ETC account, my Wedbush account, and all my charts on DAS Trader Pro. I’ve developed a taste for the DAS Trader platform for some reason. I used to hate it, but now I just love it.

Do you use different accounts for different reasons?

I usually use ETC for longs and Wedbush for shorts. I keep it separate so if I find myself in a sketchy situation, like being short a low float stock that can swing from down 50 percent to up 50 percent intraday, I have the ability to box my shares.

Can you explain for newbies why you would box your shares?

Boxing can be sketchy sometimes. Some guys are doing it just to avoid losses. They know the stock is coming back down at some point but when? For me it’s more about the mental aspect. It has saved my ass a few times when I’ve been stubborn. Either I didn’t want to realize the I loss at the moment or the offer is just way too thin and I didn’t want to chase the stock up.

How do you pick your trades? Is it purely technical analysis or is some of it based on fundamentals or news?

I’m a strictly technical trader. Lately people are shorting these low float stocks based on the fundamentals, but they don’t realize everyone in the world is going short. The stock is actually about to squeeze.

And that’s when you go long in your ETC account...

Yes, that’s exactly what I do. I’m looking for long entries in stocks that are heavily shorted. That’s my specialty. That’s where I tend to make most of my money. Those are my bread and butter plays.

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Do you generally find that squeeze setup in the afternoon?

Usually what happens is in the morning and during the lull, people are shorting the stock, but it’s not coming down and it’s not going up.

They’re just getting tired of watching it. And that’s when you spot those trends. It seems like the squeeze always happens when everyone is tired during the lull or into close.

Do you use technical indicators like Bollinger bands or VWAP?

I use VWAP mainly when I’m shorting blue chip stocks, but I’ll keep it up on others because it gives you a small idea where the stock could potentially go. But I don’t really focus on it that much.

What kind of charts do you use?

I usually use 1-min charts. WTien I’m looking to spot weakness or a bullish sign in the stock, I’ll check the 15-min or 30-min charts just to get a sneak peek at it. Maybe check for lines of resistance or support.

But most of my trading is based off 1-min charts.

What’s your opinion on using social media for trading?

Social media, (laughs) Let’s put it this way: when I see a lot of people shorting a stock…

… makes you want to go long?

Well, I start looking for trends to go long. I start looking for a trend to confirm that my thesis on the long side is correct. I’m not going to short a stock or long a stock just because someone on twitter is doing the opposite.

Let’s talk about entries. Do you remove or provide liquidity?

Both. When I’m trying to long a stock, I tend to be a trader who is looking for dips on the way down. My average full size is between 10K

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and 15K shares, so I’ll start in with 2,500 shares on a dip, probably, and providing liquidity. And if the next dip is a higher low, I’ll add. If it’s a lower low, I’ll leave it alone. Basically I only add on higher lows and once the position is moving in my direction, not against. Then I’ll add the final shares on the breakout point, which is when I might hit the offer and take liquidity. I won’t have the very best average but I have a decent average. Decent enough so that if it goes against me, I have room to gauge whether or not the position is still good to hold or not.

So you’ll do a starter position of 2,500 shares on a trade you want 15K shares total?

Yeah.

And then you’ll add on a higher low. How many shares do you add on that first add?

I’ll just double my position. I’ll add another 2500 shares.

And by “breakout point,” you’re talking about a technical breakout, right?

Yes, and I’ll double my position there. I’ll double the position to 10K

shares long. If I’m right, usually the stock will shoot up before coming back down to test that breakout point once more. And that’s where I’ll gauge whether or not I want to add even more to the position. Most of the time I won’t, because I’m already in full size. But if I like the trade, and I like the risk to reward on the stock, I’ll add again. I’ll add up to four times total. That’s just the way I trade.

What about on the short side?

When I’m shorting into a parabolic and I think a top is coming, I don’t go in full size immediately. Same as when I go long, I’ll start with 2,500

shares short. If the stock keeps going, I’ll short another 2,500 shares.

If keeps going again, I won’t add any more. I’ll wait until that lower high shows up on the chart before adding to full size with stop on the

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prior top. People tend to add, add, add all the way up into parabolic moves, but I have a rule, which is I won’t add twice to a parabolic.

So you’ll take a short starter into a parabolic, but if it goes against you higher, you’ll add only once?

Yeah, I’ll add once, but if it keeps going past that, I’ll cut it.

Where do you cut it if it keeps going? Do you have a 10 cent stop or a percentage stop?

Usually for me, if I’m getting stopped out, it’s a starter or half position. I’ll either stop on a whole or half dollar mark, depending on where the stock is going. It’s really rare that the stock moves that much against me. It’s usually when I’m caught adding, adding, adding, so that’s why I implemented the one-add rule. It has saved my ass countless times. If the stock moves against me $1 per share and I have 5K shares, I’m down $5K. Is that a lot of money? Yeah. But it’s not enough to take me out of the game.

Do you use hidden orders to hide your size?

Oh yeah, I hide my size every time. I don’t trade size without hiding.

How do you determine your exits when a stock keeps moving in your favor? Do you have targets or do you let the chart tell you?

I don’t have targets. Usually if it’s a breakout on the daily chart, I won’t set a target because of the potential. I left a lot of money on the table in the past because I’d be done selling my entire position by the time that first breakout move happened. Now I tend not to sell any part of the position until the first big breakout or after. I like to start selling into the second and third move of a daily chart breakout because the odds of making more money in that situation heavily outweigh the odds of losing money.

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And when you say daily breakout, you’re looking six months or a year back to determine that the stock is making new highs above previous prices on the chart?

Yeah. If the last highs on the chart are from only three months ago, some of the bagholders from that push are probably still in the stock and ready to sell, so it creates a lot of resistance. But if the previous highs were six months or a year ago, it’s more likely those bagholders have sold already.

To your point of exiting into the second or third move, are you looking for it to speed up first, and then sell in increments?

Yeah, I start selling in increments as it speeds up. But something I’ve learned is that you can be more profitable waiting to sell positions until you see lower highs on a breakout trade. The notion of selling into lower highs instead of at highs sounds ridiculous, but you can’t nail top sells on every trade. You just can’t. With a lower high you can gauge it better because the chart is showing you some weakness, instead of trying to guess the top of a breakout.

That’s a good point. We’re always trying to guess the top.

It’s something that took me a few days to think about because it sounded ridiculous. I started experimenting with it and watching charts that were breaking out. I would long them, sell into the pops, then realize that the first lower high was actually higher than where I sold.

Especially if it’s a strong daily breakout like we discussed.

Exactly.

How long do you typically hold a trade?

Anywhere from two minutes to three or four hours. I’d say on average it’s 20 to 45 minutes. But I’ve held positions all day before, and I’ve held positions for a minute.

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How far do you let a starter go against you? You mentioned half and whole dollar marks. What if you enter a trade 40 cents away from a half dollar, do you still use that as a stop?

It’s a starter for a reason. But it really depends on the trader. If I lose 40 cents with 2,500 shares, that’s a thousand bucks, so it’s not going to kill me. You have to respect your starter positions. Do not add as the trade goes against you. If you’re long, you add on higher lows. If you’re short, you add into lower highs. If you’re adding into lower lows on a long position, you’re going to get yourself into trouble. You never know how bad a loser is going to get if you’re adding on the way down. Just have a set plan. If you’re long at $11, and your risk is $1, stop out at $10. Set your plan and trade your plan. If your intention is to risk a dollar to make two dollars, risk the dollar. Even if the stock goes 50 cents against you, stick to the dollar risk because stocks have a tendency to bounce back. Yesterday I was long 55K shares CDTI and I got bored and took it off for no good reason. And you know what it did the rest of the day—squeezed up over a buck.

Do you have a set percentage of your account you’re willing to risk on each trade or do you use a different measure?

I don’t have a set percentage. Every once in a blue moon, if I really like the trade and know I’m going to go balls to the wall with it, I’ll decide beforehand that I’m going to risk $15K to $20K to make $40K

to $50K. That’s 10 percent to 15 percent of my account at risk, but I’ll do that every once in a while. Although on the average trade, I’ll just risk 10 cents or 15 cents. I don’t really look at the numbers anymore because the more I look at the numbers the worse my trading gets.

Sounds like you look for trades with a 3:1 risk to reward ratio…

I usually look for a 2:1 ratio or higher. The winner will make up for the loser. But if I find trades I like with a 5:1 ratio, I use a lot more size and decide to risk X amount of dollars to make X amount of profit.

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So in a 5:1 ratio trade, you decide beforehand that you think the price will move five times larger than your risk?

Yeah, that’s what I usually do. I can give you an example. When it came out in the news that a doctor in New York had Ebola, I decided I was going to long 20K shares of APT at $4.50 flat. I told myself I would risk 10 grand to make 30 grand. Even if it only makes it to $5.50, it’s still a 2:1 trade for 20 grand profit. I ended up making $25K.

What’s your most reliable type of trade?

The squeeze plays we’ve discussed. They’re the most consistent. And there’s another setup I call a perk-to-resistance trade. It’s where an over-extended stock goes parabolic and you know it’s going to collapse. But the question is how high will it go first? You can’t really know for sure, and they play games with you. So you look for that previous intraday High of Day on the chart. The stock has since pulled back from that high, but now it’s climbing back up slowly, ABCD style like Nate teaches. This all comes from experience, but the play is to start shorting into that HOD break when it goes parabolic into that resistance. All of a sudden they pull the bids and the price collapses. It can be a tricky trade.

Right, because other traders might be longing that action for a breakout. But you’re saying they basically “stuff it” into the break instead of actually letting it break out?

Yeah, exactly. And once they pull the bids, it’s going down.

But there s really no way to know whether it’s going to break out or get stuffed. It’s more of a hunch?

Yeah, hunch or intuition type play, because you’re watching the Level II quote montage and letting it speak for itself.

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What are you looking for on Level II?

You’re looking for hidden size. That’s the key. They’re showing 100

share lots on the offer, but you see 1K, 5K, and 10K shares being filled there. All of a sudden, that price is just absorbing all the volume being thrown at it. And you just know someone is selling huge. It can be a hunch, but seeing it just comes with experience. You learn to spot that action, and it can be a profitable trade.

Do you have a bias towards going long or short?

Right now I’m 50/50. Just depends on the market. Usually I just try to get on the opposite side of the popular sentiment. Sometimes the trend on a stock will be up, and then it will start moving straight up. If the short interest isn’t really high enough to support a move like that, I’ll short the hell out of that stock. The move is just a result of longs chasing it up, so you know’ it’s going to come right back down to where it started. On the other hand, on the long side, when shorts attack a stock like GPRO and the sentiment is suddenly negative, there’s no way vou can short those dips. Usually you should buy those dips because eventually it stops dipping when there are no shorts left to attack, and it often comes right back up and starts squeezing.

How do you determine it’s a short attack?

It’s a stock you’re familiar with that has tons of short interest, like GPRO. And the price is breaking trend where you know shorts will pile on. All of a sudden the price gets clobbered, and you know people are shorting it “in the hole” late and other shorts will want to cover into the pull, so chances are the stock will go right back up to where it started falling.

It seems you’ve been trading less lately yet making more money.

I’ll trade one to three stocks per day. I don’t do more than that because I’ll get confused. You have to watch the montages on the stocks you trade to see what games are being played.

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So you generally watch every tick during a trade?

It depends on the position. If the stock is going in my favor I try to ignore it. If you pay attention to every little thing and every person who is buying or selling, it can frustrate you out of a good position.

Of course I’ll always keep an eye on it, but I try to ignore the noise.

That reminds me of “trade your plan”. Don’t let the noise influence you…

It's usually the quick scalp trades where I really must focus and watch Level II. When a stock is going down quickly and I’m trying to buy dips for a scalp long, or when a stock is going parabolic and I’m trying to short it, those are the ones I have to really focus on. But when I’m building a position into a trendline, I try to ignore the trade as much as possible because that trendline can go for an hour or two before it decides which way it wants to go. If you’re sitting there staring at it the whole time, you’re just going to get frustrated with the trade.

How big are your positions usually?

It depends on the stock. I try not to let one trade determine more than half of my buying power. So if I have $150K in the account and my buying power is 4:1,1 try not to put over $300K into one position.

How big of an account do you trade?

Suretrader has about $50K. Wedbush at Centerpoint has about $150K.

ETC at Centerpoint has about $115K. So roughly $300K to $350K in my trading accounts.

Do you have a rule where you wire out if an account gets over a certain amount?

I tend to wire out on a hot streak, because a hot streak either ends with you taking your money out or a trade taking your money back.

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And you're typically flat at night, right?

I’ll take one position, maybe two positions every two or three nights for a gapper. But the gap has to be highly likely, otherwise I won’t take it. I like to be cash at night because I like to sleep.

Do you watch your profit and losses during the day?

I try not to focus on it. The more I focus on it, the worse my trading gets. If I’m up $15K intraday, I might get ballsy and say I’m going to risk $5K on this trade when I normally wouldn’t. You can get yourself into trouble that way. Just take it trade by trade.

Do you use hard stops?

No, because the algorithms just mess with them. If you have a hard stop at $10 per share, the algorithms know there’s going to be a lot of stop losses there, especially because it’s a double digit whole number.

They’ll intentionally hit those stops to sell positions. That’s why I like to give myself a little wiggle room.

I think “wiggle room” is where a lot of new traders have problems because how do you know they’re just taking out stops? If you’re short a stock and your stop is at $10 per share, the price might spike to $10.07 or $10.10 before falling back…

Set your stop at $10.13 or $10.14 and hold to your stop. I do think you have to give yourself some more room due to the algorithms, but you have to be very disciplined with that. If it goes $10.20 or $10.30 and you still haven’t stopped out, you’re going to get caught adding to a loser. You don’t want to be in that position. Newer traders should probably use hard stops, but more experienced traders should not.

Do you have set amount of profit you’d like to make each day?

No.

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Do you have a maximum amount you’re willing to lose before you quit for the day?

Usually about $10K.

How much attention do you pay to the overall market or economy? Does it play into your trade decisions on a daily basis?

Just the S&P 500. I like to watch that while I'm trading big boy stocks like FB, TWTR, TSLA or GPRO. Usually the S&P 500 doesn’t really matter when trading other stuff like low float stocks.

What’s your biggest win?

My biggest win is APT. It was a $40K profit.

What happened?

Well, you know the whole thing I said about not adding, adding, adding into parabolics? I did just that. APT gapped down huge in the morning and then ripped back up pretty nicely. I started shorting in the $9s, then $9.50s, and then $10s. Before I knew it, my broker cut my buying power when I had 60K shares at a $10.00 flat average. At this point APT was trading in the $10.60s, so I was down around $35K. But then that perk-to-resistance play started happening. They just started stuffing the hell out of it. It went right back down to $10.00 and I was even. But I decided to hold for a bit. It ran back up to $ 10.20s, then started sinking back down. It put in lower highs and all of a sudden we got the $9.50s flush. That’s when I started covering.

I ended up covering the last batch of shares around $7.40 that day for total profit of $40K and change.

And by “they” you’re referring to the funds running the stock?

If I tell you I know there was a fund behind APT, I’d be lying because I don’t know there was a fund behind it.

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Right, but we all suspect it…

The type of moves it did, there’s definitely a fund behind it. There’s no way a stock gaps down 40 percent and then goes green on the day without someone behind it.

So basically you had a 1:1 risk on the APT trade. You were down $35K and ended up making $40K.

(laughs) Yeah, I guess so. I didn’t really like that one. I got caught with my pants down. My best trade to date, but the risk on that was crazy.

How big of an account were you trading then?

My account held $21 OK, so I was down like 17 percent of the account.

What were your emotions like?

Honestly, I almost broke one of my screens. I was really mad, and I asked myself, how can this keep going? When you put yourself in the position to ask yourself that, you know you’re in a sketchy situation.

You should be cutting your losses. The only thing I had in my favor was the trend line. And risking on the prior top. You can look at the daily chart and see there was about a 20 cent difference.

The current price was 20 cents away from the prior top where you would have stopped out?

No, it went 20 cents over the previous top.

There's that ‘*wiggle room.” So where would you have cut it off ?

You don’t know, do you…

My broker would have probably covered me at $11. I wouldn’t have blown my account, but at the same time they wouldn’t have liked that risk. They already cut my buying power that day. I had nearly a million in buying power to start, but they cut it to $750K, so I feel like they

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would have covered my position around $11. I think I was about 20

cents away from having my broker cover the position for what would have been my largest loss to date.

What is your largest loss?

KATE. A $23K loss. I got caught trying to buy the dip on Aug. 12, the day it collapsed. It fell from $42, and I started long 500 shares at $32. I kept buying the dips and somehow ended up with 20K shares at about a $31.50 average. It sunk to $30.50 before I finally cut the loss. It was a big hit, but it fell to $27 after that, so I would have blown my Suretrader account that day had I not cut the loss.

So you were making the mistake of adding on lows…

Exactly. That’s what I was doing. It’s an example of why you shouldn’t do it. Have I gotten better about it? Yes. But I could be caught doing it tomorrow. You have to respect your plan, that’s all you have to do to survive this market. If you don’t respect your plan, good luck to you.

How did you come back from the loss?

I started grinding back. I ignored my Suretrader account for the most part and still don’t even trade in it much. My Centerpoint account was on fire, so I just kept trading in that account. The loss was in the back of my mind, but I toned down my trading and starting making $1K

and $2K days again. For a month or two. Then I started pressing again at a perfect time in the market during this low float craze.

Is that how you handle big losses or a losing streak? Go back the next day and start grinding?

Yeah, usually after a big loss I start grinding. That’s the only way you’re going to come back. If you start pressing bigger and bigger the results are just terrible. You put yourself at high risk trying to make it all back at once.

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Have you had unprofitable periods in your trading?

Yeah, the first four years 1 was not a profitable trader. I kept losing and losing. I questioned whether trading was for me or not. But every once in awhile I d have one good trade that would knock out five losses. I started to realize I could be good at this. But those first years were tough. My parents were against it and wanted me to go to college to become a lawyer or something, but I really wanted to be a trader.

How did you sustain four years of unprofitable trading and still believe that you’d become profitable one day?

Well, I’d go three or four months trading an account before I’d blow it up. It wasn’t me just blowing one account, restarting, then blowing another. I had periods where I was trading fairly well. But it only took one trade to blow up. And that’s what happened three or four times.

How big were your blowups?

The first account I had was a $40K account. I lost $20K before I pulled the plug on it. In another account, I started with $5K and grew it to S12K before blowing it. I opened the next account with $10K and blew’ that one, too. And the other account I blew was $23K.

And you borrowed money from relatives the last time, right?

Yeah. Of course they’ve been paid back now, but I had to hit up my sister and little brother to fund my restart.

And turned it into what you have today…

Yeah, since June 2011.

Did you ever have a specific turning point in your trading career?

(laughs) Yeah, I shorted NEWL on a Thursday pre-market at $6.00, and it halted shortly after. I was scared shitless.

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I remember that. I think I told you it was going to be bad news for NEWL and you were going to make a ton of money…

Yeah, everyone was telling me the halt was good for shorts, but I had about 10K shares short, so I was scared. Meanwhile PLUG was setting up nicely for a long, so I bought 80K shares PLUG while NEWL was halted. Monday I sold PLUG for around $37K profit. Then Tuesday morning, NEWL re-opened after the halt at about $2 per share, so I made like $35K on that. Then I shorted PLUG and made about $13K

more intraday. Along with some other trades, I had made nearly $100K in a few short days. That was the turning point in my career.

Because you realized you were capable of making such a large amount of money in such a short time?

Yeah.

Even up until that moment, it really hadn’t sunk in yet that you could be successful trading?

No, not until then. Then I knew I could do this.

What’s your proudest moment in trading?

DOMK. It was a pump and dump company. The stock had run from something like 10 cents to five bucks a share, so I shorted it. Then 20

seconds later a well-known penny stock guru shorted it as well. I ended up making about $10K, the most green I had ever seen in my entire life. I covered dead bottom and the guru covered like 10 cents higher. It was a proud moment because I had just beaten this guru.

Am I wrong for thinking that way?

You basically bested someone you perceived as a better trader than you at the time?

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Then no. Making trades before the crowd, or in this case, before the guru with his own crowd, is just a sign of your improvement.

Man, I’ve been having days that are ridiculous. It’s hard for me to even believe it. Sometimes I’m at the gym after trading and I’m laughing.

People are staring at me, thinking, why is this kid laughing? My account says I made S30K today, but my head doesn’t realize it.

Just poker chips, right?

I have nearly S350K in trading accounts, S100K in the bank, and $75K

invested with a buddy of mine. It makes me realize I’ve come a very long way in two and a half years.

Do you still worry about going broke or blowing up?

Yeah, I’m a pretty levelheaded guy, but I had a panic attack last week. I was trading in my dream and woke up at four in the morning thinking I was down $185K. I ran down to my desk to check my open positions. I had no open positions. It was just a bloody nightmare.

That has to be a scary moment.

It has happened a couple times, but the one last week was the worst.

That’s exactly why I don’t like to take gappers overnight.

Do you think trading is an innate skill or can it be learned?

I wasn’t profitable for the first four years. I’ve heard traders say trading is all instinct, but it’s not. You might have the innate skills to do it, you might have a talent to do it, but you still must learn it. Once in awhile, instincts do come into play, but those instincts come from experience.

Does one person have a natural advantage over another person? I don’t think so. Going unprofitable for four years and then going two and a half years making money, that’s not instinct. It’s because I learned how to trade.

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Do you think gut feeling or instinct is crucial to your now that you’ve learned how to trade?

No. It’s more about consistency. Taking trades over and over again Every once in awhile when you see a trade line up, you might get a gut feeling that it’s going to be a big trade, but I don’t think it’s crucial to my success.

What are you currently doing to make yourself a better trader?

I’m trying to develop into the person I need to be. Obviously I’m 23

years old, making a lot of money… I ’m still soaking it in. I think that’s why I had that panic attack, because I’ve never seen so much money before. I’ve never done anything like this before. So now I’m trying to become the person that it takes to be a million dollar guy.

Million dollar guy?

I want to hit a million dollars in profit next year. And I think I’m going to do it. But more than just making the money, you have to be able to sustain that level. Like Bao always says, you only have to get rich once.

I think I have my trading down to where I need it to be right now.

That doesn’t mean I’m going to stop learning, because you never stop learning. But I want to expand my mind to be able to sustain that million dollar level. Because you can lose all your money at any time.

Sounds like you’re discussing becoming a better trader mentally.

Yeah, mentally. The technical stuff you can learn, but one thing trading will never teach you is how to become a better person or how to fix your ego.

What’s something you do that you think other traders don’t do?

When I see a trade line up, I take it. Some traders might see a trend but not take it because they have confidence issues, whereas I’ll just take it. I think that’s what separates me from other traders. That’s what

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separates guys like Nate, Phil, and all the other great traders on Twitter and in chat. If they see something they like, they take it. I hear people say “woulda, shoulda, coulda”, but they didn’t take it because they’re not confident.

Perhaps one of the downfalls of a beginning trader?

Yeah, lack of confidence. And their inability to take losses. Some traders don't want to be wrong and they let ego get in the way, but they’re going to eat shit doing that. You humble yourself before the market humbles you.

What do you think other traders do better than you?

What other traders have over me is fundamental analysis. I’m a technical trader. If you tell me a company’s PR looks like shit, I don’t know how to trade that. That’s where I lack in my trading. That’s what these big name guys have over me. They’re great technical traders as well as fundamental traders. My main goal for next year is to learn the fundamentals. Because right now I might cover my short based on technicals intraday, but these guys have read the PR and know how bad the news is and might hold their short overnight.

And cash in bigger the next day.

Exactly.

What are the trading rules you live by?

My main rule is to stick to your plan, which means cutting your losses.

That’s obvious. Second rule is to come prepared to the stock market.

If you’re walking all sloppy from big losses or whatever from the day before, you are not prepared. I also have a lot of little rules, like don’t trade parabolic moves into close, only trade during normal hours, and don’t short PRs. I could go on and on. Usually during the week, I try to get to a point where I’m not breaking any rules.

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If you had to pick one thing, what’s the most important thing to remember when trading?

In the end, you’re lighting to take each other s money You must hold onto your money.

What are the traits of a successful trader?

One thing I’ve noticed about successful traders is they have their life together. Nate goes to the gym, has a wife and house. He has his life in order. Phil has his life in order. The most successful traders out there have their personal lives in order.

How do you judge success in trading and life in general?

Success in trading is obviously based off numbers. People can define success in life many different ways. A person can say they’re successful because they’re paying their bills on time, they have a family, they have a car… Is that a successful life to me? No.

What is a success life to you then?

I’m young. I don’t have kids yet. I don’t want to get married yet. So success for me right now is being able to have extra money in the bank. I’m living the life I want to live. If I want to buy a plane ticket to visit Australia, I can. If I want to go fishing tomorrow, I can. I have no limits right now.

What do you wish someone had told you when you were first starting out?

Funny thing is, I was told, but I never paid attention. I’ve notice newer traders get upset when they leave money on the table, but you don’t go broke leaving money on the table. Could you have made more money? Yes. But you don’t go broke taking profits.

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Do you need to be emotionless and robotic when trading?

Yeah, you do have to be like that. You can’t trade your P&L. Although it doesn’t affect my decisions anymore unless I’m up huge on the day.

If I'm up huge, I might quit trading because to me, it’s already been a successful day. But once you let emotions get to you, it can get messy quickly. You have to be robotic in a way. When a trade hits your stop, you cut it. When a trade sets up, you take it. If you don’t, someone else is going to take that trade. Someone else is going to take that money.

Do you have any advice for leaving emotions out? I think a lot of traders lack that ability and would like to improve in that area.

It all comes back to confidence. If you don’t take that girl out, someone else is going to take her out. You have to have confidence to take the trade. I would say if you’re too scared to take a position when you see the stock is lining up the way you want it to, there’s only one reason—your position size is too big. If you’re afraid to risk $100 to make $300, you’ve got to cut down your size. Go half or even 25

percent of your regular size. I think that’s what messed me up in the beginning. I would try to take three or four thousand share positions, which was crazy relative to the size of my account back then.

Are you able to step away from the market for days or weeks?

Right now it’s proving impossible. My plan was to take this entire week off, but so far I’ve successfully done that for half a day. I’m addicted to my work. I love what I do.

So you consider yourself an addict?

(laughs) There’s a difference between an addict and being someone who’s dedicated. I see myself as being a dedicated person. If someone opens a business, they’re going to be dedicated to that business. Just because they’re minding the store every day, doesn’t mean they’re addicted to it. They’re dedicated and motivated. There’s a fine line.

Don’t cross it.

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“I didn’t want to buy a stock when I was 15 and sell it when I was 80.”

Phil Goedeker (@OzarkTrades) is a 30-year־old trader from St. Louis who turned $5K into a million dollars in nine months while still a senior in college.

His parents weren’t wealthy but always put him in the best schools, stressing the importance of not only a quality education but staying busy and being physically active. While earning an accounting degree and his MBA, he played collegiate volleyball and some sand volleyball in the A VP league before an injury to his back put an end to his athletic days.

He has always loved the market, and although his parents wouldn’t let him be sedentary or play video games as a child, he certainly developed a knack for pushing buttons because he currently earns over $1 million a year in trading profits.

How did you first learn about the market?

When I was 15 or 16 years old my family vacationed at a place called Lake of the Ozarks in Missouri. It’s a huge lake with like 1,300 miles of shoreline. It’s a big party lake, and there’s a lot of big money, fast boats, and huge houses down there. I started thinking I would like to

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have those things and a life like that. So what can you do to get them?

You can get a job as a doctor or lawyer, but those professions take a lot of schooling, effort, and energy, and you can’t do them until you’re older whereas I thought anyone could try trading and learn the stock market, and at any age. That’s when I first became interested.

Did you try trading at all at that point?

No, it was just studying, doing things like reading the business section of the newspaper every day and finding articles about the stock market. Although I did start investing in some mutual funds with my dad. He didn’t know much about the stock market, but he knew a little about mutual funds, so I bought a few with a couple hundred bucks.

After that I just kept doing more and more research and studying the market. It was obvious people were making big money in the markets, but I was trying to figure out how. It was a slow process of familiarizing myself with the terms people were using, like “going long” or “going short” and basically just trying to figure out how to make money trading.

So at 15 years old, did you know you were going to be a trader?

No, I had no idea. I didn’t go out a whole lot when I was younger.

Sports took up most of my time, but I just wanted a hobby, a side interest. The market filled that role because it all seemed like a game to me, just a big game you try to figure out how to beat. I heard about people like Warren Buffett, Peter Lynch, and even Jim Cramer, who were beating the market and making huge money. I thought why not me, even on a much smaller scale. My interest in the market just slowly evolved. It went from reading the business section to reading books to researching on the Internet, which was done at the library back then because we didn’t have Internet at home yet.

Take me up to the moment you decide to place your first trade…

First I read several books, but most of them were about long-term traders or investors like Buffett, Lynch, and Benjamin Graham.

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Buffett’s thing about buying a stock and never selling didn’t appeal to me at all. I wanted to sell. I wanted to make money. I didn’t want to buy a stock when I was 15 and sell it when I was 80. So long-term trading never appealed to me. But I kept researching anyway, and somehow I picked up on day trading. I studied the market for years but didn’t start trading until I was 18 or 19 and a sophomore in college. Freshman year I had really gotten into studying charts and patterns and realized that was where the short-term traders were making their money. I realized technical analysis is what I wanted to start doing, so I opened my first brokerage account with my mom as co-signer in order to get a margin account.

So you placed your first trade sophomore year...

I don’t really remember my first trade. When I started I wasn’t even day trading, I was swing trading. I opened the account with only around $3K and was going to school and playing sports full-time. I could only trade when I had free time, but I still placed at least a couple trades per week. I’d buy a stock that I thought might be breaking out and hold it for a few days or a couple weeks.

Have you been trading continuously since then?

Yeah, for the last 10 or 11 years or so.

How many years did it take to make trading your primary source of income?

It took two years before I was profitable. I made about $3K working for my dad in his warehouse each summer and then I’d slowly lose it over the course of the school year. I had a few wins in there but most were losses. I did that both sophomore and junior years. I was studying the market more and more, but I just couldn’t find my niche.

I couldn’t figure out how to be consistent. Then my senior year I figured out how to go short. I figured why not since every stock I picked went down anyway. Maybe I could just pick stocks that go down for a living.

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How did you do?

My first short ever was CAFE. I think the company was named Host America. It was trading at $4 or $5 when they put out a press release mentioning something to do with Wal-Mart. In three days the price shot to $15 before sort of settling a bit. That’s when I shorted it. I went all in with my $5K account and within a day the stock was halted.

I panicked because I had no idea if it was good or bad. I was reading Yahoo! message board posts that CAFE was going to open at $50. I thought I was going to owe my broker $30K or $40K. I had no clue.

Five weeks later it opened for trading at around $4 or $5, so my $5K

was now worth around $15K. This was right at the start of senior year, and I thought, well shit, this is what I’m going to do. I’m going to short! And that’s when I really started to study overbought patterns that shoot up and then come right back down. I quickly got on a huge hot streak and by the time I graduated in May I had turned that initial $5K into a million bucks.

In under a year, wow…

Yeah, it took about nine months. But when I think back on it, I had no rules, no money management, and no position sizing. Every stock I ever longed or shorted, I went all in. Whether my account was $30K, $100K, or even a million bucks, I was all in on margin.

Dangerous…

Yeah, but it was just eight straight months of winners. That huge hot streak helped me get to a million bucks. When I graduated I was cocky as hell. I figured by the time I started my MBA program in the fall, three or four months later, I should have at least three or four million dollars in my account. Needless to say, I blew up and lost $500K in the next two or three months. The market turned south, I didn’t see the same type of stocks, and I had no rules. I blew up and lost half a million bucks. I immediately wired $400K out of the trading account into the bank and started over from scratch with S100K.

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And you’ve been profitable since then?

Yeah, I had one negative year, but nine vears or so profitable trading.

So you never had to get a job after college?

No. I have worked on and off for my dad's business here in St. Louis my entire life, but I’ve never had another job.

You mentioned reading books and researching, but did you do anything else to educate yourself along the way?

No, 1 actually didn’t know of any chat rooms until maybe three years ago, and I didn’t join Twitter until two years ago. It probably took me longer to learn and longer to become profitable, but everything I learned was self-taught. It took tons of time, patience, and a drive to succeed. When you put your mind to something and do it almost every day for a couple years straight without making any money, there are times where you doubt yourself, but I just stuck with it. I continually saw the pattern of stocks that would shoot way up and then come right back down, but at the time I just didn’t know it was possible to go short. Once I figured that out, everything changed.

Did you ever backtest your strategy, or was it as simple as just looking for an overextended chart?

That was basically it. I never really backtested. It was just looking at charts and figuring out what pattern did what. I’ve just loved the market my whole life. My mind is always on the market. When I wake up. When I sleep. If I get up in the middle of the night to go to the bathroom, I think about a trade from that day. It became ingrained in me to remember which patterns did well and which did not.

I’m sure your wife loves your preoccupation with the market…

(laughs) Yeah, she wants to throw my phone out because I’m always checking quotes.

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What’s your routine on an average trading day?

I get up with my son, so it s usually an hour and a half before the market opens. I immediately turn on my computer to see what’s moving pre-market. What’s the news? How are futures trading? Are they up or down? What are the biggest gainers and losers so far? After 10 minutes I’ve got a feel for what’s going on out there. My biggest preparation actually comes the night before when I run through all my screeners, look through all my charts, and figure out what I’m going to nail the next day. I’m not a huge fundamental analysis guy who’s great at deciphering press releases in the morning. I do want to know what’s going on, what’s moving and why, but it’s not a huge part of my game.

So you consider yourself a technical trader?

Yeah, I would say I’m 70 percent technical analysis, if not more. I follow the chart and watch Level II. I think whether you’re a technical or fundamental trader, price action and volume are what matters. Take a stock like PLUG, for instance, when it ran to $11.50. The fundamentals sucked just the same when the stock was at $4, $6, $8, or $10, so you couldn’t short based on the fundamentals alone.

You can still get run over…

Yeah, so at the end of the day it’s price action that matters. It’s the only thing that ever matters, so that’s what I focus on. I would like to learn more fundamental analysis, but TA is where it’s at for me.

Do you review trades at the end of the day?

Rarely. The only thing I will do is check Gainskeeper or Prop Repots programs that tally all of your trades, to see what kind of trades are my winners and what kind of trades are my losers. I know I’m making all of my money shorting stocks like DGLY a $30, LAKE at $30, $PLUG

at $11, and APT at $9 or $10. Extremely overbought situations.

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Can you say anything more about the scans you’re running?

I run my scans on Finviz.com, looking for a stock that has daily volume over 100K shares and price over $1. I look for the biggest daily, weekly, and monthly gainers. If I see something I like, I put that ticker into BigCharts, which is the charting service I like and am most familiar with. Basically I’m looking for overbought charts. I want something that looks extremely parabolic. 1 do also look for oversold opportunities to go long, but it’s so much easier for me to find an overbought situation that I think is going to fall than it is to find a falling knife that I think is going to bounce. Some knives keep falling dav after day after day, and it’s not where I make my money.

What's your trading desk setup? What platforms and tools?

Gateway desktop. Nothing special. Four 27” monitors, three arranged side-by-side and one double-stacked. I still trade with the Scottrade account I opened when I was 18 because I’m familiar with it and they’ve always had great borrows up until recently. Apparently quite a few traders have blown up lately so any stock with volatility is being restricted. I place most of my trades through Centerpoint Securities using Sterling Trader Pro with my Wedbush account and DAS Trader Pro with my ETC account. I also use Equityfeed to scan intraday for the biggest gainers on a 2-, 5-, and 10-minute timescale. Equityfeed is good for when the market is slow and nothing from my previous night’s watch list is performing. I can see what’s moving and if there’s anything going parabolic out there for a nice scalping opportunity.

Which platform do you use for charting?

I use DAS Trader for my intraday 1-min and 5-min charts and BigCharts.com at night for scans.

What about chat rooms and Twitter?

Investors Underground is the only chat room I use. I’ve tried a couple others, but the service wasn’t great. Chat is good because news is

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usually posted in a timely manner and you’ve got a handful good traders posting their ideas. It’s also helpful because stocks get brought up that might have fallen off your radar. Twitter is good because I can filter out who I want to hear from and who I don’t. If one of the 35 or 40 traders I follow has a good idea, I’ll look into it.

Do you have specific criteria a stock must hit before placing a trade, or do you just play them as you see them?

I’m really just looking for something that’s overbought. When I run my scans, I want to have at least five candidates for trading the next day. But it all depends on how the market is behaving. I try not to short into strength. Although if something is going truly parabolic, straight up, I might try a short, but I usually like to wait for the trend to break before jumping in. Why fight the trend? If something’s going up, I’m not touching it. I prefer a breakdown on heavier volume when sellers are jumping in.

How biased are you towards the short side?

I’d say 90 percent of my trades are shorts.

Are you using technical indicators like VWAP, etc?

I have never used technical indicators. The only thing on my chart is volume and price. It wasn’t until as recently as two years ago I really started looking at Level II as well. But it’s not as efficient as charts.

So a stock goes parabolic, are you slamming the bid to get short?

I don’t mind taking liquidity and having ECN fees add up, but it all depends on the trade. I definitely try to get in on the offer, but since I prefer to wait for a downtrend first, preferably on some increased volume, it can be quite difficult to get in on the offer at that point.

You’re almost forced to take liquidity to get in on a short like that.

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Entering on a break of support or just the first sign of weakness?

First sign of weakness. But when it does break support, I’m jumping in with both feet. I scale in and look for confirmation. Say I want a full position of 10K shares. I might take a starter position of 2K shares first. Then if the stock stays weak and it’s still downtrending, I add a couple thousand more here and there as it goes. I will often have to chase a trade on the downside, but I actually kind of prefer it that way rather than getting in bigger and adding to my losses as the stock goes up. I would rather add to my gains than try to guess the top. Guessing the top is a fool’s game unless you see something going truly parabolic on the 1-minute chart. Then you might take a stab at it.

Are you always starting with about a fifth of a position?

It’s probably around a fourth, but there’s really no set amount because it depends on the setup. It doesn’t happen too often, but if I see something like DGLY at $30 and it tanks two bucks very quickly on huge volume, I might get in a half or two-thirds position right then and there. When these huge parabolic charts breakdown and finally lose momentum, the end can happen so quickly there’s hardly enough time to react. You just have to get in and get out.

What’s the process on a more typical trade?

Yeah, the majority of trades are not those huge setups. The typical trade is what I would call mediocre. I cut my position size way down. I won’t take a half million dollar position, and maybe it’s only 3K or 4K

shares. And I will scale in a lot smaller. I never jump into two-thirds of a position immediately on a mediocre setup. When the huge reward isn’t there I don’t want to take that huge risk.

Where would you stop out? Do you have a hard stop?

No, I never have. I never have hard rules. It really depends on the price action. If I start an early short on a stock that’s going parabolic, I probably won’t even take a fourth of a position. I’ll take something

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really small like a tenth of a position. Then I can really give it time to add in again, because I don’t want to have any conviction on a trade until I see downside. I never want to have a full position on something that’s still uptrending. I want to see it breakdown first. So if it does the opposite and breaks out to the upside, I get out immediately. I take the small loss and move on. I don’t want to take big losses. In fact I would rather get in and out of a stock five times before making money than get in once and stay in while it goes against me and the losses mount up. I tried the add, add, add to a loser method when I was younger and it never worked for me. So I don’t mind commissions and fees adding up if I can just keep my losses to a minimum.

Some guys will add to the moon just so they don’t take the loss…

Yeah, I don’t have that conviction. I don’t want those huge losses. I would rather make less and risk less every day. I never want to put so much on the line where I could blow up and lose $500K. That would be demoralizing. You would want to quit. Trading is a mental game.

Once it gets in your head, you’re screwed.

What’s your most reliable trade setup?

My most reliable setup is shorting a stock that’s up huge three or four days in a row, something like APT which went from $4 to $10 in three days. At that point you don’t even care what the news is really. In fact most of the time the news is bogus with these small caps anyway, but I’m very confident that a stock that has run extremely hard for three or four days is going to offer a nice pullback.

Is that also your most profitable setup?

Yeah, I would say so. Although they were probably more profitable when I used to hold them a lot longer. When I started making money going short my senior year in college, I would hold these big chart shorts for weeks and just let them ride themselves out before covering.

But with my current brokers you’re really only allowed T+3, or basically four days, so I don’t hold as long as I used to.

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How many trades do you typically realize intraday?

I probably trade five to seven tickers, but with scaling in and out there might be a hundred trades. If I have to get in and out of a trade several times before nailing it, and then adding on the way down, I might place 30 or 40 trades on one ticker.

How many positions are you comfortable holding at once?

I’d say three to four trades max. If there’s a great setup, something up huge where I think I can make $20K or $30K on it, I’ll usually zone everything else out. I’ll forget the stocks where I was going to make $500 or $1K in order to focus on the main one. But if there’s no huge trade out there and everything’s a scalp, I’ll take three or four trades.

I’ve done more before, but I’m placing trades with multiple brokers, and before you know it you’re down on this one, up on that one, and you’ve missed taking profits on another one. It’s just too much.

How big are your positions generally?

I have four brokers for day trading with about $500K in each account, so that gives me about $2 million in buying power. I’d say my positions are anywhere from 20 percent to 40 percent of the account.

If I have more conviction, I’ll go in more than that.

How often are you flat at night?

My trading has really evolved over the last several years to where I rarely take positions overnight. I like to take profits intraday. There’s nothing worse than waking up $5K or $10K in the red. Sure, you could be up a lot of money too, but starting the day down $10K just isn’t worth it. It puts you in a bad mood and messes with your mind.

Not worth the aggravation…

Yeah, exactly. And I think taking overnight positions is how a lot of traders end up blowing up, too. Start off red and then make it worse.

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However there are certain positions I don’t mind taking overnight stocks like LAKE at S30, something truly overbought and parabolic But then again, with the Ebola press releases coming out what seemed like even’ hour, that stock could have gapped up, so it’s all risky. Bur I sleep better when I’m in cash overnight.

Do you set a target before you place a trade?

Not a firm target. When I place a trade I’m looking at short term charts but also long term charts to see the bigger picture. I take a look at the 3-month chart or 6-month chart to see how far the stock could potentially fall. I’ll have that number in mind, but I usually don’t have the patience to hold for that entire move. Just like I’m scaling into a trade, I’m scaling out. If it drops 50 cents, I’ll cover a quarter of the position. If the price falls another 25 or 50 cents, I’ll cover another quarter. Scaling out all the way down.

Do you keep the last portion of the short for a homerun?

I usually don’t. I never just hold something to see where it can go the rest of the day or week. I usually take profits and then possibly start looking to re-enter the short if the stock bounces.

Are you taking profits on any flush with volume or at chart-determined areas like previous support?

It’s usually on a flush.

How long do you typically hold a stock? Is it hours or minutes?

On average, probably half an hour to an hour. But the best money is usually holding several hours or all day, at least on bigger setups.

What do you do during the trade? Surfing the web or analyzing?

I’m studying the chart and Level II. I’m also probably watching the charts of competitors, too. If I’m trading American Airlines, I want to

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have the charts of Delta Airlines, United Airlines, and maybe Southwest up, too. XXliat are those charts doing in comparison to mine? If the other three airlines are tanking, I might feel a bit better about my short, but if they start to bounce, I might think twice. But yeah, I keep a pretty steady eye on the trade I’m in.

Are you looking at your P&L?

Oh yeah. Some traders claim it’s not about numbers, it’s not about money, but it is to me. What else is there? It all comes down to what you’re making. I don’t necessarily take profits or place trades based on P&L, but I want to know how much I’m up or down.

Just don’t let it influence your trade decisions…

Yeah, don’t let it influence you. But I want to know what I’m up or down because if I go into a trade thinking I’m going to make $2K and I’m already down $1K, my risk/reward ratio is way out of whack. I should be getting out. So yeah, I keep an eye on it.

Any advice for other traders on how to let winners run?

Patience. I’ve gotten lazy about it, but what I started to do was print out all the biggest winners from the previous year on BigCharts.com.

I’d print out the chart of anything that went from something like $2 to $20. Then I’d print out another chart of the same stock as it went from $20 back down to $4 or $5 or whatever. I kept copies of these to remind myself that these patterns would repeat themselves over and over again. They go way up, then come way down.

It gave you the conviction to hold…

Exactly. You gain confidence. Looking at those patterns over and over gives you confidence to take trades like LAKE and DGLY.

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You know they’re going to come back down but timing is key…

Yeah. In hindsight of course shorting LAKE at $30 was the obvious play, but at the time it seemed like even* day another Ebola headline would hit and the stock could have gapped another $5 or $10. So it’s hard to have conviction to hold no matter what. But Eve got 50 or so charts in my desk I can look at, all with the same pattern, all with the same crash in the end. Once the fear and emotion subside, the momentum disappears and the price comes back down.

Talk a little about risk management. How do you handle it?

Improving my risk management is probably the most important thing I’ve done in the last couple years, which has led to me having the best two years I’ve ever had. I went back and reviewed my trades from the previous five or six years and looked at the setups that produced $30K

to S50K wins and the setups that produced $15K to $25K losses. I could tell the difference between them. So if it’s not one of the good setups, either A) don’t trade it, or B) cut your position size way down.

So part of risk management is knowing when to size in or not. Review your trades and figure out where you’re making money and where you’re losing money. If a particular setup doesn’t make you money, why the hell are you even trading it, let alone with size? The other side of risk management is simply cutting losses quickly. I don’t like doing it, but like I said, I don’t have a problem taking several smaller $1K

losses before finally getting it right. Keep the losses small.

What was the difference you discovered between your big wins and your big losses?

The charts just weren’t as good for the losers. The setups weren’t as good going in.

You forced those trades rather than let them come to you?

Yeah, you force it when you’re bored. Let's face it, if you sit in front of your computer for eight hours a day trading, you feel like you can’t

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end the day without making at least a little bit of profit. If you sit all day without placing a single trade, then what the hell are you doing? So you end up forcing trades. My most profitable trading occurs when the setups just appear. They’re so good you just know you’re going to make money. You don’t need to force those. But if I enter a trade with huge size on a mediocre setup, then yeah, I deserve to lose money.

Do you aim for a set amount of profit each day?

No set profit. It all depends on how good the setups are. Quite often it takes several days to nail a good trade. You think you’re going to make money today, but it doesn’t crack. The next day you try again, but it still doesn’t crack. Maybe the third day it does finally crack. So I never go into a day with a profit target in mind. I’m not a trader who makes $2K to $3K a day consistendy. I make money in chunks, $10K here, $15K there, and then maybe nothing for a week. In the meantime I’ve been working on improving my scalping, $1K here, $500 there.

Do you have a max loss amount where you’ll tap out for the day?

I like to tell myself it’s $10K to $15K, but no, not really. Because it’s hard to walk away if you’re down $10K. You tell yourself that it’s going to crack next time, I guarantee it, so you stay. But I do think it’s important for most traders to have a maximum loss point where you just walk away, because I’ve seen it snowball into bigger and bigger losses. It gets in your head and that’s no way to trade. You can’t trade unless you’re thinking clearly, and when you’re losing money quickly, you’re definitely not thinking clearly. It’s best to just walk away. At the very least, take a break, go outside for 20 minutes and sit in silence, just get away from your computer. Once your head is clear you can decide whether or not to continue trading.

What’s your biggest win?

I think it was my senior year in college. There was a company called Empire Resources, and I made around $400K on it.

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Was that a parabolic chart?

A short, yeah. Parabolic. The stock went from around $10 all the way to $60 within two months. Then it went from $60 to $40 in two days, which is where I made the first huge chunk of profit, maybe $200K.

Then the stock bounced to around $47, where I re-shorted it and rode it back down to $30 in like three more days. It must have been a pump and dump, but I really didn’t even know what a pump and dump was back then. It just fell so quickly.

That was a big year for you…

It was sweet. I was a senior partying in college and had the money to go with it. I was happy about the money, I’m not going to lie, but even more so, after slaving away studying the market for hours literally every night, I had finally figured it out. I finally realized I could do this for a living. I didn’t need to go get an accounting job or study for my CPA test, I was going to trade! That $400K trade was the trade that put me over a million in profits for the year.

What’s your biggest loss?

I honestly don’t remember one giant loss. I’ve had several losses between $20K to $50K, but I’ve never had a $200K or $300K loss. I did have one red year, though.

What happened?

After making a million senior year, I gave back nearly half of it during the rest of the year being stupid. So I wired everything out except $100K and started over from scratch. Back to basics. The next two years I made nearly $500K each year. I was 25 years old with profits of about $1.6 or $1.7 million. After taxes I had about a million bucks in the bank, so naturally I was cocky as hell and thought I could do no wrong. It was time to step up my game. $400K to $500K per year just wasn’t going to cut it anymore. It was time to put $500K into my account and increase position sizes. I started trading large caps and

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soon learned of triple leveraged ETFs. This was around the time of the financial crisis, 2007 or 2008, and FAS and FAZ, two triple leveraged financial ETFs, were making unreal daily price swings. I started trading them with huge size and got my ass absolutely kicked. Day after day after day I would lose $5K or $10K. At the end of the year I had lost at least $300K.

Why did you stick with the ETFs when it was going so poorly?

I don’t even know. I have no idea why I stuck with it. I thought I was smart enough to beat it. I had made good money trading for three years in a row and thought, after a little bit of a learning curve, I’d be nailing these ETFs by the end of the year. I told myself I was smarter than the market and I took a beating for it. Ever since then I’ve banned trading ETFs. I won’t even look at them.

What did you learn, besides avoid ETFs?

Stick with what you know and what you’re good at. Be happy with it.

There seems to be this thought amongst traders that you always need to learn something different. Even though a guy makes J200K per year trading OTC stocks, he feels he needs to learn Nasdaq stocks or something else. Now obviously there’s nothing wrong with learning, everybody should be continually learning, but there’s also nothing wrong with sticking to what you know, sticking to what you’re good at.

You don’t want to jump into something new with both feet.

If it’s not broken, don’t fix it…

Exactly. I was 25 years old, making half a million bucks a year, yet I told myself it wasn’t good enough. But in a way, I’m glad I had that year. I think everybody’s going to have a cycle of stupidity, if you want to call it that, where you just do dumb shit. I’m happy it happened back then rather than today. I still try to learn new stuff, but what’s more effective is tweaking what I already know to make it even better.

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What did you do after that year to return to profitability?

I went right back to trading the way I had before. And it took awhile to readjust. It took a couple months to get back to being profitable.

Back to basics is the way you handle big losses or losing streaks?

The best way to handle a big loss is to keep it in the back of your mind, but act like it didn’t happen. If you’re still dwelling on yesterday’s loss, you’re going to get killed today. You have to get it out of your head because trading is a mental game. You have to be in the right state of mind to be successful. Handling losing streaks, on the other hand, is a bit different. I just size way down. If the losing streak is really bad—I don’t like doing it—but instead of keeping $500K in each account, I’ll wire down to maybe half. I don’t like it because if I see a killer trade setting up, I’ll have to go right back to the bank and wire money back in, but sometimes it’s necessary. I think when you’re cold, you have to play with less money, less position size, and less risk.

Focus on money management. Day traders don’t fail because they don’t make money. They fail because they lose all their money. So you have to limit losses. I rarely go to bed angry that I didn’t make more money, but I guarantee I will go to bed angry if I lost money when I shouldn’t have.

Have you ever thought about quitting trading?

Yeah. The year of triple leveraged ETFs. (laughs) But even now I’ll go through cold streaks of one or two months where I make very little money. It s not easy. It’s really not. I know some people think one month is probably no big deal, but if you sit at your computer eight hours a day, five days a week, for four weeks and you’re still sitting at zero, or worse, down $15K, it weighs on your mind. Fortunately after 10 years of trading, I know the cold streak will snap and something will come along to make decent money, but it’s not easy.

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What’s your biggest disappointment when it comes to trading?

I’m 50/50 on it, but back when I started trading at 18, I knew of no chat rooms, no Twitter, no social media for trading. Nor did I have any service or mentor to help me. I think it would have been nice to have a chat room where I could have watched good traders make trades. See when they enter, when they exit, and basically find out what they’re looking for. I think that could have helped tremendously. On the other hand, I think the experience I gained doing everything myself was invaluable. I had to pour through so much more information compared to the average trader today. Everything I learned was on my own.

The shortcut might have changed the type of trader you’ve become. Today there are so many voices to influence you…

Yeah, I’m not influenced whatsoever because I already have my own experience, my own methods.

What would you call your defining moment in trading?

Learning how to go short. And I feel kind of dumb that it literally took me two years to realize that I could even go short. But ever since then I probably go short 90 percent of the time.

Do you remember how you learned to go short?

I have no idea. Reading an article somewhere, I’m sure. But when you’re researching the market, who is talking about going short? You can’t read on CNBC.com about short selling. Maybe one article here or there, but finding material about short selling is difficult.

And it’s usually a negative piece…

Yeah. Short selling is evil and un-American.

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What’s your proudest moment in trading?

Probably just what I’ve accomplished in the last two years. I never thought I would hit a million bucks.

A million dollars in profit per year?

Yeah, a million in profits in 2013 and again in 2014. One reason is because the market has been good, no doubt about it. The market has been on fire, producing a lot of parabolic charts. If you have the right market, you can trade it. But another reason for my success is cutting down my losses. Like we discussed, I figured out what setups weren’t working as well as others by looking at my past trades. Instead of focusing on making more, I’m focused on losing less. So I really don’t feel like I’ve traded my winners any better the last two years, and yet I’ve doubled my profits by minimizing losses.

Do you think you’re an addict?

Without a doubt. If I won the lottery and was set for life, I don’t think a day would go by without still looking at the market. Maybe I wouldn’t be up in time to see the open as much as now. (laughs) But yeah, I’m definitely addicted. I think that’s what makes us successful.

My love for the market and it being constantly on my mind is what drove me to study, learn, and never give up on trading.

Do you still worry about blowing up or going broke?

I don’t worry about going broke, but I definitely still worry about cold streaks. I understand they will end, and I understand the market will get better, but during those periods of not making money, I definitely worry. I don’t treat my savings in the bank as spending money. I like to make money trading month in and month out. I expect to take enough money out of the market each month to at least pay our bills, pay my taxes, maximize our 401Ks, and still have some left over to keep stockpiling our savings. So if I can’t do that at the end of the month, I do get worried.

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Have you diversified in other investment vehicles?

It’s a topic I’ve discussed with a lot of other traders recently. What do you do with your money outside of the market? I wish interest rates were higher so I could park every penny into a 5 percent or 6 percent CD backed by the government. I’d have no problem doing that because everything else requires taking on more risk. I’ve had rental properties and considered getting bigger into real estate. I’ve been making roughly 10 percent with Lending Club for a couple years. But pd say the majority of my account is just sitting in a bank making me nothing. I hate putting money into an area in which I have no expertise, so I’m still searching for the right diversification.

You mentioned 401Ks… Do you trade under a business name?

Yeah, my wife is actually 50 percent owner of the business. Secretary.

So we each get to max out our 401Ks every year. We can make the limit of $17.5K, but I think with profit sharing we can each put in something like $50K. Tax-wise I’m not sure, but I think you get 50

cents on the dollar for everything over $17.5K. We also have other taxable accounts with mutual funds and longer-term stocks like Bank of America and Citigroup. No debt either. Everything is paid off.

Do you think trading is innate or can it be learned?

I think trading can be learned, no doubt. But I think to be a great trader you have to have the right mentality. You can’t worry about risk to the point it becomes a detriment. When you see a great setup, you can’t hesitate to put a million bucks on the line if you have great conviction. You definitely need money management, but you can’t be too worried to even take a risk. Some traders are good, but they don’t make much money because they’re only willing to trade 500 shares.

What other traits are necessary to become a successful trader?

In my case, I’m addicted to the market and have been from a young age. And I love the market. I had no problem taking all the time in the

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world to study. I was in college, didn’t have a wife or kids, and I didn’t need trading to provide an income. I would just study constantly. I would study until I fell asleep. Lazy people who want instant gratification won’t be successful traders. I don't think trading is any different from other professions in the sense that you have to put in the effort and hours to become a pro. People just starting out come to me for shortcuts, but honestly you just have to study.

There’s no easy way...

You have to put in the time. There’s no other way to do it besides putting in the time and effort.

What are you doing now to become a better trader?

I’m happy with what I’ve been doing cutting my losses the last couple years. But I would also like to improve my fundamental analysis. I need to dig deeper, research more, and figure out what’s behind the move.

ViTiy did PLUG go from $5 to $12? Is it being pumped? Who s behind it? What are the press releases? What are they really saying?

Knowing that information brings conviction to your trade. Not that I ever want to fight the trend and hold through large drawdowns—-I don’t think I’ll ever do that—but knowing that information can still improve my trading. If you can read a PR and justify whether or not it’s worth a 50 percent increase in stock price, you can make an informed trade. So I’d like to get better at that.

What’s something you do that you think other traders might not?

I try to scan almost all day if I’m at my computer. I think a lot of traders sort of slack during the day if there’s not much to trade, whereas I am constantly scanning. Is there something out there for me to scalp for $500, something to help me end green on the day? I admit to surfing the web, too, but I definitely don’t go 10 minutes without running a huge scan to see what’s moving.

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What do you think other traders do better than you?

Fundamental analysis?

Yeah, without a doubt. There are traders who can read a press release in a second and know what’s really going on. I’d like to get better at that. And recently, as I’ve focused on cutting losses, I’ve probably sized down too much on better setups because I was nervous.

You’ve missed out on maximizing opportunities?

Yeah, I’ve lacked the conviction to hold lately. As a stock fades I’ve been taking profits on my short as soon as I see a little bit of an uptick, afraid that it’s about to bounce. If I had more conviction I would know it’s going down and just hold the position for larger profits.

What’s the most important thing to remember while trading?

I think patience, definitely. Wait for the trade to set up instead of chasing it. And when I say chase, I’m not talking about shorting a stock on weakness. I’m talking about forcing a trade that’s not quite there yet. Rarely do I have a trade work out when entering an imperfect setup. You have to wait for the perfect ones.

What do you wish someone had told you when you first started?

Study. It takes time. You have to do it yourself. Don’t be afraid to put in the hours. Don’t expect not to put in the hours. Don’t expect it to be given to you. Don’t expect to learn the secret method from someone else. You have to work out your own method because even if some great trader taught you his, you might not be comfortable with the drawdowns he endures, or the amount of time his strategy takes.

You have to figure it out yourself. And it takes time, so be patient.

What other mistakes do rookies often make?

Overtrading. Trading when there’s nothing out there. They’re so anxious to make money it’s a detriment to their trading. It’s deadly.

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How do you judge success in trading? In life?

I think success in trading all comes down to money. It s an easy way to keep score. Success in life, on the other hand, comes down to how generous you are, what you do with your money, how happy you are outside of trading. Day traders can make a lot of money, but it’s what you do with it that matters.

What do you think when people say you have to be a robot or emotionless to trade?

They have a point. When you let emotions get in the way, bad stuff can happen. You shouldn’t trade unless you’re mentally steady. I’ve been at it for 10 years, so I know what happens when I forget that.

There are consequences. If I didn’t sleep well, or there’s a traumatic event, or maybe I lost huge the day before, I might not even trade that day. If your emotions are out of whack, it’s not good to trade.

Do you have trading friends who you interact with daily?

Now, yes. A network of maybe five or six guys that I talk to every few days or so. But I’ve never been a trader who relies heavily on other traders for ideas or things like that. I just didn’t learn that way. If I put on a trade I want to do it because I feel like it’s what I should do, not because somebody else is doing it. I never want to be too influenced by others so I try not to get too attached to what they’re doing.

It’s better if the trade is yours, if you own it…

Exactly. Then I take responsibility for the win or the loss.

What is the public’s biggest misconception about trading?

That trading is evil and that traders serve no purpose. Some people are even pushing for a financial transaction tax, which is ridiculous.

Traders provide a living for themselves and others. I probably spend $30K to $50K in commissions alone per year. I pay for chatrooms and

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services involved in trading. I pay a ton of taxes and create a lot of jobs. People don’t realize that it’s an honest living.

If there was one thing you could change about the market, what would it be?

I’d make it a more level playing field. You hear reports all the time about high frequency traders, hedge funds, or basically any “big money” entity getting information early, giving them a huge advantage over us. We’ve all seen stocks spike on huge volume two or three seconds before news releases are published. I can’t say for certain that people are cheating, but where there’s smoke there’s usually fire.

What’s your goal for the next five to 10 years?

I want to have enough money set aside to be able to not work if I don’t want to. I don’t think there will come a time where I want to quit trading, but I might want to take a summer off here or there. Sure, I probably have enough money to do some of that now, but I don’t feel comfortable doing it unless my money is working for me elsewhere. Trading is stressful. You grind away day after day and you might make money or you might not. Even the big winners start out as big losers sometimes, so it’s stressful. Plus you never know what’s going to happen in life. Can you live comfortably on your savings if you suffer a disability that prevents you from trading? A second source of income could alleviate some of that concern.

How do you handle that stress now?

It’s not easy. Working out daily de-stresses me tremendously. When I work out I’m in a good mood and I come home in a good mood.

That, and playing with my son are the two things that can completely take my mind off trading. Staying busy helps too. If I m just sitting doing nothing, my mind will be on the market, so you have to get your mind on something else.

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Anything you’d like to add?

I'd just like to stress to newer traders that there are no shortcuts. To be the best trader, you have to have the whole setup. You have to have the right brokers, the right tools, the right chatrooms, the right screeners and scanners, and all of that comes with experience. It takes time. The longer you trade, the more you trade, the better you’re going to be. Simple as that.

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The Rock

“I became rich when I realized every OTC stock is a scam.”

Bao Nguyen (@modern_rock) is a 40-year-old trader from the Bay Area who made the bulk of his fortune trading penny stocks on the OTC bulletin board market.

His family came to the U.S. as refugees from Vietnam when he was 5 years old with nothing but a “determination to work hard and kick ass.” His father worked as a technician, and his mother went to school at night and eventually became a drafter for Stryker Corporation.

Since his career began, he has been banned from routing to certain market makers, won battles with high-frequency trading algorithms, and turned $50K of home equity into over $10 million in profits.

These days he can be found on Twitter spouting trading wisdom and exposing FURUS, or fake gurus, to the delight of many.

Where did you grow up?

When I came to America, we lived in Portland, Oregon, where a black guy named Ray Ray and I were pretty much the only minority kids. We got picked on all the time, so throughout childhood I despised the Asian/immigrant/minority label. It was a huge chip on my shoulder,

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bur it drove me. I knew I would grow up to become their boss someday and then fire them.

So you were a determined kid…

When I was 15 I started working for the company my mom worked for called Stryker. Of course now it’s one of the biggest companies in the world, but back then 1 didn’t even know who the hell they were.

They had less than 300 employees. Now they have 22,000 employees.

What did you do there?

I had the dirtiest job. Stryker is a medical equipment company and I worked in the shipping department. If an endoscope broke somewhere, Stryker would send out a loaner, and eventually it would come back—after it had been inserted inside people’s bodies. And it would stink horribly. It was my job to stuff it into a bag and label it.

Where did you go to college?

I grew up in the hood, and we had no money, but I was a smart kid. I studied. And back then, as an Asian, you could only be an engineer, a doctor, or a lawyer. I figured out which one required the least amount of schooling and headed to UC Davis for engineering, (laughs) And somehow the engineer turned into a trader…

After college, my goal was to make $100K per year by the time I was 30 years old. But when I got my first job working for Bechtel engineering, the largest private engineering and construction company in the world, I found out the guys who worked there for 30 years were only making $100K. And these guys had PhDs. They were the smartest guys on Earth and they made $100K. So I quit to join the dotcom revolution that was happening at that time. It was the dotcom era, and I got a job as a programmer for a startup company. Suddenly here I was in Silicon Valley and everybody was talking about stock

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options. It was the wild, wild west over here on the West Coast because nobody knew shit about stocks really.

This was mid 90s?

I graduated in 1996, so around that time. The late 90s to early 2000s.

We were trading fractions.

So everyone was talking about stock options at work but really had no clue…

Basically everyone thought you buy stock, hold it, and hopefully sell it for more. It was pure gambling. Everyone just bought shit and hoped.

And you joined in?

I opened an account with $2K and started to gamble. It was a straight up gambling fever. I had a good job which fed me more and more money to put into my trading account, and there were no pattern day trader rules back then, so I could trade as much as I wanted.

Did you have a strategy?

As an engineer I was very analytical, sol created what I thought was a system. It was based purely upon earnings releases, and I would try to guess the direction the stock would move.

Wow, earnings, so you were really gambling…

(laughs) But I thought I had a strategy. Turns out it was pure gambling, of course. But my first trade was a very profitable trade. I made like 30 percent trading Silicon Graphics on earnings. I bought right before earnings and it worked. I thought, damn, I’m good at this.

% first job out of school was $40K a year, so making $600 on one frade was great money. Obviously my earnings strategy over time Would get pounded, but I was hooked. Nobody had high-speed

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Internet at home, so I would get to work early every day to trade stocks. My boss thought I was a diligent worker.

Where were you working at the time?

A startup software company that eventually got bought out by a European company. Then that European company went from a $3

billion valuation to bankrupt within one year and got acquired by Fair Isaac. Meanwhile, those of us working there were living the life. I switched from programmer to sales engineer and eventually moved to New York. I had a cushy job which afforded me a lot of free time, and everyone in New York was day trading, so I thought I’d give it a shot.

How did you do?

I pretty' much lost my entire bankroll twice. But I was making like $250K a year at my job, so I had money to dump in.

So you kept feeding your accounts as you’d lose…

Yeah. I lost because I didn’t take it seriously. It was more like sports betting for me. It was fun and I got a little adrenaline rush. I would put in 20 grand and lose 20 grand. Then do it again. I would trade the open and the close, then schedule all of my work meetings around that. I loved trading, and I could actually make money consistently.

But it was always one trade that would take me out. It was always one stock that I wouldn’t sell and end up averaging down to zero. I remember a 10-cent penny stock, GBLX, that doubled or tripled within an hour, and my $25K account ballooned to $40K. I thought if I just held that stock I was going to be rich. Before I knew it, the price started tanking and I m left with $10K in my account.

You couldn’t get out…

There was no way to get out. In fact, I think I just bought more. That’s how you do it when you’re a beginner. You think it will go back up. It

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was a classic penny stock pump and dump, the kind that’s still happening today. “Investors,” aka suckers, get killed.

And you were primarily a long back then, right?

Yeah, back then you couldn’t really short these pump and dumps.

Only market makers were shorting them. But I would long stuff like that all the way to zero. That’s how I lost all my money twice. Then I finally decided to take trading seriously. I knew the one problem I had was holding onto losers. It was always one stock that took me out of the game. I mortgaged my house and took out $50K to try trading again. Only this time I knew I could not lose that money, because I’d lose my house if I did.

Scary proposition…

Yeah, but that's how I became successful. I started playing like a chicken shit The fear of losing stopped me from making those same mistakes again. I had no choice. I had worked all my life up until that point for that house. So I went back to trading what was working and avoiding huge losses. I went back to my bread and butter, which was buying overnight positions or gappers. I was still working then and only had time to trade the open and close. So I basically created a system for finding stocks that were strong at the end of the day. I’d buy them and wait for the gap.

Wait for the stock to gap up in the morning and then sell…

Correct I did that for the longest time and built my bankroll. I loved day trading. It was my passion. It was less about the money and more about the challenge. So I gave myself a goal. If I could make $500K, I would quit my job. How could I quit a job where I was making 250K+ per year? I figured I’d have to save at least two years salary first in order to do it. Using the same strategy, I grew that $50K to $500K within three years.

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Can you explain the strategy a bit more?

I started with $3K positions because I had a small account. I would buy five to seven positions a night to diversify. I scaled those positions up to more like $10K each as my bankroll increased over time.

Why five to seven positions?

Basically I would buy as many stocks as there were plays. I would run my scan and buy however many stocks matched my criteria for gapping. I could have 10 positions overnight if necessary. There was really no dollar or account value limit. And $3K worth of a stock was just enough to stay under the radar and not move the market. I could be invisible getting in and out. I kept it small and diversified. My goal at the time was just to make $1K a day. I had a phenomenal strategy for such a small account.

But that strategy doesn’t still play today, does it?

If the penny stocks were back in play, it would.

So it was mainly OTC stocks then…

Yeah. And I grew that $50K account to eight figures trading the OTC.

After I quit my job, I was banging out $300K to $500K a year trading for the next few years doing that exact same strategy. I was very risk averse. I got to the point where I was very comfortable making $500K

a year with zero risk. And I mean zero risk.

Zero? You’re going to have to explain how you did that…

Zero risk basically meant that my position size was never large enough to affect me in the event of a loss. I asked myself, if this stock goes to zero, will I survive? I played the size I was comfortable with while assuming the stock would go to zero. Each night I was probably only using about five percent of my capital.

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Per stock or total?

Total. Imagine a $500K account where you’re taking 10 positions of $3K each overnight. That’s only $30K total.

I see, so it didn’t matter if you lost all $30K…

Yeah. But chances are I’m not going to lose on every single position, right? That’s why I diversified by buying several stocks. I’ve seen friends put all their money into one stock and then it goes to zero. I always say you only need to get rich once, and don’t let one stock take you out of the game. So I never got greedy. Although looking back, maybe I should have. Imagine if I had just tripled my sizes all those years. I’d be filthy rich, right? I was making $500K a year on only $3K

to $5K positions. People nowadays are loading $100K positions.

But $100K positions wouldn’t have held to your zero risk idea…

Right. If I loaded up $100K and something went wrong with that stock, I’d be dead. Whereas losing $5K wasn’t a big deal. Once I reached $500K, I quit my job and paid off every single debt I had, including my sister’s debt and my parent’s debt. Once that was taken care of, I realized I could probably start risking more. I started trying to grow my account like it was a video game. I didn’t want to spend it.

I was making $500K+ a year and still driving a shitty car.

And the video game score has since reached over $10 million…

Yeah, cumulatively over the lifespan of my trading I’ve made over eight figures. The last four years were each seven-figure years. In fact, my strategy was so good I taught only one other person, and he did the same thing.

He made millions doing it, too?

He made around $8 million simply following my strategy. But I taught him because I needed his help doing my scans and stuff. It actually

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became difficult because we traded pretty much the exact same way.

He became so big he was my main competitor (laughs). Which is why most of the gurus are frauds. If they knew a secret like I did, they wouldn’t sell it for the world. Talk about trying to make millionaires, I taught one guy and he made multi-millions. I always joked about the moment I stopped making money using my strategy, I was going to teach it. And now the system doesn’t work anymore, so I’m going to start teaching, (laughs)

Your strategy doesn’t work any longer because the OTC market is so dead?

The strategies still work, but yeah, there’s very few plays left.

It’s amazing it worked for as long as it did…

Yeah, the moment the light switch went on was when I realized trading wasn’t gambling. When trading was my secondary income, I lost money because I did it for fun. The moment it became my only source of income, I became serious and stopped the bad habits.

When you took it seriously how did you educate yourself ?

I met a friend in New York who ran Stockgappers, the original chatroom for this type of trading. I have to give him credit for starting all this. Me, Nate, everybody was in there. His strategy was a very simple one: buy stocks at close and sell at the open. That’s why he called it Stockgappers. I watched him and eventually created my own strategy. Everybody has a different criteria of what to buy. I found what worked for me and kept doing it.

Did you ever backtest your ideas?

No, it was just trial and error. I think the key was diversification, I could see what worked and what didn’t, which led to developing the pattern I milked for 10 years. In fact, it worked so well I had one year where I only had seven red days and another year where I only had 12

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red days. And I traded every single day. You do the math. There are about 250 trading days m the year. Imagine a guy with a record of 243

wins and 7 losses.

Not bad.

I became so consistent my broker was watching my account and copying my trades. I couldn’t take a vacation, either, because every off-day was a $10K loss in my opinion. I’d lose money not trading, and I’d lose money paying for the vacation.

Opportunity cost…

Yeah, and it was so easy. My strategy felt like I had found the secret.

Were you still only trading the open and close, even after you quit your job?

No, I started trading during the day, too. I held gappers into the open and traded around those positions the rest of the day. Scalping.

And this was mainly OTC…

It was all OTC. The strategy doesn’t work with Nasdaq stocks. It never did. I tried replicating it, but Nasdaq is too unpredictable. If the overall market is down, Nasdaq stocks are down, whereas OTC stocks don’t care at all. Every single OTC stock is a scam. Put that in the book! I became rich when I realized every OTC stock is a scam. You just needed to remember not to mess with the promoters. They have the big money. You want to ride with big money because big money never loses. Then you get the hell out before they start dumping.

Whatever happened to Stockgappers?

I don’t know. We had a falling out over something and I started my own chatroom. I eventually quit that too, because it became too successful. The competition threatened me and vandalizing my house.

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Competing chatrooms?

Yeah. I ended up going to the police over the matter and they basically laughed it off because it was a bunch of kids in chatrooms, etc. They didn’t understand, and I knew they weren’t going to help me, so I just quit. I was doing it for free anyway, so it wasn’t worth it.

What’s your routine on a typical trading day?

Well now I'm kind of retired and messing around too much, but I can tell you what I did all the years I was a well-oiled machine. I love penny stocks because I don't have to wake up early. Everyone starts with a fair advantage. The market opens at 9:30 a.m. EST, which is 6:30 a.m. here in California, so I'd wake up at 5:30 or 5:45 a.m. to be on my computer by 6 a.m. OTCs don't really move until about a half an hour before open, so I'd be looking at my gappers and scanners to see what’s moving. Before the open I’d have all my positions already keyed into Level II quotes and ready to click because there were so many positions to manage. When the market opens it’s a frenzy. I already know where I'm going to sell certain stocks and have live orders out. If 1 have eight positions, three might be main positions where I have bigger size and I’m going to hammer at the open.

“Hammer'' means I go in big size long or short at the open to push them. The other five positions I’m just aiming for $500 each, but they add up nicely. I might have 50K shares of one that goes up one penny, and I’m out! I don’t care if it goes up more because I was never planning to trade the stock anyway. Of course as my account grew I increased size. Eventually I was holding $50K, or even $100K to S200K overnight positions, but it was all done with proper risk management. Those five positions are simply bonus money.

You just take whatever the open gives you on those positions…

Yeah, out of five bonus stocks, two might lose and three might win.

But based on my strategy, they always averaged out in my favor. To do that I kept the position sizes similar in terms of dollars. I knew how much I could make and how much I could potentially lose. Depending

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on that, I changed position sizes so the wins and losses would average out. I didn’t want one position so heavy I couldn’t recover its loss with other positions. Within 15 minutes of the open, I could already be up $5K to $10K with 10 positions each profiting $500 to $1K.

What happens when those bonus plays gap against you?

I get the hell out right away. If a stock is up, I can hold it, but if it’s down, I’ll be the first guy out. It’s as simple as that, because I didn’t want to trade those stocks anyway.

So now that you’ve sold the bonus plays and the new day has started, what are you doing?

I’m hammering the shit the rest of the day. I don’t even take a pee break. I’m scalping my main positions. And just like the bonus profits, the scalps add up nicely. I would make 300 trades a day, net $50 to $1K a trip, whatever the trade would yield holding for as little as seconds or minutes at a time. It was basically manual labor. Manual high-frequency trading. I’d sit on the bid and offer all day, moving it around and scalping the spread. That was my specialty and what got me banned from market maker NITE. In essence, I was trading like a market maker, and I stole all their prints. They changed a lot of rules because of me.

Can you elaborate?

NITE was basically the main OTC market maker, so you have to use them. You have no choice. And they could see my I.D. when I placed hundreds of orders a day. They wanted to cut me off because I was stealing all their prints. But they needed a reason to cut me off, so they made one up. They said I canceled orders too often. Well if they don’t fill my orders, I have to cancel them, right? But suddenly they issued me a two-for-one mandate on cancels. For every two times I canceled an order, I had to fill at least one other order. Essentially they wanted to stop me from canceling so they could fill my orders. And usually when they want to fill you, you don’t want it.

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Because the price is about to head in the opposite direction…

Exactly. So what I did was choose a sub-penny stock trading at $.0001

per share and every time I needed to cancel a real trade, I would buy 1K shares of the sub-penny for $1. I did that so often I would end up with a million shares of a sub-penny buying 1K shares at a time. But canceling orders was the main reason they gave to shut down most of my accounts. They said I canceled too much and that I was manipulating the market by being on the bid and offer simultaneously.

But it’s fine if they do it…

Yeah, I don’t see why, but they make any laws they want. It’s a cat and mouse game. They would shut down my accounts, and then my brokers and I would figure out a way to mask my I.D. or put my account in a separate bank, any way to spread out the trades.

How did NITE get your brokers to shut you down?

They threatened the brokers that they’d yank the route for everybody, so they shut me down.

Wow, so how many accounts did you have to use to trade?

I think I have every account on the street. But I didn’t trade them all regularly. Technically you could use just one if you had to, but I use three primarily. Once you get big enough for the market maker to know your I.D., you have to spread the love around.

After hours, you’re done trading, right?

That’s the beauty of OTC. When the market closes, I’m done.

Do you review trades at the end of the day?

No. I don't need to. I was so good at reading a chart I could tell you what it was going to do 80 percent of the time. It’s all pattern

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recognition. It’s how high frequency trading works, except they’re programming the patterns in with statistics and data. It’s all pattern recognition and probability.

Seems like the algorithms know patterns so well these days they do just enough to manipulate stocks to make it difficult for us…

That’s why I can’t trade Nasdaq the way I traded the OTC, scalping on a micro short-term timeline. It’s hard. If I put in a stop, they hit it and reverse direction. If I don’t put in a stop, they run me over, (laughs) Do you come back at night to scan?

No. I’m a lazy guy. I scan one hour before the close.

When you pick your gappers…

Yes. I have a routine. During the middle of the day, outside of the first or last hour, I scalp. I choose the most liquid stock and I just hammer it. I think the most trades I ever made intraday was 600. And I’m talking about manually clicking to trade, not counting partial fills.

What tools or platforms do you use?

I’ve been using RealTick Pro for charting for 10 years. It’s like $300 a month, but my visualization of the charts is so tied to RealTick’s display that I must have it. If the scaling is off, I get confused. I don’t want to jeopardize my pattern recognition. I don’t use it to trade, though. My order entries are through my brokers.

The chart is most important to you because on the OTC market fundamentals don’t matter…

Yeah, I don’t even know the names of the companies we trade. I don’t know what they do. All I know is the ticker symbol. OTC is a scam, so the only reason a stock is up is because someone is pushing it up. And I let the chart tell me what the stock is going to do the next day

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Do you use any technical indicators?

No, just price and volume. I guess RealTick draws trendlines in for me, but I mainly just eyeball it. I use 3-day, 5-day, 10-day, and 1-year charts to look back and see how low or high the stock has gone.

And intraday you’re using 1-min charts?

Yeah, I use all l־min charts during the day for scalps. And I’m a huge Level II guy for OTC trades. Level II is perfect on the OTC.

What are you looking to see on Level II?

The beauty of OTC trading is on Level II. On Nasdaq the Level II is all over the place, spiking up and down very quickly and sporadically.

But on the OTC the market makers are the ones who dictate where price goes, and they usually keep the movement very smooth and uniform. So if you learn that game, you can actually pinpoint where the stock is going to bounce or turn. That’s why I was the best at bouncing. I had the timing down. I could see when they flinched. I knew their pattern.

How would they show their hand when it was about to bounce?

It was a combination of me seeing them flinch and me buying so damn large that they had no choice but to go with me (laughs). I always knew that if I was wrong, I was dead, because I would basically buy that sucker until it bounced. If I was wrong, I would dump it immediately and take the big hit.

And weigh on the price even more…

Yeah. So you have to pick good entries. My entries were very good, they were very close, but I’d keep buying until the market makers said,

“Alright, I m joining this guy, and start buying, too. Then other people would start buying and the stock starts to go up.

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So you’re absorbing massive volume on the bottom. Are you sitting on the bid or hitting the offer?

I do both. Hmm. . should I reveal my trick on how to do it or not?

I vote yes.

Okay, what I do is once I see them flinch and I know I want to get in, I put in a bunch of bids. When I get filled enough shares, I slam the sucker on the offer. I slam it with so much size the market makers won’t fill any other orders out there. They are greedy as shit and now they see this giant order trying to buy. Once the price moves higher, I just leave the massive order there. Everyone else is now chasing over that price and now the market makers won’t fill them.

The market makers won’t give fills because they’ve already accumulated their own massive position at the bottom and also want the price to rise now…

Yeah. So I’m slamming the offer to make sure that sucker goes up. I don’t want to just sit and fill on the bid all day as it sinks lower. The key is to get what you want and then make that shit uptick yourself.

The moment it up ticked, everyone else is chasing it like an idiot.

And you’re already selling…

I’m already in twice as much as I want to be, so I’m dumping the bonus shares, the ones I don’t want, first. Those profits cushion me on the main position. That was my secret for big bounces. But it requires balls and great timing. You can’t just muscle it at the wrong price. A lot of traders try to muscle in the wrong places and get killed.

Because if they’re still dumping millions of shares, your flexing isn’t going to do any good…

Correct. So you have to wait. And when I was wrong, I would immediately dump the position and make it go lower. The point is to

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buy as low as possible, right? So in a way, if I was wrong, it was good.

I would slam back out with size and find out where the real bottom was, because when I filled, the bottom was in (laughs).

You’re still filling your sell for a loss and now you’re quickly trying to cancel it…

Yeah. Because when they’re finally filling my size it’s probably the bottom. Then I just buy back all the stock I just sold.

So where are you taking profits if a trade goes in your favor?

I’m recycling all the time. I’m the guy selling it all the way up and buying it all the way down. I’m basically the guy who controlled how the stock moved.

The unofficial market maker that NITE didn’t want to battle…

Correct. The moment I sell it, I’m already trying to buy it back. But if I get filled and it goes against me, I’m out. I’m recycling.

The entire position over and over?

If it’s too big, I’d probably recycle partials. But sometimes I didn’t have huge positions. Maybe 50K shares of a 25 cent stock that I’m just buying and selling over and over again. If you do that enough, the profits add up, and you don’t have the risk of carrying a huge position.

People have the impression that I’m always trading huge size, but often I’m just recycling the same shares a million times a day. My risk exposure is small compared to the total amount of shares traded at the end of the day.

So when you do take a big position, how do you treat it?

Believe it or not, the only big OTC positions I usually take ate overnight. Intraday I just scalp around the core position I held overnight. It’s the complete opposite of how I trade Nasdaq.

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What about with the massive pump and dumps we used to see?

Well, there’s two types of trades on the OTC: Promotional mailer/campaign type trades, and stocks just moving on news. With the big promotions back in the day, there used to be a trend. They would last for multiple days or even weeks. My secret back then was to buy the hell out of those on Day One of the push. And then don’t add. You’re a dumbass if you add outside of Day One.

You wouldn’t add those big pumps if they went against you?

If it goes against you, get the hell out. That’s how I would always have the lowest average. In fact I would overbuy on Day One. I knew it was going to go up, so I would sell the bonus shares early to cushion myself on the real position. If I wanted 50K shares, I might buy 75K, and then sell 25K early. Most people kept adding on the way up and that’s how everyone got burned.

There were quite a few plays back then where Day One ended up being liquidation day, though. The promoters would dump millions of shares into the buying and crushed the price. I remember because I got killed on a few of them…

Correct. And that’s when I lost my ass, too. But I was out immediately.

How do you use social media in your trading?

Personally I use it to educate people for fun. You see a lot of people using it to move stocks, but I don’t. I’m a very different trader. I have integrity. When I ran a chat room, I never did that. I posted my plays after the market had closed so that it wouldn’t influence people. I posted them as more of a teaching tool for people to go back and see the reasons why I bought or sold. A lot of gurus nowadays will find an illiquid stock, load the shit out of it, and then pump it to their 10K

sheep to push the price up. Is that real day trading? If they had no sheep, that stock would never move. So social media can be good if you use it like a free scanner to get trade ideas, see what people are

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playing, but it can be bad if you don’t know what you’re doing and get burned by the scammers. I think the SEC should crack down on it.

And how do you use chat rooms?

I use chat rooms for the same reason—to see what’s moving. Once I see the ticker suggested, I pull up the chart and do my own research.

It’s like a scanner. New traders should be careful about reading and believing the content. Only use it to see what s in play. By the time you’re reading about a trade posted by someone else, they re already in.

They’re pumping and you’re chasing, doing them a favor. What I do is pull up the chart and wait for a better entry.

What’s your most reliable trade setup?

For the OTC market I talk about the 3-day rule for longs. Actually you might start on Day Zero, when a stock that has no volume at all sort of pops up out of nowhere. It’s not being talked about yet on social media, but you can see someone accumulating shares and pushing it up quietly. You can buy a little bit that day. The problem with buying on Day Zero is that you can be wrong, it could be nothing, and then you’re stuck. So a safer way to play is wait for Day One, where you see a classic breakout on huge volume following a flatline chart. Then you ride it until Day Three, reducing your position each day. That’s what I did for OTC, but I think it works to an extent with Nasdaq, too. I would be heavy on Day Zero and Day One, then light on Day Two, and even lighter on Day Three. Then if I can short it Day Three, I short it.

So you’re already looking to short on Day Three?

Yeah or whenever the trend changes. That’s ideal. OTC was far more reliable. For Nasdaq you definitely want to wait for the back end of the trade. Avoid shorting it when it’s going up. Better to be late than early. And the best thing to do with Nasdaq is avoid the big boys, avoid the stocks that all the analysts cover. You don’t want to be short when J.P. Morgan comes out defending the stock. Stick to small caps

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that you know are scams, where you know the huge overextended move up isn’t justified. It’s ran for three days and now the first signs of weakness are showing. There are little, if any, analysts covering small caps. It’s just a bunch of pumpers and dumpers like the OTC.

What’s been your most profitable setup?

Definitely the gapper play. Gapper was my bread and butter every day.

You could make $3K to $5K depending on position size, but a good day would make me $7K by 10 a.m. Then the rest of the day was just hard work. But the gappers enabled me to know which stocks were strong and which were not. Plus it’s very difficult to want to initiate a buy when a stock has already gapped up, but if you’re already long from the night before, it’s easier. If it’s strong, I might not even sell it.

I’ll probably add to that opening spike, trying to rip the shit out of the shorts and force them to cover into the squeeze. The downside risk was so limited, and these gains added up so quickly. $5K a day makes $1 million a year. Slow and steady wins the race.

So when you start the hard work of scalping intraday, it’s likely a position you’ve held over from the previous day?

Yes. Unless a new play comes out that day. Although with a new one, I usually wait until the end of the day to start playing because I am so risk averse. The stock price is probably up so much already, who wants to touch it? But by the end of the day it might produce a pattern you’re familiar with.

At the end of the day you’re trying to determine whether or not it will gap up the next day?

I’m looking to see if it held support and if the support was higher and higher. I also want to see if the volume is still there. The key to all these plays is volume. If there’s volume, the next day there will be follow-through because promoters aren’t going to give up on a stock if there’s still volume.

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I see on Twitter you’ve been going short more often. When did that transformation happen for you?

Back when I was trading OTC heavily there were very few brokers that allowed you to short. The stocks were too low-priced and brokers didn't have shares. It was all naked shorting. And shorting OTC stocks is difficult. You have to time the pump perfectly unless you want to be upside down 300 percent while paying borrow fees and the rest of the fees the whole time. So I was nearly always long. Besides, the maximum you make on a short is 100 percent, right? The maximum profit on a long is unlimited.

But now trading Nasdaq, it seems you go short quite a bit…

Yeah, I do. That’s strange, isn’t it? I’m not an expert on Nasdaq, so I take what I think is the easier trade. Nasdaq is so liquid you don’t need to trade too many positions to make good money.

Easier because the companies you short are usually trash?

It’s easier for me to see a chart that’s overextended than to see a stock that’s about to rise. In other words it’s easier to spot a stock that’s been up for five days straight with no profit taking than to see a stock that’s suddenly going to have a lot of buying come into it. To me gravity is more powerful. At some point those longs are going to take profits. The key to shorting is to have patience, which, of course, is very difficult. But avoid cherry picking the top. You don’t need to be the guy who has the best average. That guy is going to be wrong five other times where he gets killed. Play only when the trend changes.

When I lose on Nasdaq it’s because I’m fighting the trend.

Do you think the OTC market will be coming back into play anytime soon?

I see spurts, and then it dies. Spurts, and then it dies.

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What do you think happened? Was it SEC regulations?

Every rule the SEC made was in effort to shut the OTC market down, including the pattern day trader rule. It makes no sense at all. Plus OTC stocks are non-marginable. Why? Brokers hardly even take bulletin board trades anymore, and when they do, they charge a shitload for them and there’s no rebates. They make it very cost prohibitive and difficult to trade the OTC. But I also think movies like The Wolf of Wal Street were another nail in the coffin because they drew so much attention to the scams.

Promotions have all but disappeared…

The OTC market is dead. And Nasdaq is too much money. The beauty of the OTC was the very low risk exposure. All I needed was $5K positions to scalp for $100 and $200 per flip all day long. It did not matter what the overall market was doing. With Nasdaq you never know what’s going to happen overnight.

How big of an account do you need in order to trade your way?

For OTC, probably a million bucks. At least half a million, because things were non-marginal and I would hold a ton overnight. So if you hold $200K overnight, you want an additional $200K for the next day’s trading. Depends on how big you’re trading. For Nasdaq now, I don’t even need that much because they give you huge leverage.

But with Nasdaq you’re flat every night?

Yeah, because I can’t predict it as well as I did the OTC.

Do you look at your P&L?

Yeah. They say not to look, but that’s bullshit. The reason most become traders is for instant gratification. That P&L is your instant gratification. What they really mean to say is don’t let your P&L

influence your trade decisions, but you’re going to look.

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Do you place hard stops?

I use mental stops. But lately I keep forgetting to look at positions, so I should be using hard stops.

Do you set targets?

I just play the chart. I short at resistance and try to cover at support.

How long do you typically hold a position?

I’m the worst at holding. I have zero patience. When a short reaches an area of support, I’m out. I take it off on the first washout. So it could be 10 minutes. I’m basically scalping on Nasdaq like I did on the OTC. It’s scary to hold positions for long on the OTC because most of the companies are scams. I’m trying to get better at it on Nasdaq.

You considered the worst case scenario while trading the OTC, how do you manage risk while trading Nasdaq?

Nasdaq is a different beast. I’ve never had so many losing days in my life until I started trading Nasdaq. I’ve never taken such big losses either. My risk management has gone to shit. I’ve found myself averaging into short positions lately, which is something I never would have done on the OTC. Don’t get me wrong, I still do well with the trades I post on Twitter or in chat, because I’m patient on those, but where I fail is when it comes to boredom trading. When I’m bored I’ve been looking for something to trade instead of waiting for setup to happen. You think you’ll risk $100 and next thing you know it turns into $10K.

Good way to ruin the day…

Yeah. Actually the best secret is to turn on the TV, listen to music or just search porn, (laughs) Do anything it takes to curb the boredom.

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Do you have a set amount of prof״ you’d like to make each day?

When I was trading OTC my goal was $10K or more a day, but now with Nasdaq I take what the market gives me. Although making as much as I did on the OTC is always in the back of my mind.

Do you have a max loss amount per day that you’ll stick to?

I should, (laughs)

How much do you pay attention to the overall market now?

That’s what I hate about Nasdaq. You have to understand all the macro shit. On the OTC all you needed to know was whether or not the promoter was still in, still sending out emails, still pumping. If he stops sending out emails, get the hell out. (laughs) OTC pump and dumps were your bread and butter, but you also traded stocks moving for other reasons, like FNMA…

Yeah, trading is all about momentum. Don’t fight the trend. If something has trend, no matter what market, I’ll go with it.

What’s your biggest win?

Fannie Mae. FNMA. And also American Airlines when it was still an OTC stock. I made a lot of money trading them over the years. I had many days where I’d make $50K, $100K, even $250K on them. But the biggest one day profit was $1.42 million. FNMA was around a $4

stock, and I came into the day with a long position overnight. It was probably around a $200K position of 50K shares, and I immediately started buying more at the open, trying to squeeze the shorts.

What about it was a buy? Was it simply trend?

Yeah, trend. Plus the fact that a bunch of funds were pumping it.

When Fannie Mae was bailed out by the government it became a GSE,

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Government Sponsored Enterprise, so all these shareholder funds are suing to get a piece of the billions of dollars of dividends the government is getting. They were pumping it up, saying FNMA should be worth $60 if shareholders do get the dividends. They were pushing legislation, going to court, etc. But basically it gapped up that day and I was hammering buys trying to squeeze every short so the chart would go parabolic. As it ramped towards the top, I still had huge buy orders in that I hadn’t canceled. The price was already beyond my buys, but I didn’t cancel because I was giving the illusion that there was huge demand. At least the market makers thought there was huge demand.

With live buy orders below the current bid…

Yeah. They never filled all my orders on the bid, so I just hit the offer.

Which, like we discussed, is how I would get stocks to go up back in the day—just send huge buys to the offer. Market makers are so damn greedy, they would just spike the price up past my buys without filling me. So I’m putting in 10K and 20K buys on a $4 or $5 stock, which is a sizable position for an OTC stock. Then right at the top, when FNMA went parabolic, I sold my entire long. Then I hammered the shit out of it on the short side and pulled my live buy orders below.

You sold your long and immediately flipped to a short position?

I scaled out of my long position on the parabolic move. The demand was huge because everyone thought it was going to $60. But being a longtime OTC trader, I know not to drink the Kool-Aid, so I sold into the parabolic. My strategy is that I can always rebuy if it keeps going. I always remind myself of that. But based upon my experience, I took a chance and shorted a shitload of FNMA at what felt like the top.

How much?

I must have had like 200K or 250K shares short near $5, near the very top. About a million dollar position. They were showing huge bids, so I took a chance and took them all out. Then the stock basically dropped to like $2.50 after that.

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What strategy were you using going into this trade?

Well since I already had a huge long position coming into the open, my strategy was that when I decide to sell, that stock will go down, and I’m going to short it. First I helped drive the parabolic move by not selling any at open and instead buying more. I knew that the instant it downticked, I was going to spray these guys with a huge amount of shares. When I thought it was going to top, I unloaded my entire long, like 250K shares, and then shorted 200K shares. So I took out almost 500K shares of FNMA at $5. Roughly $2.5 million. So I had just stuck them with nearly 500K shares at the very top of the parabolic. As soon as they reversed the price action and started selling I canceled my buys below that. Now the demand is gone. They thought they had a million dollars worth of buys below, but it’s gone.

Who’s “they” in your opinion?

High frequency trading. I know it was them, because the next day they turned the machines off. They stopped showing half a million shares size and started only showing 10K shares. They went from 500K bids to 10K bids because I destroyed them. I never saw large sizes in that stock again. They were stuck with no buyers at the top. What’s better is I still had a 200K short position as the stock fell. And I knew that when I decided to cover, the stock was going to bounce, or at least stop, because not only was I going to cover 200K shares, I was going to long another 200K shares.

And you did that in the $2s?

Something like that. Way at the bottom.

How did you hold your short that long without covering? You’re typically a scalper…

I probably didn’t cover because I was literally shaking too much to look at my P&L. (laughs) I was staring at the chart and Level II. It was just so damn smooth. It was a one-in-a-million trade. They were stuck

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with so many shares they were trying to liquidate along with everyone else. The offer was just stacked. There was no reason for me to cover.

What were you waiting to see on Level II?

I was waiting to see something I’ve been familiar with for 10 years.

And there were a bunch of fake-out bounce attempts, but I knew they were fake. Besides, I was cushioned with enough profit already that I could hold for more. Then when I covered and went long, I made sure it bounced. There was no chance in hell that stock wasn’t going up.

You employed the same tricks we’ve discussed…

Yeah, and it bounced to like $3 or $4. At that point I was shooting for a $2 million profit, probably held just a bit too long, and ended up giving back like $100K in slippage. Buying and selling that much size isn’t easy. Once they turned off the machine, the liquidity disappeared.

You were shaking, yet you had the presence of mind to flip the giant position at the bottom and go long…

Yeah, but that’s how I always traded. That was always my strategy, except this time I stepped up to the big boy league in terms of size.

That was the difference. It was just so damn liquid, I could trade size.

Is size usually determined by the liquidity on big plays like this?

Yeah. I like to choose a size where if I want to, I can click a button and be out. With FNMA they showed enough size I could do that.

After you nde it to the bottom, how far did you ride it back up?

Right to the top. I stop trading a stock when I start to lose money back. I keep hammering until I lose. Then I’m done. Usually that’s when the liquidity is over and it’s gotten choppy.

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So what do you do when you look at your P&L and $1.42 million is sitting there?

I was shaking. I didn’t know who to tell. I couldn’t tell anybody. I did a screen capture and said, let’s go drink, (laughs) It was actually less about the money than the fact that I had done it. The seven-figure trade was on the bucket list.

What’s your biggest loss?

I forget the name of the penny stock, but I lost around $300K in it. It was a promotional mailer play that went wrong. I went long on the dip thinking they’d save it and ramp it back up, but they didn’t.

You’re normally very good at selling as soon as something moves against you…

I was already up around $2 million for the year, so I was very cocky, and it bit me in the ass. I was arrogant, thinking I couldn’t lose and that the stock had to bounce. But something I’m good at is screaming, crying, getting angry and taking the loss, but then starting over. I go back to my bread and butter, which is gapping stocks overnight and scalping intraday. I start making $2K or $3K a day and get back on track. Eventually I’ll make it back. And I did. Within a couple months I had made it back and closed the year up around $3.3 million.

Have you ever gone to zero in the trading account?

Before I took out the mortgage I was probably down to about $8K.

How do you handle losing streaks?

Forget the streak and remember what made you profitable before it started. Small gains. Rebuild confidence. Go back to trying to make $2K a day instead of $10K. Just aiming for $2K you’ll have good days where you make a lot more. I tell myself I need to get a couple days of green, even if that means a dollar. Then I go from there.

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Have you had unprofitable years?

No. Not since the first couple years.

What’s your biggest disappointment when it comes to trading?

Not fully capitalizing on the huge winning streak I had. I was playing so small. If I had just upped my game a little sooner, I could have made a lot more money. I was too happy making $500K a year. The moment I decided to step it up, it was easy to double the profits doing the exact same shit. I started having seven-figure years, the biggest being $3.3 million. Although I will say you have to be ready to step up your game. At that point it wasn’t about the money for me, it was about the challenge. I was comfortable financially. Who knows, maybe if I had stepped up my game sooner, I might have lost a ton of money.

Do you have any advice for traders trying to get to the next level?

Sounds like it was a deliberate process…

It was very deliberate. I think the problem traders have is that they may not be financially secure yet, and going bigger brings fears of losing bigger. And you can’t play scared because you won’t correctly play the cards you’ve been dealt. Like poker, if you’re too nervous, you’ll be folding your winning hand when your opponent is bluffing. If you’re not comfortable with the size you’re playing, you’re not going to make the right calls.

Any advice for the guys trying to start with $5K…

It’s very difficult. If I were starting with $5K, I’d only be looking for $100 and $200 gains. You can do it, but the pattern day trading rule is going to make it even more difficult.

What was the turning point in your trading career?

When I lost nearly all of my money and realized to be successful I couldn’t treat trading like gambling any longer. Once I changed that

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thinking, I became profitable almost every damn day. I realized you had to take the gains. Book the gains. “Let your winners ride” is only applicable to swing traders. If you re a scalper, “let your winners ride”

doesn’t mean shit. You better be taking profits.

The key is knowing when to take profits, because you can also minimize profits to your detriment…

I let winners run until the chart indicates an exit. Then I just take the gains. If you do that enough times a day, it’s like a paying job. One strategy you might employ is to take small gains like that until your daily quota is met, then mess around with the other trades. But don’t lose it all back, (laughs)

What makes you most proud when it comes to trading?

People assume my proudest moment was the seven-figure FNMA trade, but I’d say that was the most thrilling moment. My proudest achievement is the years and years of consistency. I had a three-month streak without one losing day. I had a whole year where I only had seven losing days. I had another two years of only 19 losing days. I’ve tried to model my career based on baseball hall of famers like Ichiro Suzuki and Tony Gwynn, non-flash guys who were some of the most consistent hitters of all time. Anyone can get lucky once in awhile, but having a prolonged, consistent career is definitely my proudest achievement.

Do you think trading can be learned or are you born with it?

It definitely can be learned, although a lot of it comes down to personality. Anyone can learn the technical aspects. But can you change your personality? Are you a risk taker? Are you a gambler? If So, this profession is never going to work for you. Trading is all about discipline—the blowups come when you don’t have it. And it’s very difficult to realize and correct your lack of discipline while you’re actually blowing up. During a blowup you’re in a frenzy. So if your personality is that of a YOLO, You Only Live Once, “I’m all in,”

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you’re going to lose it all. I can tell you if a trader is going to be good or not based upon his personality, not his intelligence. My friends who are successful traders are disciplined and calm. They can get pissed sure, but they don’t let it affect their trading.

Some people say trading should be robotic. “Disciplined” and

“calm” seem to point in that direction…

I was a robot. And it has to be reflex. You have to get to the point where you don’t think, you just react. The market moves too quickly for you to second-guess yourself. I compare it to being an athlete.

They don’t think. They react. Once trading becomes instinctual, all confidence problems are solved. You just act.

What are you doing to make yourself a better Nasdaq trader?

I force myself to sit all day and concentrate. I don’t rely upon past success. I treat it like I’m starting from scratch with no bankroll—like I need the money. Each day is a new day. Doesn’t matter if you’re up already this week, what have you done today? Pay yourself every day.

What do you think other traders do better than you?

They have more patience. I have no patience. I take the profits, and then I cry about it when I miss out. (laughs) What do you think you do very well?

I’m very good at picking entries. When I post something publicly to Twitter I’m pretty dead on. My timing is also good in terms of spotting tops and bottoms. Simple charting.

Do you have any trading rules that you live by?

Don’t fight the trend. Cut your losses. Don’t add to losers. Remember you are not smarter than the market. The market doesn’t give a damn what you think. If you can do all those things, life will be easy.

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Do you still worry about going broke?

No. The only reason you would worry about going broke is if you’re gambling. It’s like Rounders, “you can’t lose what you don’t put in.” If you’re not putting your entire bankroll into a trade, then you don’t have to worry about going broke. The only fear I have is not being able to make the same amount of income I used to. And that fear can lead to further losses because you become impatient to get back to where you once were. Once you get a taste for the good life, it’s very difficult to go back. So you have to save your money all the time. I’m not going to buy a Ferrari every month like I used to. (laughs) After trading so long, what do you think when you look back?

I’ve been doing this for a long time, and up until recently, it was always about the challenge, the quest to succeed and become the best at something. In my opinion I became one of the best penny stock traders, hitting many goals along they way, including the bucket list, seven-figure trade. But the problem is I committed so much time and energy it destroyed my personal life. When I became successful at work, I became a nightmare at home. I never took a vacation. I did a three-year stretch where I never took a day off. If I took a vacation, I had laptops set up in the hotel room. I was trading on my laptop as my kid was being bom. I was driven to become the best at all costs. Now that I’m older, I’m focusing more on enjoying life. Having more money or more toys isn’t really going to do anything for me. You have to find balance somehow.

So where do you see yourself in five to 10 years?

Still trading. Enjoying life. And not having to compete. I’ve always thought of trading as a videogame, where I was trying to get the high score, competing with others but mainly with myself. And then I thought I got the high score with the FNMA trade. But the high was short-lived because you can never really get the highest score. Trading ls a video game with no ending. You have to find a life outside the

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computer. You have to find enjoyment outside the numbers because if you get caught up in the money, it will change you.

It’s more about the journey, the fulfillment of goals…

Correct. It sounds like bullshit, but it’s true. When you get to that level, what’s another S100K? Nothing. So you have to find motivation outside of money, like trying to accomplish something that hasn’t been done before or trying to go on winning streaks of months at a time.

So how do you define success?

For me, it’s having the respect of my peers. I think if you have the respect of your peers, especially the top people in your field, you know you did something right. And throughout it all, I’ve had integrity and lived by my principles. I always wanted to be more than normal. I wanted to do something that had never been done before or at least something that very few had done before. And with penny stocks, I feel like I did that. I started out as a kid with a goal of making $100K

per year, and there have been times where I’ve made hundreds of thousands in a matter of minutes. I did something that I never thought possible, and I did it honorably, admirably, and with integrity. Sinatra said it best: “I did it my way!”

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The Tape Reader

“I always enter a trade thinking I’m going to lose.”

John Welsh (@johnwelshtrades) is a 41-year-old trader from Connecticut who once funded his trading account with cash his employer gave him to pay for his MBA.

Raised in a middle-class neighborhood in Norwalk by divorced parents, he didn’t really know the market even existed until college.

But he loved math, especially algebra, and with self-declared “autistic type” qualities, he eventually earned a degree in accounting and a master’s in finance.

He trades without the use of charts, Level II, or multiple monitors, calls his two brothers “dicks” (”You can print that!”), and blocks Twitter followers at the drop of a hat, including this author for a period of time. But it’s this no-nonsense attitude that has served him well in the stock market over the past 16 years, allowing him to see companies for what they truly are.

I hear the money you used to begin trading was obtained in an interesting way…

After I got an accounting degree in college, I got a job with a corporation that wanted to pay for me to go back to school and earn

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my MBA in finance. They wrote the checks out to me personally, and it was my obligation to pay for school with that money, but I didn’t.

Instead, I took out student loans to pay for school and used the corporation’s money as my capital for the market.

How much capital?

Around $100K over the course of the four-year MBA program. No one was going to give a kid coming out of college $25K to trade, so that’s how I acquired my capital to do it. It was risky and not something I’d do today, but I wanted to try to leverage the tech market and how insane it was then. It turns out I just happened to be investing at the right time. I actually had no idea what I was doing.

What did you invest in?

I was very intrigued by the Internet, dial up access, and how you could connect anywhere in the world, so I invested pretty heavily in AOL. If you look at the chart between 1998 and 1999, when I held it, the stock split five or six times. It was literally my only holding. Whenever I got money for my MBA, I’d buy more AOL. While I was working I would be watching the AOL ticker, fixated on it for nearly two years. Not only did I make back the J100K in student loans I took out, but I made enough to pay my taxes and have some left over to continue investing. I was instantly hooked on the market, even though it was a blind investment that I got very lucky on.

Did you continue working for that corporation?

After they paid me my last MBA check, I cashed it, waited until it cleared, and then put in my resignation.

To become a full-time trader?

I still wasn’t a full-time trader because I took a job at Priceline, which had just gone public, I wanted to trade fulll-time, but I got such a huge

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raise to go there I just couldn’t turn it down. I decided going it alone trading was too risky at that point without enough capital.

When did you evolve from an investor into a trader?

In 2000 and 2001 when the market started to tank and I started to lose a little bit of money in my investments. I decided I needed to pay attention because putting money into the market and not paying attention just wasn’t working anymore, (laughs) The market was going down and I started learning how to short sell.

How actively were you trading then?

Not very. Maybe twice a month because I was still working at Priceline. But I don’t like the corporate structure. Within the three years I was at Priceline, I was promoted five or six times, so it was going well, but I always clashed with management. I didn’t agree with everything they said, and they didn’t like that I wasn’t a “Yes” man.

During my last year there I started an online business.

What was that?

TheConsumerBridge.com, which was a beautiful business model that can’t exist today. I was re-selling cell phones on Google for five cents per click when people accidently searched for typos, like “cel phone,”

or when people misaligned their fingers on a keyboard’s home row and typed in what they thought was “cell phone.” That’s where I made the majority of my money and was finally able to quit at Priceline, even though I knew that business was only a one or two year deal before Google would find their error. Eventually they’d figure out people are actually trying to search for the real term and fix the algorithm.

So your intention was to do that for a couple of years before trading full-time?

My intention was to save every dollar I made before Google finally figured it out and wanted to be paid more for those clicks. And that’s

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what happened. They found and fixed it within about 15 months.

TheConsumerBridge.com did about $500PC in revenues the first year, half of that the second year, and then not even 10 percent of that the third year. But I was able to put away about $250K from that little blip in the Google algorithm. It gave me the capital I needed to quit my job and cushion my start as a full-time trader.

So you started trading with over $200K?

I started with S100K.

How did that first year of full-time trading go?

I had developed a knack for short selling already, and when TheConsumerBridge.com wound down it happened to be 2008/2009

when the market got absolutely destroyed. So once again it was just good timing. I started trading very actively, especially the ETFs.

How did you become so proficient at short selling?

When the market corrected in 2000 and 2001 after the tech bubble, the one thing I noticed about myself is that I was a good reactive trader as opposed to a proactive one. Tm much more comfortable shorting a company on a parabolic move than I am predicting a parabolic move, especially if I know the company well.

And the setups you saw in 2000 were setting up again in 2008?

Yeah, I saw those patterns and noticed people tend to flock to things that are moving. They also tend to overshoot. That’s why I got into short selling more, because to me it was easier money. I had this short-seller mindset heading into 2008 to the market action was right in my wheelhouse. I made the most money on SKF, a double short financial leveraged ETF of all the banks. Actually, one of the reasons guys like Jim Cramer and Doug Kass were claiming that the banks were going bankrupt was because of the wonky things this ETF was doing. It was

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the right instrument at the right time for me. That first year I made between $400K and $500K in profits.

And the next few years? Did the success continue? Did you have any down years?

Knock on wood, I’ve never had a down year. 2008, 2009, and 2010 are the best years I’ve had in the market, but I’d say I average about $400K a year usually. I’ve done less some years, but I also have consulting income where I advise a couple hedge funds.

What’s your daily routine while trading?

My routine is about as structured as they come. I wouldn’t say I’m a diagnosed autistic, but I definitely have autistic type qualities, which is great for trading I think. I get up at 7 a.m. every day and fire up my software. I immediately look for news items, preferring the 7:00, 7:30, and 8:00 a.m. news. I trade until about 10:30 a.m., depending on the day, and then go to the gym for an hour or so. I do most of my trading before noon with very little trading after 2 p.m.

Are you in open positions when you head to the gym?

It depends on if they’re working or not. If they’re not working, I can’t go to the gym. And that’s a bad day.

And you come back and close most of them out before noon?

No, if my positions are working, I can keep them all day. And if I like the action, I will keep them on overnight. But I’m very structured in the fact that I will not open a new position after 2 p.m. unless there’s special circumstances surrounding it.

Do you trade after hours?

I watch the market after hours, but I rarely trade. I usually shut it down around 4:30 p.m.

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Do you keep a trading journal?

Yep, 1 have an Excel spreadsheet that 1 record every trade in. Not really to keep track of the dollar amounts, but to identify patterns problems, or things I could be doing better. For instance, I’ll look at my position sizes over the course of that week and compare those sizes to the time of day the trade was made, because I like to be more aggressive in the early morning, around 8:00 to 9:00 a.m., and less aggressive as the day goes on. Stuff like that.

Do you perform a scan at night?

No, I never do. I have a watch list, but I don’t do any scans. I’ll look to see what stocks are setting up between 2:00 and 4:00 p.m. and put those on my watchlist for the next day. I’m not trading at the end of the day I’m looking for stocks that are setting up for tomorrow.

I Do you come back to the market at night?

Nope. With kids it’s definitely shut off until the next day.

What’s on your trading desk? What tools do you use?

I’m probably the most different trader you’ll interview when it comes to this, but I don’t use Level II, charts, or multiple monitors. I have one monitor. I use E*Trade, TD Ameritrade, Interactive Brokers, and then Centerpoint Securities for hard-to-borrow shorts. But there’s no mobile platform for Centerpoint, and I can’t stay in front of a screen all day – I want to go to the gym—so I don’t use them as much. I also have TradeTheNews.com up and Twitter.

No Level II, no charts…

Nope. People can't believe that fact, but it’s true. I feel like I’m a tape reader. 1 think 1 m better off seeing where a stock is moving, rather than where it was. 1 see whether the price is moving up or down, and I stick to my time frames for the trade.

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How do you pick your trades then without technical analysis?

My big strength is processing large cap news very quickly, so I tend to get in and out before people can even think about what to do. It's hard to teach, which is why I don’t have a paid chat room or anything like that. Well, that and the fact I don’t want to deal with all the headaches.

What do you mean by timeframes?

At Interactive Brokers you can trade at 4:30 a.m., before anyone else.

And people still don’t understand how significant that advantage is over a platform that doesn’t offer that capability. If I gave you the option to long or sell something before anyone else, wouldn’t you say that’s a significant competitive advantage? Because a lot of people aren’t awake for premarket. A lot of people just see the news later than me. And since I’m able to process news quickly, it works in my favor.

Do you make most of your trades premarket?

A large percentage between 8:00 a.m. and 8:30 a.m., yeah. I definitely make more than 50 percent of my profits in the premarket, which I think is rare for traders.

A lot of people don’t like the low levels of liquidity that early in the morning…

Right, from 4:30 to 8:00 a.m. there’s not much liquidity at all, but from 8:00 to 9:30 a.m., believe it or not, there is. And that’s my favorite time frame. That’s when I like to enter trades. And if they’re still working for me when the market opens, I’m likely to keep them on. Otherwise I’ll cover the trade just a couple minutes before the open.

Is that to avoid the volatility of the open?

I do it because all the stops and limit orders from the prior days still need to be processed. If a stock is up 50 percent on news that morning, there are a lot of orders that are waiting to be filled that can’t

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be executed in the premarket. So market makers need to start adjusting for those orders between 9:27 and 9:30 a.m. I’ve made a lot of money during that three-minute time period when the stock pulls back, especially if the news isn’t as good as everyone thinks.

Can you give an example?

Let’s say a stock closed at S10 yesterday but has news today and is set to open at SIS. A lot of people who are at work and haven’t even seen the news still might have limit sell orders in from $10 all the way to $15. The market maker won’t bring it all the way down to $11 to fill someone’s sell order, but that order basically turns into a market sell.

That’s when a little air pocket comes into play. It looks like people are actually trying to get out of the stock when they’re really not. And the thicker the stock with the bigger the market cap, the better it works.

There just aren’t enough orders waiting to be filled on the thinner stocks…

Right. Not a lot of shares, not a lot of orders. But if the market cap is above $1 billion, it 100 percent applies.

And you take advantage of that…

All the time. In fact, if I just stuck to that type of trade, I wouldn’t say I’d have more money, but I’d say I’d have less stress. They’re pretty much guaranteed trades, because I don’t think there’s any way for the market to “fix” that occurrence. In my opinion, that’s a strategy that isn’t going to eventually fail like some other ones we see lately.

Like which ones?

Well I find it very interesting that everyone seems to be a short seller these days. That’s pretty rare, and it’s a pattern that’s kind of disturbing. If everyone is short selling, eventually the shares are going to run out. There’s a limited supply. And the whole practice lately is a very gray area. Interactive Brokers only finds you a short if it’s

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available. Other brokers don’t look at it that way. The whole issue of naked shorting gets brought into it. But what I’m saying is, what happens if suddenly those shares aren’t available any longer? I like my method of trading because mine is liquid. It will work regardless of whether or not short selling these micro caps gets weeded out.

A lot of people are making a lot of money right now on these low float stocks that get so ridiculously over-extended…

Right. And as a trader I ask myself, is this a good business model?

Truthfully, it’s not. Where someone else might mimic that approach, I just don’t think it’s a long term strategy. I prefer mine.

Have you backtested your strategy or is it something you’ve learned over time?

Again, with the autistic tendencies it’s just something I do over and over and over again. And I’ve made money every year. I think I’ve had two losing months over the last 66 months, so it’s very consistent. I used to be short about 90 percent of the time, but last year I actually made more money going long. With everyone being so short-minded these days, I know now is the time to develop my long game.

Do you scale into your trades?

I should. I try to. But I really don’t. Depending on the size of the company, I do a minimum of 25 percent of my portfolio. Like today, CYTR had news in premarket, and I shorted it at $3.75. But the market cap was small so I used 25 percent of my portfolio, shorting around 8K shares. I covered around 9:00 a.m. for $3,200 profit.

And if it’s a larger cap?

If it’s something like BABA I have no problem going up to four times my buying power on margin intraday. But I’m such a structured guy, I don’t want to risk as much capital as other traders. I have saved 50

percent of my after-tax paychecks for the last seven or eight years. I’ve

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never spent any of it. So I don’t take huge risk like other traders do, but my savings have accumulated significantly over time.

You don’t leave the capital in your account to put at risk…

That’s correct. I have $100K in each of my trading accounts and 15

times that or so in savings accounts.

Do you add to positions when the trade goes in your favor?

I rarely ever do.

Do you average down on a loser?

Never.

Good risk management…

When it comes to risk management I have two fail-safes. One, I always have a stop in mind when I enter a trade. In fact, I’ve never entered a trade without a stop in mind..

How do you determine a stop if you’re not using charts?

Usually around whole numbers. So in the CYTR example, $4 was my mental stop.

And the second failsafe?

If I’m underwater in a trade by the time the market is set to open, I automatically take the loss.

Before the open or at the open?

Usually during that 9:27 to 9:30 a.m. window. Because in my experience, if I’m down in premarket, that stock has a very good chance of continuing to run during the regular session.

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What’s your favorite setup?

Shorting an after hours news release the following morning. For example, NERY came out with news last night that sent the stock price from $6 to $12 in after hours trading. I don’t short them in after hours, though. I wait until the next morning. If it opens up premarket near the highs of AH the night before, I short it. Unfortunately this one was such a low float garbage stock with rip-off news that it opened two dollars lower at $10, so I didn’t short it. But it faded all through premarket and then all throughout the day. That’s my bread and butter play. What I should have done with NERV is shorted it anyway at $10 with my stop at $12.

Are your long trades counter-trend as well?

Yep, everything’s definitely counter-trend. If it’s a long it’s usually something getting hammered and I’m taking a chance on a bounce.

I’m not a good breakout buyer.

How many trades do you typically realize intraday?

I would say probably two to four trades.

How many positions do you feel comfortable being in simultaneously?

One. (laughs) I can sometimes get up to two or three positions, but 90

percent of the time it’s one.

Are you usually flat at night?

Traders like Gregg Sciabica have taught me that a lot of big money is left on the table if you don’t hold overnight, especially on conviction shorts. The trend now and the bigger money is when people have forgotten about the stock and moved on. So the majority of the time I’m flat, but I have been holding more overnight lately.

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So that’s a recent addition to your trading?

Yeah, I’ve made two successful additions to my trading lately. One, I go long more often ever since I noticed this trend of everybody getting short. And two, I hold shorts for multiple days to catch the back end of the move when nobody’s talking about the stock anymore. I typically cover half the position the first day, then let the rest ride.

How long are you letting the rest ride?

No more than a week. Probably within the three day cover window.

Do you look at your P&L during a trade?

I definitely try not to look at it all the time because I think that’s a mistake. If you’re staring at losses daily you’ll try to recover them quickly. It just clouds your mind. But I think it’s easier for me because I could lose all the money in my accounts and still have plenty left over in savings. All I’m concerned with is whether or not I’m making money monthly.

Do you set a target before entering a trade?

Never. I always enter a trade thinking I’m going to lose. I want to know where my stop is. I never think about how much I might make.

So how do you determine your exits on a winning position?

Usually that’s done by time. If a position is going my way in premarket, I may cover half into that 9:27 to 9:30 a.m. window, and then put my stop at entry for the rest. Let it run throughout the day, maybe even multiple days.

So you only put that stop at entry if you’ve already covered half ?

I put that stop at entry whether I’ve taken half or not.

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If you’re still in a full position and haven’t taken any profits, you’ll let it come all the way back, lose all your gains, and stop at entry? Or do you adjust your stop as the trade goes in your favor?

Truthfully, that happens a lot because I don’t like to be in front of the computer all day. Although if I’m up five digits, I’m definitely going to start taking some profits. But it also works in my favor because not watching every tick makes it easier for me to allow the stock to fade all day without minimizing my gains by covering prematurely. If they haven’t taken me out by the end of the day and the stock is starting to ramp back up, I’ll just cover it all. But if it’s weak, I’ll probably hold at least half until the next day.

So you do scale out somewhat…

Yeah, I will take it in halves. I don’t do thirds or fourths, etc. Either half or all.

Let winners run by not sweating the intraday movements…

That’s correct. My win/loss ratio might actually be negative, but so much of that is taking a $100 loss on a $100K trade when I stopped out at entry with a penny slippage. So many of my trades are stop-to-entry, breakeven trades, but they still count as a loss technically. But that’s my method for letting winners run, putting my stop at entry. If I get stopped out, it costs me nothing. But if I don’t get stopped out, I can make big money while working out at the gym or volunteering at my son’s school.

Those must be the best days…

That’s what my normal days are. I make money 80 to 90 percent of the days. It’s pretty consistent. I definitely could have a more scalable method, or I could pay attention more, but it’s just not my nature.

Wouldn’t you think it would just benefit me to learn charts?

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Possibly. But it’s also possible overanalyzing every tick of the chart would make you second-guess the conviction you currently have for a trade…

That’s how I feel. I’ve never bothered to learn charts because I worry it will take away my consistency. I’m hesitant to change something I believe is working. In fact, I’m just excited I’ve been so successful this past year while making the changes I did make, like going long more and holding shorts for multiple days.

Do you have a profit goal for each day?

I used to tell myself a grand per day is a good living, but now I just focus on the monthly goal of making at least $30K. Although coming up short is not a big deal.

How much does the overall market play into your trading?

It used to all the time. But so many of my trades are news driven now that the macro doesn’t really come into play. Yet when the market is frothy and speculative and the low float stocks are moving, I will definitely try to long garbage that I would never usually hold. And on the flip side I’m careful shorting them.

What do you think about trading tips or suggestions for trades on social media?

I don’t follow anyone into trades. I’m sure I’ve taken a tip from somebody before, but 99 percent of my trades are my own. On the other hand, I think social media is great for new traders because I think the education and access to other traders cuts down on the learning curve. I didn’t have that when I started. That being said, I don’t think social media a year or two down the road will be like it is today. You won’t have this circle jerk of traders promoting their own holdings on Twitter.

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What do you think it will be instead?

Much more regulated. There’s just no other way. Right now companies have algorithms that run off the Twitter API and compute trades based on stock symbols and the frequency they’re Tweeted.

Machines have access to the API, so that needs to be regulated, but also gurus putting their picks out on Twitter, people constantly pumping their own holdings, it’s all going to be regulated.

You think the SEC can step in and handle that?

Absolutely. I think they’re already doing it now. They’re learning what type of pumperish activity is misleading investors. Take Twitter pump SPEX for example, a stock that went from $1 to $30 in a week and now it’s back to $1. That type of activity is definitely on the SEC’s radar, without question.

I always figure free speech will prevail…

Technically, with the markets, you’re supposed to have a Series 7, although I know there’s legal verbiage you can put on your Twitter page or chat site that says you’re not responsible. But the SEC isn’t going to allow a stock to go from $1 to $30 to $1 within a year without some repercussions. They’re just figuring out how to do it. I’m pretty good at being one step ahead of where the market is going to be, so I definitely see a lot more regulation in social media within the next couple years.

What’s your biggest win?

I actually don’t like to talk about my wins. I never focus on them. For karma purposes.

So what’s your biggest loss then?

About five years ago I lost over $100K in SPPI. I had just started trading biotechs, and I had longed 20K shares at $7. I thought the

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FDA panel hearing was coming on Monday, but I didn’t know the committee notes came out a couple days before the hearing. They came out on Friday and that sucker started sinking $6, $5, $4, and I had no idea what was going on. I ended up selling around $2. That was a huge learning experience for me. I’m a date trader. I trade by time and catalyst, so learning the FDA process and how to trade biotechs around those dates has made me more money over time than I actually lost on SPPI.

Were you playing the run up into Monday?

I actually planned to sell intraday, but it was my own ignorance that got me. I’m very careful with biotechs ever since that trade. I still remember it because John Ashcroft, who is still an analyst at Brean Murray, said it was going to be approved. I even talked to him via email about his opinion beforehand. After SPPI tanked I sent him a nasty email telling him how bad he sucked. So I didn’t take full responsibility for the loss, (laughs)

But you learned from it…

Oh yeah, that’s why it comes naturally for me to talk about my losers.

Every bad trade gives me the learning experience necessary for my winning trades.

What percentage of your account was lost?

Well it was 25 percent of my gains for the year. But to lose it just because I didn’t know the notes were coming out is pretty pathetic if you think about it.

How do you handle losses or losing streaks in general?

Losses don’t bother me at all when I follow my rules. If I have bad losing streaks it s usually because I haven’t been following my rules, but I handle it by getting away from the computer and taking a day off.

Sometimes you run bad. It happens. I just had a week where I lost

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Monday, Tuesday, Wednesday, and Thursday, so I took a three-day weekend and came back Monday with a clear head and started printing money again. People think they need to make their money back right away, but that’s just not the case. You need the time away. But it’s actually rare for me to have back-to-back losing days.

Yeah, you mentioned you’ve only had two red months in the last 66 months…

And one of those months I was on vacation. I only traded one week that month and lost $5K, so it’s insignificant and immaterial. But the other month I got absolutely destroyed. It was when the market started to turn around in 2010 and I kept trading SKF. I stuck with it day after day, losing $2K or $3K each day. After about three weeks, down like $70K, I finally decided the strategy was no longer working.

The market had changed…

Yes, and I didn’t pick up on the change and stuck with my strategy of shorting ETFs too long. It had worked well for two years, so it took me awhile to realized the change. But my philosophy is the problem isn’t being wrong, it’s staying wrong, so I adjusted, and since then I haven’t had a losing month in five years, besides that one $5K.

What’s your biggest disappointment when it comes to trading?

I love my job. I love what I do. But I can’t really talk to many people about trading. It’s a lonely gig. At least it is for me.

But you still wouldn’t wish to do something else…

No, this is what I was meant to do.

What’s your proudest moment?

Paying off my mortgage. I hate debt. Although with interest rates below 4 percent it’s actually not horrible, (laughs)

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What would you consider a defining moment or turning point in your trading career?

My defining moment was when I first invested in AOL. (laughs) Because I had never thought about the market before then. And I don’t think I’ve had a turning point really because month to month I’ve been very consistent ever since. My accounts just keep going up.

I don’t suppose you’ve ever thought about giving up trading along the way…

Truthfully, I think about it all the time. Especially after a bad trading dav. I think about what it would be like to have a normal job, and then I laugh because I would never want one. It always comes back to knowing that this is what I want to do.

Do you ever worry about becoming unprofitable?

No. But trading is stressful, so what I worry about is whether or not I need to continue to risk income. I have savings, so should I get a steadier stream of income without trading? Maybe. But I keep trading because the profits have always been so consistent.

Do you think trading is an innate skill or can it be learned?

My type of trading is innate, unfortunately. I loved math as a kid. I have an accounting degree and an MBA in finance. My brain is just geared to think about numbers, balances, P&Ls, and cash flow. I’m definitely not your typical Twitter trader. I actually understand filings.

So do you often do that research on the trades you’re in?

No. (laughs) But once I’m in a trade I will do a little bit of research sometimes. But with my strategy I don’t have to think much.

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You basically trade on the psychology of other traders…

Sentiment. Although some trades do come up on the balance sheet, like realizing a certain company might be raising money soon based on the news that just came out, but I rarely ever crunch P/E ratios or competitor’s statistics. I can, but I’m too lazy.

Can you give an example?

Say a biotech comes out with some sort of positive news and I’m already familiar with the company and know their drug is still in early phases of development.. I have no problem shorting that stock before researching anything besides reading the news. Then when I go research and find out it has a higher debt load, I’m more likely to stay with that position for multiple days.

Thinking a raise might be coming…

Yeah, that’s my thought. I love biotech because you can place whatever value you want on a stock until it gets FDA approval. It’s all about sentiment. Plus, there’s crazy volatility. Just yesterday I banked $30K on a biotech that went up 50 percent. Then today KBIO got halted and I lost $20K right back, (laughs) At least I net $10K.

What are your shortcomings as a trader?

I definitely think too much in a box. I’m so structured via time. I could also scale into trades better than I currently do. Like with the CYTR

short—I knew it was going to pull back on that news, so instead of taking the minimum 25 percent of full position, I should have gone larger. I should have doubled the $3,500 profit I made, but I didn’t want to take the additional risk.

What’s something you do very well?

Repetition. Some might consider it a weakness, but I consider it a strength. I have the same reaction win or lose, which is no reaction. I

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do the same thing day after day. In fact, my gym routine changes more than my trading routine. We’re seeing a little volatility right now in the market and if you ask me, a lot of traders aren’t coping with it well.

Not many traders can go up $30K one day and then down $20K the next without it having some kind of affect on them. Especially if that move is as big a percentage of their account as it was mine. But I’m coming into tomorrow’s trading like it never happened. I won’t even think twice about it.

So you are of the camp that believes you should be emotionless when it comes to trading?

Absolutely. 100 percent emotionless. Robotic.

Any advice for traders trying to control their emotions?

Unfortunately, the best way to calm your emotions is to know that you have a bit of a financial cushion, some money in the bank. But most people don't start with that cushion. Although if you trade the correct position sizes relative to your account size, you can train yourself right from the beginning of your career. But if your position sizes are too big, you're going to be too emotional.

What other mistakes do you think beginning traders often make?

They dont acknowledge risk. You learn that through loss. They also follow the crowd, which ultimately leads to their demise. In fact, I probably make most of my money off crowd-following new investors.

What’s something you do that you don't think other traders do?

Admit when I'm wrong. All the time. I also don’t over-celebrate when I’m right. It’s so rare for people to actually post their losses on Twitter, but I like to share what I’ve learned from the loss. So I’m probably more transparent than your average trader, too.

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Do you have any trading rules you live by?

Ten rules I try to follow are taped to my screen: 1. Pre-market and early morning trading are more profitable than afternoon.

2. Try to buy/short near the day’s low/high.

3. Try to avoid buying headlines. Get in before the headlines.

4. The more stubborn vou are, the more you will lose.

5. Shrug off all losses if all rules and guidelines are followed.

6. Don’t chase stocks just to make a trade. If the trade isn’t there, pass, and sometimes don’t trade at all.

7. Keep tight mental stops while monitoring the stock and overall averages.

8. Try to make S1K a day, and don’t get greedy.

9. Do not overtrade. Simple mathematics. The more you trade, the more likely you are to lose over the long term.

10. Avoid the second big losing trade. You will improve overall returns.

What’s the most important thing to remember while trading?

Managing risk. I try to remember that you can blow up your account in one day or in one single trade even. That’s why I assume a loss before I even enter a trade. I know where my stop is.

What are the traits of a successful trader?

Robotic tendencies. Emotionless. Someone who is a leader, not a follower. Independent. Someone strong-willed with a strong mind, not easily taken down by criticism.

How do you judge success in trading?

Success in trading is just what my P&L looks like at the end of the month. That’s it.

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What about in life?

Success in life is doing for others without acknowledgement. I don’t want to list a bunch of stuff, but I coach my son s baseball team, do summer programs, pay for uniforms, help out in his class, hold Math Mania and math classes for students. I do things for charities and for the community that people don’t realize. But as a trader, specifically a successful one, you can make the time to do these things because you are your own boss. Obviously if you don’t have money or freedom, it’s more difficult, but donating your time is how to be successful in life.

What do you wish someone had told you when you were first started trading?

I just wish Twitter had been invented, (laughs) To glean insight and advice from professionals?

Not just advice, real-time advice. Now there’s a whole community of traders out there available to talk to at any point. Just to see what types of trades professionals make is invaluable. There are so many different tools at your disposal that just weren’t there when I started out.

What do your friends and family think about trading?

My friends never ask what I do for work. A lot of people probably think I don’t even have a job, because I’m always coaching and volunteering at school. My family really doesn't say too much. They know I'm able to provide for my family, but my mother probably doesn't know to what extent. The only one who did was my dad, who passed away nine years ago. But I'm the type of person that if you don't ask, I don't tell.

Are you addicted to trading?

Absolutely not. No way. If you asked me five years ago, I would have said yes, but I’ve learned over the years that there's just no way you

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can follow even' tick of the stock market. And I’m so much more relaxed because of it. I probably trade better because of it, too.

If you could change one thing about the market, or its participants, what would that be?

I hate the “kabooms.” When I watch the NFL and see Dez Bryant do a ridiculous dance after a catch it makes me sick. And you can apply that to making money on a trade. I know a lot of these traders need to sell themselves in order to get followers or subscribers, so they want to look smart and shout from the rooftop how great they are, but I cannot stand it.

What are your goals these days?

I have an income level goal of making $30K a month. I want to keep my consulting positions. I also have a goal to take at least four vacations this year. It sounds like a strange goal, but I've never had four vacations in one year.

Where do you see yourself in five to 10 years?

Doing the exact same thing because I want to be doing the same thing.

Are you trying to diversify with the money in your savings?

I do have a little invested in real estate, but experiencing losses like SPPI has ingrained in me a need to have a huge capital cushion. All these savings accounts are like coffee cans in the backyard, (laughs) It’s just frustrating to earn less than 1 percent on them, but I know that’s not the way the world’s going to be forever. Historically interest rates are usually high, and the average is around 4.5 percent, so if it just gets back to that, things are going to be great around here.

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171 The Student

The Student

”I’m only interested in the part of the chart that has volume.”

Tim Grittani (@kroyrunner89) is a 25-year-old Colorado trader who recently came to the community’s attention after passing a million dollars in profits while in Tim Sykes’ Millionaire Challenge program.

He grew up in the upper middle class suburbs of Chicago where his father started his own business in the buying and selling of railcar components. The freedom and autonomy of being in business for oneself rubbed off on Tim, who even struck a “make it or break it”

deal with his parents in order to continue trading after college instead of getting a job.

In the mere three and a half years since, Tim has turned what was essentially prize money won from his own sports betting into over $2.3 million in trading profits.

When did you first get interested in the market?

In high school I was in a paper trading contest where you trade the market with fake money, but there was a glitch. The game was soon figged because you could see what stocks were already up during the premarket each day and still buy them for the previous day’s closing

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price. Everyone soon figured it out and grew their accounts by 10,000

percent. It wasn’t a realistic simulation, but it was interesting. I also had an uncle who was always into the market. I remember him telling me I had a mind for the market and that I should give it a try sometime. But while I was in high school, Texas Hold Em and the poker world was blowing up. An amateur, Chns Moneymaker, had won the World Series of Poker so everyone thought they could do it.

My friends and I really got into it and started playing for money at this little traveling casino where you only had to be 18 years old to play.

They got away with it legally because they would give the rake to charity or something. But I had really good success with it for the first summer. Probably just dumb beginner’s luck, but it got a lot tougher after that. I’m sure I lost money overall.

You play online too?

Yeah, during college. But my parents were really trying to nip that in the bud, dishing out punishments when I got caught playing poker online at home. But I was fed up with poker anyway. After you lose enough you get fed up with anything. And that’s when I really got into the NFL and sports betting. I opened up some sportsbook account online and was successful at first yet again. I tried to take a statistical approach to it. I did stuff like upload stats to a spreadsheet every week and make formulas to predict score totals. My junior year of college I entered a free-to-enter sports betting contest with over 700 other people and won it. The prize was $5K put into my account, but the rules said before I could withdraw the money, I had to make a certain dollar amount of additional bets with it. So I bet more and turned it into over $9K. I thought I was really good and could possibly keep going, but same as with poker, the next year the wheels fell off and I lost at least half of it back.

You must like math. Most people don’t enjoy developing formulas with NFL statistics…

Definitely. Math was always my strongest subject by far. I went to college for finance. But developing formulas with NFL stats was just

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me trying to make sense of it all, trying to find an edge. What can I do that other people aren’t doing? I would also search online forums about betting, looking for NFL picks from guys who knew what they were doing. The guy who seemed to stand out had a system where he’d input all the stats and the system would spit out his picks. That inspired me, at least partially, to try to figure out a system of my own.

So how do you go from losing money betting sports to deciding to trade stocks?

It was a combination of a few things. I was well into a finance major but wasn’t really enjoying much about it. I could tell the accounting classes and financial planning classes weren’t for me. But I didn’t want to change majors so late in the game either, so I searched for other options. That’s when I first started thinking about trading.

When did you place your first trade?

About a year before graduating college. I opened a little $500 account and honestly just starting buying stuff. That’s really all it was. I bought penny stocks because I wanted something cheap and volatile. I wanted something that could make me 20 percent quickly. I would even punch in random tickers and buy them if they were cheap enough. Needless to say half the account was gone in a couple weeks.

Half the $500?

Yeah, so I quit trading just as quickly as I had started. I cut it off because obviously I had no idea what I was doing. I went back to the stock forums and the Internet looking for somebody who consistently picked winning stocks. Basically I wanted to be spoon-fed winning picks like a lot of new traders, or at least find a system I could learn.

And what did you find?

Not much. I never found someone on the forums I thought I should follow, but one of the forums had a Tim Sykes advertisement. I

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clicked on the ad and watched the little video. It wasn’t about Lamborghinis and the millionaire lifestyle like it is now. It Was an instructional video on how pump and dumps work. It was all new and interesting to me because it sounded like a very predictable area of the market. That kind of hooked me.

And you’re not trading at this point, just researching…

Yeah, just researching. So I signed up for Sykes’ program because I wanted to learn. But I was also still looking for someone to follow. I didn’t have enough money to short sell, so I looked at his track record for long trades, created a little spreadsheet, and calculated what kind of exponential returns I could get if I had just followed his picks trade-for-trade starting with $1,000. That was actually a big motivator early on because I wanted to be spoon-fed now and ask questions later. I wanted the quick money, not a nine-to-five job. I worked at State Farm in the summer, and I hated the office environment. I was actually lucky I signed up with Tim when I did because it was around this time that my parents got wind that all my money was gone. They knew I had won the football betting contest and turned it into $9K. I was fortunate that they were taking care of all my college expenses, so they knew I shouldn’t have blown through my own money yet. They threatened to pull the plug on the college funds if I didn’t give them access to my bank accounts, so I had to start budgeting my spending.

They saw that three days prior I had spent $400 or something on Sykes non-refundable pennystocking silver plan, and I said, “Sorry, can’t do anything about it now.” They wanted me to focus on school instead, so I couldn’t trade right away. Which was really a blessing in disguise because for the next three months I just watched and tried to learn how to trade. Eventually I talked them into letting me open a $1,500 account, and I made my first trade in May of 2011.

What was it?

I can't remember if it was truly the first trade or just one of the first, but it was a new pick from Awesome Penny Stocks, the promoter. I had watched a few of their prior picks, trying to find a pattern I could

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play, and this one was on Day 2 or 3 of the promotion. It was trading between $.06 and $.066, so basically in a 10 percent channel, and I bought it near support with intentions of selling it into a pop. It promptly failed and broke down. I lost 10 percent or like $150 on my first trade. It was a terrible start, and it had been my own trade decision. I wasn’t following anyone. So that pushed me even more into following someone else’s alerts instead of doing my own thing.

So you start following Sykes5 alerts?

Yeah, it was a combination. I didn’t know what I was doing. I was blindly following. One of the first times I followed him the trade went against us and he cut his losses, but I couldn’t do it. I was down too much and didn’t want to realize the loss. I got lucky as it came back to near breakeven, but that was just another example of me being completely in over my head. I moved back home over the summer and worked for State Farm again so my trading was limited to maybe two or three trades a week. Meanwhile I kept telling my parents I needed more money because after I executed a trade my money would be tied up until the trade settl ed. So they loaned me money to bump my account up to $3K with the stipulation that I couldn’t trade with their portion of the money. Only my money was fair game.

How did it go after that?

Well that’s when I really got into the idea of short selling. I wanted to short these terrible companies when their stocks ran up, so I asked my parents to put $10K into an Interactive Brokers account for me with the same idea that I would only trade with my money. They did.

Throughout the summer I watched all these fantastic promoters like Best Damn Penny Stocks, Penny Pic, and Awesome Penny Stocks push stocks, and I started to learn. I watched Michael Goode in Tim’s chat buy these promotions on Day 1 and sell for $3K to $4K profit.

He did it again and again every time there was a new pick, so I got really interested in learning how and messaged him. I learned about market makers, routing orders, and stuff like that.

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Were you profitable that summer?

I started off down but got back to even pretty quickly. After three months of juggling trading and work I was up about $300 total and lost it all in one trade. All my profits for the summer were gone. It was really frustrating. I thought I had learned my lesson, but then I went back to college and within a week or two I had lost $1,300. I wasn’t working anymore, so I had a lot more time on my hands for trading. I even scheduled my classes around trading hours as much as I could.

So you ended up over-trading…

Very much so. And I was still experimenting with many different strategies. I had learned the concept of boxing shares from Michael Goode, but I soon discovered I couldn’t mentally handle boxing. I would think the stock was about to break down so I’d sell my long position for a loss. Then it would hold support, so I’d panic and buy it back. Then it would get weak again, so I’d sell and take another loss.

Finally I’d get squeezed out of the short side, too. Pretty much all of the $1,300 of losses was attributed to really impulsive, dumb boxing trades on LBAS. By the time I was flat on LBAS, it was a disaster.

You lost on both sides…

Yeah, and when you look back at it you wonder what the hell I was doing. The stock traded sideways for like two weeks. It wasn’t even tradeable. That was a wakeup call that I needed to focus. I had some money from working at State Farm over the summer, so I started fresh with a new $1,500. I forgot about boxing and all the other random strategies I had been trying and focused on setups with which I was most comfortable and had the most success. I had seen so many daily) breakouts work well on the OTC market, especially on promotions, so I knew I really wanted to focus on those. Plus I had yet to nail a big promotion on Day 1 like I had watched Michael Goode do so many times, so I wanted to find a way to make that work.

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You caught the end of the “good ol’ days” on the OTC Market…

I caught the end, yeah. I wish I had started trading just a few years sooner. When I finally focused on good setups it was already the last semester of my senior year of college. But my trading improved quickly. Within a month or so I had made back about $600. And I had finally nailed an early buy on a promotion for $200 profit. That was a really exciting trade for me, because I knew I was on the right track.

Soon I had made back all I had lost and was back at breakeven. And now I had $3K of my own money to trade with since I had just made back the original $1,500. That’s when Awesome Penny Stocks hit AMWI and I was prepared for it. I had a bunch of different email addresses and basically got one of the first emails they sent out. I threw my buy order in and filled about a $2,700 position at $.11 per share. Then it upticked on air and within five minutes I got out for like $2K profit around $.18 per share. It was just mind-blowing for me considering I had been grinding out $100 here and there for months on end. That might have been the most excited I’ve ever been on a trade. I was jumping around the apartment.

You nearly doubled your account…

(laughs) Yeah, really. And it was a relief because trading had been really nerve-wracking up until that point because I was getting mixed results and time was running out on college.

You were close to having to get a real job…

Right. So I was careful the rest of the semester until I graduated and moved back home.

Did you go looking for a job?

At that point, no, because around Thanksgiving I had told my dad I wanted to try trading for awhile after college instead of looking for a job. I felt like I was finally turning the corner on it, and he understood.

He was sympathetic to my desire not to work in an office

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environment, not have a boss, because he was the same way. But he and my mom were concerned that if I wasn’t able to trade profitably I’d just be sitting at home for a year wasting time.

Plus you had only made a total of about $2K in six months, not exactly a great living…

Exactly. So I worked out a deal with them. Starting Jan. 1 I had three months to trade full-time and I had to earn at least $10K during that period. If I could do that, I could stick with trading longer. If not, I had to either get a job or find someplace else to live.

How’d it turn out at the end of three months?

I made it. I had $1 OK in profits by the middle of March.

And during that time you’re still mostly buying promotions?

Yeah, I shorted a bit here and there, but it was mainly promotions.

And I was doing it full-time now, which was great. It was the first time I had been in front of the market from open to close every day. I treated it like a job and stayed disciplined.

Newer traders might like to know how you dealt with the pattern day trader rule?

I split my money between three accounts, Interactive Brokers, Speedtrader, and thinkorswim at TD Ameritrade. That way I could make nine day trades a week, three in each account. I still had the money my parents loaned me, so I hit the $25K mark in a couple months and merged all the money into one account in order to day trade freely. Then my trading really took off from there. In January and February I made a few thousand each month. March was $6K.

April was $9K. In May I remember hitting a big promo Day 1 for like $10K in five minutes again. So that’s when I realized, wow, this is getting to be serious money.

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What were your parents saying at that point? Still hesitant?

A little, yeah, but I think after that $10K win everyone became a bit more of a believer. Our Internet wasn’t working that day, so I made that trade from a Panera. I came home and was like, “Hey, look what I did.” (laughs) By the end of 2012 I was up $150K.

Using the same strategies all year?

I had started to branch out. Once I had enough money, I started paying my parents back and refunding my IB account so that I could focus on shorting again. Most of my money was made buying promotions and other OTC stocks, but I was slowly learning how to also buy bounces, short sell parabolic moves, and short sell bounces once they topped out. I slowly added to what I was already comfortable with.

So how did you get to a million from there?

Well I had moved out of my parents’ house in August of 2012 and moved in with a best friend from high school in Columbus, Ohio. It was good because I still didn’t have to deplete my trading account to pay huge bills or anything like that. Then 2013 really started off crazy.

By the end of February I was already up almost $150K, as much as I had made all year in 2012. Part of the reason was because I started with a much bigger account that year. I was also just getting more comfortable going bigger. I nailed a few promotions, was getting better at short selling, and there were plenty of OTC stocks to trade.

Every day was the same. Same setups, different tickers.

Take me through your typical trading day now…

I’ve never been much of a morning person, but I get up around 8:45

a.rn. EST to give myself 45 minutes to get my head in the game and get prepared. I review the watchlist I made the night before, looking for what tickers are setting up for my ideal plays on them. I prioritize which ones I want to go after out of the gate, maybe two or three. I

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enjoy morning trading, so I want to feel organized, know what I’m looking for, and not be trying to watch eight tickers. I trade pretty actively for the first hour or two, then depending on the day, I’ll watch my scanners for new trade ideas or stream TV shows on my laptop to distract myself from boredom trading. There are days I go to lunch or just walk away for an hour or two, but generally I like to be in front of the monitors in case a trade sets up. Once the bell rings I try to relax a bit, whether that’s taking a nap or going to lift weights. Later that night I’ll make my watchlist for the next day based on whatever scans I run.

You don’t trade after hours?

I usually don't. Very rarely something will hit my radar and I’ll throw a couple thousand shares at it, but I try to be done at the bell.

Do you review your trades?

At the end of the week I upload everything to Profidy, which serves as kind of a refresher because I’ll look at my trades one at a time and sort of analyze them. When I first started, I tracked my trades in a journal, but I don’t anymore.

What equipment and tools do you use to trade?

Right now it’s a desktop computer with three 27” monitors tilted vertically so I don’t have to look so far side to side. As far as platforms, I use either Equityfeed or StocksToTrade for my market scanners, SpeedTrader for my Level II, and thinkorswim for my charting. It s free software, but I’ve always used it and I feel pretty comfortable with it. I also have Sterling Trader Pro open for my Centerpoint Securities accounts.

How many accounts do you use?

Three. ETC and Wedbush with Centerpoint, and then SpeedTrader.

At times I’ve had five or six accounts but it’s just too much.

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Do you pick your trades based purely on technical analysis?

Yeah, I really do. I’ve always had the “let the trade come to me”

philosophy, so I want to wait until I see a trade setting up on the chart.

And daily charts are probably the #1 thing I base my trades on. I want to know what the big picture looks like. Right now I like shorting overextended daily charts very much. I like to short a stock that’s had two, three, or four up days in a row with big range. Or if I see a daily chart breakout clearly setting up, I want to go long.

How far back are you looking? 6 months? A year?

At most a year.

So if you’re looking to long a breakout, you want it to be breaking the prior year’s highs?

Well it doesn’t have to always be a true 52-week breakout. I’m only interested in the part of the chart that has volume. A stock might have been at $10 per share during the last year on almost no volume, but then last month it went from $1 to $2 on the highest volume it’s ever traded before pulling back again. Now I’m interested in a breakout above that $2 level. You can almost treat it as a fresh chart with no history once all that volume pours in.

Due to the crazy amount of volume it has recently seen, none of the prior technical levels really matter because those buyers and sellers are gone by now…

Yeah. There could still be some key psychological points attributed to those prior levels, but the recent huge volume is what really matters.

Intraday are you using l־min charts or…?

1-min usually. But I’ll look at 5-min charts also to see back a few days.

And Level II is a big part of my trading. Mostly for the OTC market, but it does help for the listed stocks, too.

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Any technical indicators?

I don’t really use them. I stick to basic support and resistance levels.

Are you long- or short-biased now?

Now it’s short. I’ve become way more short-biased over the past couple of years. Overextended charts or shorts into spikes are definitely my typical trades now.

How do you enter a trade? All at once? Scales? Do you slam the bid or offer?

It depends on the price action and liquidity. If I don’t feel like I’m going to get an execution sitting on the offer, I’ll just slam the bid and get filled a couple cents per share worse. But it also depends on what setup I’m looking at. If I’m trying to short into a morning spike, I’m a lot more comfortable putting my order on the offer in anticipation of strength. On the other hand, if the stock is cracking and I want to be short, I’ll slam the bid, but I don’t really do too much of that anymore.

You’re not shorting into weakness much anymore?

No, I’m not. I’ve kind of come to the conclusion that a lot of my headaches, or trades that become headaches, are the ones where I short into weakness only to have the stock surprise me and find support. I’d rather short into strength because even if I’m wrong and mistime it, stocks will often provide the pullback I need to get out at roughly breakeven or for a small loss. Especially if you have other resistance levels coming into play.

What’s your process for scaling into a short like that? Shorting into strength…

I don’t really think about it when I’m doing it, but I’d say I probably enter in thirds or fourths. I will not just add and add without any kind of stop loss or plan. Usually I’ll look for an area with resistance. Say a

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stock has resistance at $1.20 and $1.40 and right now it’s at $1.00 I want to start shorting on a spike up to that $1.20 resistance area.

With how many shares?

It depends on liquidity but lately I’ve been taking positions that when full-sized equal around $100K. But I don’t really think about that when I enter. Rather I’m thinking about risk, how much money I will lose if the trade goes against me. And right now I’m trying to limit my losses to around $2K to $4K. So when I start that short at $1.20, my plan is to add if it gets to that second resistance area at $1.40 but then get out of the entire position on a pullback. If there is no pullback and it shoots right past $1.40 I have to cut the loss.

So you always have a stop in mind when entering…

I know how much I’m willing to lose and to what price I’m willing to risk, so that dictates how much size I’ll be using in the trade.

So let’s play out that example. You start shorting at $1.20 with how many shares?

Probably 15K or 20K shares. I like to kind of ease my way in.

Say it ramps to $1.40, how many do you add?

I’ll probably double at least, maybe even more. Because those moves so rarely go straight through to higher prices from what I’ve seen. So if I started in 20K shares, I’ll probably add 30K or even 40K at $1.40, bringing my average up into the $1.30’s. Then I’d be pretty confident it pulls back into the $1.20’s to let me out. Or at least downsize if I want to try to stay patient and keep that risk level of $1.40 again.

What if it ramps back up through $1.40 toward $1.50?

If I’m following my rules, I’m getting out at $1.40 as it breaks out. But I hate being the guy who covers at the top of a spike, so I sometimes

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give it a little more wiggle room to see it it s going to hold the new level. If it's been grinding back up all day and breaks through, I’m more likely to just take it off immediately, but if it s the first spike of the day, I’ll probably give it more wiggle room. It kind of depends on how big the move was, how quickly did the move happen, and what’s my feel on the trade.

You scale into trades going against you, but do you do the opposite and add to winners?

I don’t do that much right now. It’s actually something I want to work on for next year. If I’m short, and if it’s a winner so far, I want to identify levels on the chart where the stock has failed to break above a few times and then add right at that resistance level.

What’s your most profitable setup?

Since I’m still working on following my rules while shorting, I’d say my most profitable setup is still buying new promotions. If you find the right promoter that everyone is following and everyone is going to be buying when they announce a new pick, I think it’s an easy buy, especially if you’re quick enough to be one of the very first.

How have you been dealing with the lack of promotions lately?

That’s where I’ve had to focus on different setups. But it’s a matter of patience. I’m sitting back and waiting, hoping more promoters surface soon. But if they don’t, I’m learning new setups and adding new tools.

How has your profitability been affected as you’re trying to evolve with the market?

It s definitely been a slow down for me. Maybe a little less profitable, but I feel like it will always be enough to live on. The OTC market just died after the marijuana stock cra2e ended. That’s when I first started forcing myself into trading listed stocks.

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So it’s still relatively new to you…

Yeah, I’ve traded listed stocks for about seven months, and I really like it so far. I love the volume. I love the liquidity in the stocks that really start running. I see more profit potential with listed stocks than I did with OTCs. But I still make mistakes. Mostly being stubborn.

Do you find it more difficult than OTC?

Yeah, because on the OTC market I relied heavily upon Level II analysis, but Level II works so differently on listed stocks. I can’t use it in the same way. If I’m shorting an OTC stock into a parabolic move, it’s usually pretty easy for me to see where the stock is turning, where it’s topping, based on Level II. But with listed stocks it’s just way too fast and jumpy, so I have to trust the chart more, which has been hard to adjust to. But I’m usually glass-half-full, so I look at how I’ve traded over the last several months and realize I’m still having a lot of success. I’m still very consistent. Of course I haven’t seen a truly bad bear market yet where there might be less opportunity, so that’s a bit of a concern, but I still trust there will be plenty of trades to be made.

How many tickers do you typically trade intraday?

I probably trade three or four.

And with scaling, how many total trades?

I’d say with each ticker I probably trade three or four times on it, too.

I get in, I get out, then maybe I’ll hit it again if I see something I like later, but I don’t scalp all day long like some traders.

How many positions are you comfortable holding at once?

I don’t like to be in more than two or three. It’s just too hard to watch.

I can have six or eight charts up, keeping an eye on them for plays, but once I’m in a position it takes a lot of my attention.

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So you’re analyzing every tick?

Yeah, usually, but it depends on the setup. Watching too closely can work against me at times, too, when the trade s not moving as quickly as I had hoped so I cut the position, only to see it work out just the way I had planned anyway. But I like to watch because as a trade goes in my favor I will move risk levels.

You’ll move mental stops closer as a trade goes in your favor…

Yeah. If I’m long a stock and it forms a new support level higher up, I’ll probably play off that new support level later. Because if that new support breaks, I think the trend is now broken and the next support level will likely fall as well. Like a domino effect.

How long are you typically in a trade?

Most of my trades are probably an hour or less. And I don’t really like to swing anymore. Too much overnight risk. I like to start fresh the next day. If I’m swinging, it usually means I got stubborn in a position and I’m waiting for it to come back in my favor. My trades are also quick because I hate sitting through consolidation. One of my biggest issues the past few months is that I’m trying to be a more patient, bigger-picture trader who can hold shorts for days, but that flies in the face of what I’m good at, which is shorting a spike and covering into the first pull. I’m sort of caught between two worlds right now.

Why do you feel like you should be that type of trader? In the name of improvement?

Yeah, I think it s a matter of improvement. I see guys making good money holding shorts for days after volume drops off and everyone has forgotten about the stock. I don’t even trade stocks when the liquidity is that low, so that’s a good question. Why do I feel I have to do that? I guess I don’t know. It’s just the next thing I want to try.

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Can you discuss your process for increasing size and getting to the next level? Many traders struggle with that.

It’s definitely a slow process. I try to ease myself into it. As my gains have gone up, I push how much I’m willing to risk on each trade.

There was a time where a $100 loss would have been absolutely demoralizing, so I had to really push myself to double that to $200, then $500, and so on. But consistent gains make it easier. Once you realize you can consistently make money on a certain setup, it’s easier to go bigger on that setup. But I don't go from risking $2K now to risking $10K tomorrow. I want to slowly get comfortable with it.

How big of an account do you trade with?

You definitely want to be above pattern day trader at $25K, or at least have multiple brokers. But I tend to keep a good chunk of my money in my trading accounts, probably around a million or so right now.

Do you set a target before you place a trade?

Not before, no. Usually it’s after I’m already in a trade when I start to look at the chart and find what might be a good spot to exit. I guess I focus so much more on my entries than my exits. I think I developed sort of a bad habit while trading OTCs because watching Level II made it easier to pick bottoms or tops based on what I was seeing.

Nasdaq stocks aren’t like that.

How do you scale out a winner?

Usually I start by taking off a quarter or half of the position.

On the first flush?

Yeah, especially if I shorted into a spike. Then I’m trying to give the rest a little more time to work. If it goes in my favor, I’ll probably take the rest off on the next washout. If it doesn’t go in my favor and starts grinding higher, putting in higher lows, I’m also getting out the rest.

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Do you have set rules for risk management, like daily limits, etc?

No, I don’t really think about those things at all. I just need to know how much money I’m willing to lose if the stock hits my mental stop I’ve never had an “oh shit” number where I immediately stop trading because I always try to trade based off the chart alone.

Do you have a profit goal in mind for each day?

No, I think about it on a weekly basis. I don’t want to put that much pressure on myself daily because I’ll start to force trades. I remember when I would have loved to make $1K per week, then it was $2K, then $5K, and now? $20K (laughs). But the number one overall goal is to have a green week. That’s what matters. And I’ve done pretty well with drat. I think over the last couple years I’ve only had two or three red weeks each year.

What do you think about social media and how should new traders use it?

If some guru alerts a stock, I will treat the alert like a catalyst for a trade. If they can cause a price spike, I may scalp the buy or even short into their spike. But I also follow great traders who might talk about a stock that hasn’t hit my radar yet. Social media is a good way to find tickers to research, but I would never use it to follow someone’s picks blindly. That’s funny because it’s the exact opposite of how I started.

Part of your evolution as a trader…

Yeah, I agree, because new traders often don’t realize that following someone s picks is absolutely worthless and that you can’t make consistent money that way.

What’s your biggest win?

I made $215K one day on FNMA. It had traded the exact same pattern a few months prior where it ran to $1.40 or something, then

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dropped to S.60 before bouncing back to $1. But I had messed that trade up. I bad a good day on it, but nowhere near what it could have been. I was really annoyed by it and ready when the setup presented itself again. This time during the morning spike I shorted it a couple times but quickly stopped out for two or three cent per share losses. I didn’t get stubborn, but I kept at it and eventually nailed the top, which gave me confidence to sit short in it all day. And then it tanked.

So you ended up short from the $5’s somewhere?

Yeah, I was short from the $5’s and it rolled over and started to drop.

But it had also rolled over the day before only to quickly find support near the previous closing price and grind back up all day. So I wasn’t positive it was dead yet at this point. I was watching Level II almost exclusively, no chart whatsoever, and I covered it all near the green-tored support. It fought there for a couple minutes and started to look heavy again so I scrambled to get my shares short again. I may have missed out on $.10 per share between covers and the re-short, but I got back all my shares before it just straight tanked. Then it wasn’t even a question of locking profits in along the way because Level II just looked so perfect. It was just so liquid I could tell when it started to bottom in the $2’s and I covered everything.

So you rode it all the way down…

Yeah, I got out at dead bottom. Then I longed it for the bounce, selling pieces all the way back up, even filling some sells as it topped out. Then I re-shorted it again near $4. So it was really like a three part trade: short, long, short. It was four or five hours of trading for over $200K profit.

That must have been an amazing feeling.

I had to go take a walk, yeah. I was adrenalized yet exhausted. A really strange feeling. At the time I made that trade my trading capital was Probably around $300K, so I nearly doubled it.

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Why did you have so much conviction in that trade?

Because it had ran up for like five straight days from $l’s to $5’s. It was just so completely parabolic. I knew OTCs, and I knew that when it snapped, it was going to tank. I also had the Level II to help me watch for the bottom. If it had been a listed stock, I wouldn’t have done any where near as well on it.

They would have been spoofing bids left and right…

Oh yeah. But in this case I was confident in my ability to read Level II, and it was so liquid I knew I could get in and out effortlessly with whatever size I wanted.

How many shares were you trading?

I shorted about 27K shares, about a $150K position in the $5’s, I suppose. The long at the bottom was about 80K shares, so it was probably a $150K to $200K position. I didn’t use margin.

But you committed nearly half of your account…

Oh yeah, I was in a good portion for sure. It was just one of those times where there was enough liquidity. It all worked.

What’s your biggest loss?

LAKE. During the Ebola craze. I think they sold hazmat suits or something. See, that was the problem: I actually learned something about the company, which biased me even more (laughs). The stock had ran from like $7 to $10, and I was looking for some dumb little scalp short on it, nothing too major. I shorted it at $9.90 and was soon up $3I< when a press release hit the wire, another U.S. Ebola patient or something, and the stock ripped right back up. I didn’t want to take it off for breakeven since I was just up $3K on it, but the next thing you know I’m saying I don’t want to take it off for a $10K loss either since I was just breakeven on it (laughs). Part of the problem was that

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I had put myself in similar situations like 10 rimes in the previous four months. I would get stubborn in a trade going against me, add short into the next spike and then cover into the ensuing fade. 1 got away with it even single time. In fact, one time I was down $100K and turned it into only a $5K loss. And all the other times were actually profitable trades. So I created this terrible habit of going for a ride. So I thought the same thing when LAKE went against me. The next day when it spiked to around $13, I doubled my position to 10K shares.

The plan is always not to get stubborn with any added shares. If it comes back to highs, you take them off. But I didn’t take any adds off for profit, and it broke to new highs again. Now I’m stubborn with 20K shares instead of just 10K with like an $11 average. An hour later the stock’s at $18 or something, and now I’m scared. I’m down $100K

and the day’s not even half over yet. I kept holding the 20K core position in my ETC account overnight because I didn’t want to realize that loss, but I didn’t let any additional adds go against me very much.

Not that I capitalized very well on the adds either, though. One morning I even had a great add of like 20K shares before it dropped $2.50, but I didn’t cover any. I actually took those adds off for a small loss near breakeven later. Eventually the stock paused and hung around the $20’s for a day and I knew buy-ins were coming soon.

With your ETC account you only have T+3 days…

Yeah, so I basically had to cut it. As it consolidated between $19 and $22, I was praying it would break down, but it never did. And of course I never covered any during the pulls to $19. When it started to breakout again above $22 I just cut it off.

All of it?

All of it. I figured it was setting up for another leg up, which actually saved me a lot of money because I was out before it went parabolic into the $30’s. By the time all my sloppy trading was done it added up to a $290K loss. Just a great example of how one trade can really get away from you if you get stubborn.

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You couldn’t take breakeven because you had been up $3K…

Yeah, it’s funny because my plan is always to take a short off if it spikes further than I think, take it off into the very next pull. And I got that pull with LAKE, but I wouldn’t take it. It was just a complete failure in following my strategy. That’s why people say short selling is so risky, but it only is if you aren’t disciplined. I’ve had to try to break myself free of some serious discipline issues.

One of those cases where it works every time until it doesn’t…

Yeah, the real issue is that I shouldn’t let myself go for these rides. I wouldn’t even remember LAKE had I taken it off for a $10K loss. It would be just another trade that didn’t work. The best way to sum it up is what I've heard from other traders: It’s okay to be wrong, but it’s not okay to stay wrong. That’s when you open yourself up to disaster.

What percentage of the your account was the $290K loss?

It was about 25 percent of my trading capital, but it happened right after my best month ever. I basically gave back that month. I think I had about $1.2 million at that point and got knocked back to $900K+.

What did you learn from that loss?

Well it was the first time I really considered having an “oh shit”

number, but I still don’t because I don’t want to trade based on arbitrary numbers. Although I have gotten better at forcing myself to cut losses on big chart breaks. It’s been painful, but I’ve done it a few times since then. In fact, last month I sized in way too big on CANF at a poor average and had to cut my losses for $35K when it started to break out to new highs. I couldn’t turn it into another six figure loss.

Did you take a break after the LAKE loss?

Not right away because I wanted to be there when LAKE really cracked. The loss didn’t bother me as much as it probably should have

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because I was still keeping hope alive. I thought I could maybe make it back. The problem was I missed the re-short, and I remember that being incredibly discouraging. It went from $30’s to $20’s in a day when I didn’t have any good size. My chance at LAKE was over, but there were still all these other crazy low float stocks running, so I kept trading for a few days. I didn’t want to lose my green month streak, so I chased that a bit and was trading bizarrely. I was going bigger and being very emotional. I went for an $80K ride on APT before getting out okay, and then made $60K on VRS before losing $60K the next day on IBIO. That’s when I finally decided to take a vacation.

Did it help?

Yeah, time off is key. It keeps you from going into tilt and trying to make it back quickly. You come back refreshed and thinking straight.

Did you ever doubt your ability to continue trading?

Nothing extreme as that. I never really doubted myself because I knew the entire problem was discipline. It was all avoidable if I could just swallow my pride and take the small losses. So it was a wakeup call to reassess my method, but never anything I felt I couldn’t overcome.

What’s your biggest disappointment when it comes to trading?

I guess if I’m ever disappointed about something it’s missing opportunities. I try not to dwell on that too much because I don’t want to be a hindsight trader, but I do regret not taking better advantage of or going bigger in some of the Awesome Penny Stock promotions. I could have been going five times the size with the amount of liquidity they provided. I’m also disappointed when a loss is due not to a failure in strategy but a stubborn attitude or ego.

What’s your proudest moment thus far?

Digging out of the hole I created in my early days. I felt such pride in doing that. I battled through to become profitable and consistent.

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Was that the turning point in your career?

Well digging into that hole with the streak of loser on LBAS really taught me so much. I learned that I hated consolidation, that a five cent range was untradeable, and that I should be looking for volatility.

It also taught me to stop trying to trade so many different strategies and just focus on what I was already good at. I realized I needed to concentrate on one or two setups I liked best, and that’s where my success really all started.

Do you think trading can be learned?

I think it can. I do think there are certain personality characteristics that help, but you can develop those as well. I think it comes down to how much you’re whiling to work towards it, whether or not you go the extra step beyond just watching gum video lessons and actually spend extra time learning.

What are characteristics of a successful trader?

Keeping a cool head. If you have a losing trade or perform badly, you can’t turn around and make some hot-headed, dumb trade five minutes later. You also have to have the ability to learn from your mistakes, think independently, and trade your own ideas. You don’t need your hand held if you have confidence in your own setups. You also need patience. When there aren’t any good trades to take, you can’t be pushing buttons out of boredom.

What are you currently doing to make yourself a better trader?

I m trying to learn new setups like branching out into listed stocks and short selling. I’m trying to get better at cutting losses on these low float runners that go further than you think. I’m also trying to learn the long side on these low floats better, because not only can I make some money long on them, but it should improve my short game as well.

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What do you think other traders do better than you?

Definitely understanding filings and/or news and deciphering it. I have very much limited myself to only trading charts and their patterns, but I think learning the fundamental side of the equation can help set expectations and targets, producing better exits as a result.

What do you do well?

I adapt to price action and what the chart is telling me. I can long a stock for an hour and then immediately flip to the short side. I see both sides of it.

You never marry one side of the trade…

I do when I get stubborn, but in general I don’t.

What are the trading rules you live by?

I like the quote, “Trade the ticker, not the company.” I’m basically trading patterns more than I’m trading stocks. Also cut your losses quickly, even though I still struggle with that one. And make sure to pay yourself along the way. Take profits. Go for singles, not home runs. I knew a trader who would swing for the fences on every trade.

He would never pay himself and end up watching these nice gains turn into losers. Once he finally realized his flaw and made the change, it was a night and day difference. He became consistently profitable.

How do you judge success when it comes to trading?

My fiancée says she can’t tell if I’ve had a profitable day or a losing day. That’s because even if I’m green on the day, I might be upset about how I traded a certain setup. That’s how I judge success in trading. How well did you execute your plan? If shorting a parabolic into an area of resistance works nine out of 10 times, I’m not going to be pissed when I have to take a loss the tenth time. I’ll be pissed if I go for the ride.

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What is the public’s biggest misconception about trading?

A lot of people think it’s gambling, but that’s a huge misconception.

I’ve done gambling, and I’ve done trading. There is just so much luck involved with gambling, whereas there are repeatable patterns in trading. There might be slight variations, but you can make the same trades on them and be consistent. In fact there s quite a group of us that prove you can. We didn’t get lucky on some huge trade one time, our profits come from thousands and thousands of trades.

What one thing would you change about the market?

I think high frequency trading is pretty unfair. I won’t claim to understand it completely, but from what I know of it, it sounds like a really unfair advantage. In fact I just read something about HFT firms getting early access to filings. It’s absolutely ridiculous.

What’s the most important advice you can give to new traders?

Start small. Don’t push size early, even if you think you’re ready. You have to give yourself plenty of time to get over the learning curve.

Don’t expect to make consistent profits your first few months. People walk in all the time with expectations of becoming instantly rich, but that’s just not how it works. You have to trade small and give yourself a chance to succeed. I would also tell new traders that paper trading is worthless. It might help you get the mechanics of trading down, but the emotions of being in a real trade, with real money on the line, changes everything. It took me a long time to understand that.

Any advice for how to handle those emotions?

You have to keep them in check. One of the biggest difference makers for me early on was hiding my unrealized profits and losses. I simply hid that column on my broker’s platform. I still had an idea of what I was up or down while in a trade, but I didn’t have that number staring me in the face. That helped stop me from prematurely cutting trades due to being nervous about how much I was up or down.

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It helped you make trade decisions based on the chart instead of some arbitrary number…

Yeah, I liked it a lot. It made a huge difference. Other than that, it just took time to get over the fear and adrenaline. Just making the same trades over and over again until I was comfortable. So again, patience.

Anything else?

I think an important thing for beginning traders to look at is how long can you trade without making money? How are you going to pay the bills while you’re learning how to trade and not profitable yet? Because part of what made me successful was the fact that I was living at home with my parents still, so I didn’t have any major expenses. That gave me time to get my feet under me and get over the hump. It would have been an entirely different story if I was trying to trade with a $4K

account while pulling out at least $1K per month for expenses. I think that’s one of the reasons people fail. Even if you’re lucky enough to be profitable from the beginning, you end up just treading water every green month until you actually have a red month and you blow up.

So what advice do you have for people who aren’t in your situation, people who already have bills to pay?

As soon as people decide they want to trade they just jump in immediately, but I think they should wait until they’ve built up somewhat of a bankroll. If that means working another year and saving up money first, then so be it. And that time doesn’t have to be wasted, either. You can still watch the market, study video lessons, or develop strategies, but bottom line is you want to put yourself in a situation where you’re set up to succeed before you start.

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The Steadfast

”You can’t squeeze me.”

Tom O’Reilly is a 49-year-old trader from Las Vegas, NV who once worked as a broker at a bucket shop Jordan Belfort, the Wolf of Wall Street, had worked at.

He grew up on Long Island in New York and was raised by a father who worked for the New York Transit Authority and a mother who drove one of its city buses. Despite not having much, his parents gave him everything they could, even mortgaging their house at one point to fund his trading account.

He’s well-known in the trading community for being an excellent trader with absolute conviction in the trades he makes. He doesn’t publicize his trades often, but when he does, it’s easy to see why he’s made tens of millions of dollars in the market.

Were you interested in the market as a child?

I never studied it, but I was a little interested. I would check the newspaper for quotes and track certain stocks, but I’m not even sure why I did that. The financial market just interested me. In hindsight, I wish I would have gone to business school, but I was a political

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science major in college with the intention of going to law school and becoming a lawyer.

And yet you’re not a lawyer…

Well, somewhere along the lines I decided law school wasn’t for me and a friend of mine happened to have started working on Wall Street.

He cold called for a broker at Lehman Brothers and would tell me about all the guys in the office, how they were making so much money, driving Ferraris, and everything else. So when I graduated college, I decided to go in that direction. I didn’t know anything about the business, so I went and got licensed at this crappy penny stock brokerage firm. Actually, Jordan Belfort, the Wolf of Wall Street, worked there in his early days, before he started his own firm. That was before I was there, but I met him later on. So you know what kind of place it w’as, just penny stocks and hell.

How many years were you a broker?

From about 1988 until 1996. I moved back and forth between New York and Los Angeles from one firm to another, but I was never really successful as a broker. I liked the trading aspect, but I didn’t like the sales part of it. I was retail sales, cold calling and getting hung up on, trying to sell people shit they didn’t want.

That has to be demoralizing…

Yeah. I hated it. And I had years where I probably made $20K. I think my best year in 1994 I made $75K.

Were you trading your own money yet?

I didn’t have any money, so I wasn’t trading. Plus I almost never made money for my clients. I had no clue what I was doing, even after seven years. I wanted to get out of the business, but I didn’t know what else I could do.

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How did you make the jump to trading for yourself ?

Wen, I was learning a few things by being in the business. I had been doing a lot of new issues and secondary offerings for my clients. I was partners with a syndicate manager, so I would get allocations to give to clients who would then flip them. So I kind of learned the syndicate business, which is just flipping IPOs. In 1996, I met Nick, a guy who was way too smart to be cold calling for a broker friend of mine but that’s what he was doing. I had no money and about $30K in credit card debt, but his dad had a little bit of money, so I pitched him the idea of putting the money up to fund an account together where we would flip new issues. I promised to teach him how along the way.

And we did that for a couple years.

How did it go?

Well, you have to open up all these accounts at all these different brokerage firms, and we only started with about $100K so we had to transfer money around, buy and sell, and move the money. . it’s kind of a headache. But we were soon making around $20K a month off of that hundred grand. Then Nick’s dad got into some trouble selling cigarettes in Canada, so he had to pull their money out because they didn’t know if the government was going to seize accounts or what, but this was right when the market was really starting to take off. I had paid off debts and bought a few things, so I only had about $6K in free cash, but I needed $50K to reopen the account we were using. It was a DVP account, which is basically a prime brokerage, where I opened trading accounts with different brokerages but the money sat in a bank and that bank acted as a clearing firm and back office for me.

And what’s the advantage of doing that?

When you’re flipping new issues, you didn’t want them to know you were selling the shares. I could buy shares at Bear Steams and sell them at Lehman Brothers. Plus they gave me 20 to 1 leverage.

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Wow. So how did you reopen the account?

I pitched a buddy of mine to lend me the money, but he turned me down. Then I pitched my parents. My mom said there was no chance, because they didn’t have that kind of money. But my dad and I share a similar risk-taking personality. He used to bet the horses every day when I was a kid. So he eventually got my mom to cave in and they mortgaged the house, lending me $40K. So now I had $46K and the bank let me open the account with it. I told my parents I’d pay them back within a year. A month later I had turned that $46K into around $200K and had already paid them back. Within six months I had grown the account to a million bucks. The market was getting crazy.

Were you trading much at this point or still focused on IPOs?

Before Nick pulled out, we had already started trading a little bit more, probably making just as much trading as we were flipping IPOs. But the new issues market just kept getting better, and soon I had about four guys working for me doing the new issues. They would open accounts and talk to brokers and all that stuff and we would split the profits. But the trading I was doing myself.

What were you trading? Were you already shorting trash companies like you do now?

Well, going back a bit, when I was a broker at these crappy firms there was a guy named John Fiero. He would short all these trash stocks that individual brokerage firms were trying to manipulate higher and hold up. Pump and dumps. He would bear raid the stock, and he actually put a few of the firms out of business. Some of them didn’t have a lot of capital and they’d be holding large positions or most of the float of some stock when he would get wind of it and start shorting. He would just keep shorting and shorting, and these firms were undercapitalized so it didn’t take a whole lot before they would go under capital requirements and have to shut down. And they still had inventory so they’d be hitting the bid on all their stocks on the way out. After he made a ton of money he stopped trading for years—sort of like he

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went into hiding. Makes sense when you look back since the mafia was behind a lot of the firms involved in that sort of activity. But I was very intrigued with shorting after that. Like you see on The Wolf of Wall Street, once the broker who brought these companies public had sold all their shares, there was no support for the stock. Nobody else had any interest at all in owning these worthless companies, so the stock would just crater.

You must have traded pretty aggressively to make a million bucks within six months…

Yeah, actually I got too aggressive too quickly. I almost blew up right away. I got short Amazon when it was in its early days. I don’t remember how many shares I ended up with or at what price, but I had made a lot of money very quickly because stocks were moving 3, 5, 10 points in a day so I was overly aggressive. And I didn’t yet know how to contain that aggression. So when Amazon went against me, I just shorted more and more until I was down $3 million with only $1

million in the account.

Yikes. How did your brokers allow that?

Well, it’s complicated but things were a bit different back then. I made the bank aware of my trades by writing them down, putting together a log, and then faxing it to the bank at the end of every day. Then they would clear the trades. So I just stopped sending the faxes when I got buried in Amazon. They had no idea how much I was down. Plus settlement took seven days back then, instead of the more recent T+3.

Now they see your trades the same day electronically. Plus this bank wasn’t very organized anyway. Besides, the brokerage firms would have been on the hook for the money. The bank would have just claimed they didn’t know the trades. I really don’t know what would have happened to me. The day I was down $3 million I crawled into bed with my girlfriend at the time, almost in tears, and said I didn’t know what was going to happen because I couldn’t pay that money.

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So what happened?

That same day I’m in bed a rumor comes out that the government is going to start taxing sales on the Internet. Amazon tanked. I wound up making like $300K on the trade.

Intraday?

The same day I was down $3 million on it. The rumor came out late in the day, and I covered the entire position right before close.

And that was the first year you started trading your own account?

Yeah, that was within the first six months. I don’t even know if I would have been sued or gone to jail or what. I would have been done trading, that’s for sure. And you know what happened after hours that day? Amazon announced a 4-for-l stock split or something like that and the stock was up a ridiculous amount the next day, like 30 or 50

points. So I had about an hour to get out that day. Someone was looking over my shoulder.

Incredible. How do you continue trading sanely after something like that?

I just promised to never make the same mistake again. And I never have for the most part. I’m still aggressive, but I don’t risk more than I can afford to lose, and I don’t build size positions on bigger cap names like that. I realized it was better to short the stocks I do now, smaller caps under a billion dollars. In fact, I keep it to under $600 million or so now. But I just continued trading. One year after I started I had $3

million in the account. I bought a house for cash, a car, and whatever else, but it just started rolling from there. IPOs were going well, too.

You continued to flip IPOs because why fix what*s not broken?

Yeah, plus now I had these other guys doing it for me, so I didn’t have to do that much. All I basically did was give some of my trading

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volume to the brokerages that my guys were opening up, in order to get allocated shares of the IPOs. And that market was just crazy then.

I had one that priced at $20 and opened north of $200. Every day it was wild. The guys I had working for me were making one to two million dollars each per year and I split that with them.

Do you still have guys working for you?

I just have one guy trading new issues now who has been with me since 1999. That market isn’t nearly what it was back then because it’s just hard to get allocated stock now. And when you get it, you get a thousand shares. But he’s good at it, and I trust him, so I keep it going.

But I trade alone.

You interact with trading friends on a daily basis though, right?

Yeah, I have a group of guys I talk to all the time who trade similarly. I belong to the chat room at Investors Underground where all kinds of traders bounce ideas off one another and you can kind of see what’s moving in the market.

What's your daily routine when trading?

Usually I get up around 5:30 a.m. Pacific. If I’m in a big trade overnight that requires me to get up earlier, I will, but if I think it’s going to be a slow day and I don’t have positions on, I may sleep until market open. I do no preparation. I don’t run scanners or anything like that. If I see something moving today and maybe setting up, I’ll make a mental note to look at that stock tomorrow, but I pretty much wake up every day and wing it. And I know that’s hard to understand, but I’ve been doing it so long it kind of comes naturally.

You don’t do things like backtesting, etc…

My history is a backtest. I trade from gut, intuition, and experience.

Seeing something in a stock that I saw in another stock years ago. I wake up and see what the guys in chat are talking about. Although I’ll

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do research during the trading day at sec.gov, going through 10-Qs and stuff like that. And if I’m stuck in something or have a big position, I’ll do more research at night, but it’s rare. Anything I’m trading with small size is pretty much all gut. I trade until market close at 1 o'clock and then leave and go to lunch.

What do you do with the rest of your day?

I have a couple restaurants in Florida and a new one here in Vegas, so I spend time there. Or the kids have soccer… I don't really have to do much. I do come back to the market to see if anything has really moved after hours. And I’ll look through TheFlyOnTheWall to check for any interesting news, but I don’t like to trade earnings usually.

Do you ever wait around after hours to short these small caps if they get overextended?

Yeah, I have started positions in after hours. It’s not typical, but I definitely have because you get exaggerated moves with less liquidity.

What’s your desk setup?

I have the messiest desk you’ve ever seen because I’m the most unorganized person you’ve ever met. I have four big monitors—don’t know what size—but three on one computer, one on another. I have two TVs on my wall that play CNBC, unless there’s a game or something I want to watch—then I’ll put that on with no volume.

And what’s on the monitors? What platform do you use?

I trade with the Sterling platform, which is at Centerpoint Securities, but I don’t really chart. I’m not a technical trader. Although I do look at them. I have the 1-min chart and the daily chart connected to my order entry. I understand them a bit, but it’s not a factor in whether or not I decided to trade something or not. I do more position trading than scalping. I’ve gotten more into it lately, but I can’t really read a chart. If I have a question about something I’ll ask Nate, (laughs)

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What other tools do you have up?

I have the chat room, Tweetdeck for Twitter, Interactive Brokers, and a RealTick Pro platform that I don’t actually trade on, but it’s what I’ve been using forever. It’s what I’m comfortable with for quotes and deciphering whats going on in the market, so I keep using it. I also have TheFlyOnTheWall up for news and AOL open because I’m old and still use it for email. It freezes my computer all the time and drives me crazy, but it s a habit. I also have Neovest up to trade through J.P.

Morgan, because I still do syndicate with them. I give them like $10K a month in business so I can still get IPOs through them.

How many accounts do you keep in order to flip IPOs?

Probably 20 accounts. But I only use three accounts on a regular basis for trading. Of those three I use whoever has shares to borrow. I go to Interactive Brokers first because I know if I get a borrow there, it’s real. If they don’t have it, I go to Wedbush, but then the borrow is only good for T+3 days. That took me a while to learn in the beginning. I used to curse them, because it was frustrating having the borrow* taken away from me, but I learned to manage around it.

(laughs) Most of the time I’m done with a trade in under three days anyway. At times it’s weeks or months, but that’s more rare.

You don’t use technicals to pick your trades, so what are you looking for?

If a stock has moved from $2 or $3 per share and now everyone is starting to look at it, I’ll start to look at it. I’ll check Yahoo! Finance to see how many shares are in the float, how many shares outstanding, how much cash they have, what type of business they re in, and where they’re at within their industry.

Peer comparisons?

Yeah, just in my mind, though. For instance, I’ve traded a ticker, CPST, a few times over the last 15 years. They’re a clean energy

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company, the turbine business or something, and supposedly they had a better product than GE, but I know it s not. Plus they only had $2

million in the bank. Yet they were going to compete with GE? I don’t even need to know that much or do that much research. I just instinctively know they have no chance in this business. With that said, though, I don’t like to trade them if they have a low float.

Tough to trade large positions?

It’s where you take big losses and get blown up. The float is so small, it gets crowded with shorts, and then it doesn’t take much news and it rockets up. So I typically don’t short or build a position in anything with less than 20 million shares in the float. I’ve relaxed that rule just a little bit because things don’t move like they did in the old days, but if something has 10 million in the float I’ll stay really small. Although I can still make mistakes from time to time. End of last year I shorted a biotech company and wound up building a big position. Initially I got in for a scalp trade so I didn’t really research the company much. Plus it was trading heavy, not thin like a low float stock usually does. But by the time I looked into it and realized it had a low float, it was too late. I took a $750K loss on something I wouldn’t have even been in with size had I just researched it first.

When you find something you’d like to short, how do you enter?

Do you scale in?

My entries are usually pretty sloppy. If it’s something I’m going to build a bigger position in, I’m usually early. Although I have gotten better over the last couple years learning from good traders in the chat room. But yeah, I scale in.

On the way up or on the way down?

On the way up. And I try to create liquidity and put orders on the offer, but if it s something I need to get in quickly, like a scalp, I’ll kit the bid. It just depends on the trade and situation.

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What percentage is your starter size?

I never really know what I want my full position to be when I first start, so there’s no set percentage to my starter. I think it depends on price action and movement. My positions often end up being much bigger I thought they would. And that’s usually because they go against me more than I thought they would. But I’m not fighting a losing battle, because through my research I know the momentum is going to come to an end. If I know a stock is overvalued at $5…

It’s even more overvalued at $7…

Exactly. Most guys will be panicking or blowing up at $6, but I don’t really mind it. I’m just going to scale in and add to my position because I know fundamentally I’m right. The air will eventually come out of it.

Is it fair to say you are a trader who will pretty much add until you’re right?

Yeah. To me, it creates more of an opportunity. My biggest gains have started out as my biggest unrealized losses. I end up building a bigger position when I’m down, but my conviction is still strong. I know the company has no money, or they have convertible debt that’s being converted to shares and dumped on the market. Whatever it is. Also I never use stop losses. I don’t even know how to enter one, which is hard to believe but true. Actually, when I first met Nate he mentioned being squeezed in a short position. I told him you can’t squeeze me.

I’ve never been squeezed, (laughs) Because if my conviction is strong, I have the money to sustain the unrealized loss.

When other traders might be questioning their conviction, you’re adding. Is your conviction ever wrong?

Not really. I’m sure there have been times where through additional research I started to think differently, but it’s not just because the price moves against me. My conviction could change if I learned new

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information, but it’s very rare. That doesn’t mean I won’t take a loss but it’s rarely due to a change in conviction. More than likely my timing was just wrong, or sometimes the borrow fee is too high and it’s going to take longer to play out than I originally thought.

So what’s your favorite play?

A parabolic move caused by a bullshit press release or news that I deem worthless. Stock with a big float, low on cash, and up on momentum. Preferably Day 3 of the run—although I’m usually early.

It’s also a small cap, something worth $500 to $600 million that has run from $2 to $6 in a couple days. Ideally there’s at least 20 million shares in die float and fundamentally the company is crap. It's even better if they have a filing already effective and cleared through the SEC to issue more shares.

Is that also your most profitable set up?

Yeah, I probably make the most money in those types of setups.

Are you about 99 percent short biased?

Yeah, I do go long sometimes, but I'm naturally better at shorting. I'd say I’m right about 80 percent of the time when short but only 55

percent of the time when long. I don’t have stats for that, but I’m guessing. On the long side, I’m nervous to hold for an extended period of time and it’s rare to build a big position. It’s the exact opposite on the short side.

How many trades do you typically realize intraday?

Not many usually, because I try to focus on one to three trades that have the most potential for the most profit. Plus, I can’t track too many things at once, and I’m slow to get my orders in. But I’d gladly take 50 cents on 200K shares intraday if it happened. But sometimes you have to wait a few days.

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So be patient…

Yeah, but other traders have more patience than me. Even if I think a trade is going to continue going in my favor, once I start taking profits I can’t stop myself from taking more. My initial thought is to cover 10

percent or 25 percent of the position, but then I keep covering. Or if I’m up really nice on a trade in less than an hour, I’m happy just taking the cream oft and not waiting for the entire trade to play out.

Do you ever add to a winner on the way down?

I should, but it's a weakness. I do the opposite and scale in as it goes against me because like I said, if I like it at $5,1 love it at $7.

Do you try to keep your average within a certain percentage of the price?

I constantly reassess as it goes against me, but at some point I’m just waiting to see a blow-off move. I recognize that and then try to pile in short. So I will back off, wait, and let it run when I realize a stock still has more legs.

But you’re not covering. You’re just waiting to add..

Right. I’m not covering. Just waiting for the right time.

And you’re not afraid to double up or more I suppose…

Exactly. But you don’t want to add too much too early. You’ll end up with a horrible average. But when I see what I think is the right time, I’ll add a lot more and my average will get up there.

How big are your positions generally?

It varies. On a scalp, it’s going to be a small position, 2500 shares to 10K shares. But if it’s something I have strong conviction in and it has gone against me, I’ll short $5 million worth. It’s all situational.

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How much cash do you need in order to trade at your level?

Back in the day I’d keep $30 million in accounts, but now it’s more like $10 million. I’m not afraid to put entire accounts into one position. I don’t mind being all in.

I want to have that much conviction one day…

Trust me, there are times where you start to second-guess yourself even though you know. But your mind starts to play tricks on you when you’re down a million bucks. But you still know in your gut.

Do you set a target for your trades?

Usually when I get into a trade, I have an idea of where it could go, but the target will change based on price action.

You might cover into a flush even though it’s not at your target?

Yeah, I anticipate flushes. I put hidden cover orders in below the market every five or 10 cents just in case it flushes. And I scale out 10K or 20K at a time, something like that. That’s what’s difficult about putting on size like I do. It’s always hard to get out. It’s a process to cover 200K shares. My buddy might be out with $5K in profits already while I’ve only covered a quarter of my position. And sometimes it reverses and goes against me before I can cover everything. That’s why I like to trade stocks with bigger floats and more liquidity.

What are you doing during a trade, especially since you’re not really looking at charts?

Well, I still watch every tick while I’m sitting here.

But you are able to look away and do other things?

Yeah. Actually, if I’m getting buried in something and I’m getting stressed out, I’ll go take a nap.

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Falling asleep is the last thing most guys can do in that situation.

It’s stress relief for me. I can walk away from an ugly position and not watch. And it seems to be good luck for me. W hen I wake up, things have often turned for the better.

Same advice for letting your winners run? Take a nap?

(laughs) Yeah, that can be a tactic at times—to stop myself from covering. But it depends on the current price action and how far I think it can go. Although letting my winners run isn’t exactly a strong suit of mine. Once I start covering it’s hard to stop, even when I know there’s more in it.

Do you have a set amount of profit you’d like to make each day?

I try to average $15K to S20K profit per day. But I don’t stop trading for the day if I reach those numbers—it’s just something in the back of my mind. I just know $15K to $20K per day usually amounts to a $3 to $4 million year.

Do you have a maximum loss per day that you’ll stick to? I’m guessing no…

No.

Then how do you manage risk? You don’t use stops and you add to positions as they go against you…

I have no set rules for it, but I do manage risk.

I don’t want new traders thinking you’ll just add to the moon…

No, that’s not the case. I’m always reassessing my position, the stock, the news, and my analysis of it all.

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So the way you manage risk is to understand the fundamentals and do your research…

For sure. And with constant reassessment you can change your mind when needed. Like with that biotech at the end of last year. . I knew it was crap and would come down, but I had originally overlooked how I small the float was, so I ended up taking it off for a loss. It could have still gone from $20 to $30 in a heartbeat because the float was so small. Plus I didn’t have a good, solid borrow on it to hold for three weeks if necessary, so I took it off. The risk management there is me re-evaluating the trade and making a decision.

Does the behavior of the overall market play into your decisions?

There are many days I don’t know if the market was up or down. I do keep the SPY chart up, but I quickly forget what’s going on, especially after the market closes. To me, it’s really not that big of a factor in my trading, unless the market is going cra2y one direction or the other.

Then it has more of an effect. Although I will say this, bull markets are way better for shorts like me than bear markets. I trade mostly small cap stuff and look for parabolic moves, so I like when things are getting bought up heavily like they are now in a bull market. On the other hand, I’ll make money on the initial flush of a bear market, for a day or week or however long it lasts, but then all these high-flying junk stocks just die. They become dead money and don’t move, so there are less opportunities.

So how do you survive a bear market?

You always adjust. You might make less money and trade less, but there are still trades.

Do you think you go long more during a bear market?

Yeah, probably. You’re looking for bounces or for the market to bottom and go long.

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How does social media play into your trading?

I won’t trade something just because someone else is trading it, but their post might open my eyes to it. I’ll take a look at the stock, pull up the chart, check the fundamentals, and then decide for myself whether or not to trade it. But that is how I get some of my ideas, since I don’t use scanners or things like that. But you need to know who are the good traders and who aren’t.

Is that how you use the chat room as well?

Yeah, and I give more weight to certain traders in there, too. But you can’t just blindly follow. Take a look at it and see if you see what they’re seeing.

What’s your biggest win?

I had two wins that were pretty close to each other. One was ECNC, a local Vegas company that was a total fraud. The stock was up from SO.50 to $5 or $6 per share when I started watching it, but I didn’t short it yet. I didn’t even mention it to my partner at the time, Nick, because I knew he would want to start hitting it, but it was a monster.

They were pushing technology where you could swipe a credit card using a device for your computer or something, and the stock just kept climbing, even with like 200 million shares in the float. Anyway, we started shorting at $12 or $13 before it went to $20. We had a shitload of shares with an average around $17 before it started coming down.

It sunk to $13 or so before it got halted. The company had nothing going on, no money, and two or three weeks later it re-opened for trading at $0.50 again. Nick and I each made three or four million dollars.

What was that experience like? Did you guys go crazy?

a pretty unemotional guy so it was sort of just another day at work, (laughs) Don’t get me wrong, I was excited, but you wouldn’t know it.

What was crazier is that we actually had one of the brokers try to break

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the trade. Because we were short, they wanted delivery of the stock, but it was halted, so we couldn’t deliver. Long story short, we got an attorney involved and they couldn’t break the trade, but I remember arguing with their back office while I was on vacation in Miami. They were just trying to get part of our profits.

How big of an account were you trading at that point?

It was on the way up. For about three years I averaged about $1

million per month in profits, including syndicate, this big gain, and the second big gain I mentioned.

And what was that big gain?

A buddy of mine owned a brokerage firm and used to give me a bunch of IPO deals. I would always buy shares but none of the deals ever worked out. I always lost money, so I was ready to quit doing business with him when he got 90K shares allocated to me of another IPO.

This one wasn’t drumming up much interest either but suddenly got very hot at the last minute. It priced at $8 or $10 and went up to $50

or $60. I scaled out within 20 minutes for another three to four million bucks. So those two trades helped my bankroll on the way up.

On the flip side, what’s your biggest loss?

I don’t know exactly. I did lose around $3 million shorting Krispy Kreme Doughnuts back in the day. The float was a decent size, but it was locked up institutionally so the real float was a lot smaller than I thought. I stayed short for three months before taking the loss because it just wasn’t breaking down. Of course all the reasons I was short ended up being 100 percent right a year later when it went from $30 to $3 or something, but my timing and institutional shares were the issue.

Was that a huge blow to your account at that time?

Nah, that s when I had a lot of money in the account. It was probably 10 percent.

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Was that the final straw when it came to shorting legitimate companies?

Yeah, it was the same mistake that came back to haunt me again.

Although I still do short them once in awhile, but not with any size.

Was that as close as it comes for you to a blow up?

The only year I ever lost money was in 2008. I was having a decent year until three-quarters of the way through. I was just about to cash in on a bunch of positions—I was short the market and short a few banks—when the Fed stepped in and totally changed everything. They made it illegal to short certain financials. Then some brokers even added more names to the list, and they all went up. I got bought in.

Then the market continued to go straight up for like the next two months while I fought it a little bit. I think I ended up down a couple hundred grand that year as a result.

As far as month to month, are you consistently profitable?

Pretty much. Every once in awhile I take a big loss, so I’m sure there are red months, but usually the big losses follow a good run. It seems like every hot streak ends with a big loss. Usually it begins to feel like I’m due for a big loss.

How do you handle losing streaks or drawdowns?

It happens. You go on bad streaks. They come every year, where all of a sudden you lose six straight trades and two of them are big losses, but I just know through experience that it’s part of the business. You have to deal with it and move on. Does it play with your head sometimes? Do you start to second-guess yourself? Yeah, of course.

But reality is, I’ve been through it before and I’ll get through it again.

This is what I do. Maybe I’ll just try to slow down a little bit, size down and regroup, but I’ll push through.

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Have you ever thought about giving up on trading? You invested in restaurants at one point…

Yeah, that was because the market wasn’t offering many opportunities and the IPOs had sort of died. I just wanted another type of income, just in case, but I never gave up on trading. I sit here and it comes naturally. I enjoy it. So unless it becomes too difficult to short again or the market changes in some unforeseen way, I’ll be trading.

What would you call a turning point in your trading career?

One turning point early on was the Amazon trade I nearly blew up on, because I learned so much from it. I learned not to fight big cap, legitimate stocks and not to risk more than I can afford. But another turning point happened even earlier, when I was still trading Nick’s money. We had a rule that we could only trade 2500 shares maximum.

But as the market started to go nuts and stocks started to really move during the Internet bubble, I told Nick that it was a once-in-a-lifetime opportunity and that we had better take full advantage of it. We started taking bigger positions and to this day Nick says it’s the best thing I ever told him.

What’s your proudest moment in trading?

Just making it as a trader. Especially coming out of the Internet bubble days when so many people tried to make trading work. I had a lot of friends who also quit their broker jobs to day trade and not one of them made it. Being able to succeed and make a living at it makes me proud. Being able to pay my parents back in a month wasn’t too bad of a moment either.

Yeah, what did they say when you paid them back so quickly?

They were just shocked. But for years and years my mom was still worried about me. Because I wasn’t a successful broker, I think she carried that thought over to trading and was always telling me I should go back to school to get my masters, (laughs)

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Do you think trading is an innate skill or can it be learned?

That’s a tough one. I think you can learn aspects of it over time, like rules and guidelines, etc, but at some point instinct plays a part. And personality. I have a friend who started trading because I was trading. I would give him trades once in awhile and sort of walk him through it because he knew nothing about the market. Even his lingo wasn’t that good. He would say he covered something when he was just going long and stuff like that, (laughs) But the point is, I think he has the right personality for it and initially he was making decent money just following me. But it seems like he learned over time from being in the chat room and now trading comes more naturally to him. Through watching what we do and gaining experience, he’s been doing it for about three years now' and made like $800K last year. So I think there was something innate there, but he definitely also learned.

What are you currently doing to make yourself a better trader?

I told you I don’t really put much into this, (laughs) I guess I just try to learn from my mistakes. And I’ve been trying to hone my entries and exits a bit, being more patient when sizing in.

What’s something you do that you don’t think other traders do?

Go to sleep when they’re in losing positions, (laughs) No, a lot of guys think they’re just going to show up in chat and follow someone, but it’s hard to follow someone. You’re not going to get the same entries and exits as that person. So something I do is dig into the stocks and do my own research. I hate reading 10-Qs, but you find so much stuff in there. I never just blindly follow.

How did you get so proficient at understanding 10-Qs?

First, from being a broker, but second, from doing so much of it over time. I’ve definitely done more of it while a trader than I did as a broker. But that’s where you find everything you need if you want to trade on fundamentals.

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How many filings do you typically go through?

Usually just the last one the company put out is enough, but I win go back further if necessary.

And what are you looking for specifically?

I look for insider sales. Are they cashing out? I see if there are any convertible preferred shares people could be ready to dump on the market. I check the bum rate, how much cash the company has and how much they’re losing each month. I also want to see what they’re paying themselves in salary. Things like that.

Is it a red flag when people are getting paid too much?

Yeah, definitely. Most of these companies are losing money, so how much of it goes to them?

What else is a strength of yours?

Dealing with being down. I do that well. I don’t get emotional and I think clearly through it all.

Any advice on how to do that?

I think it’s just my personality. I’ve been through so much and have seen it all. A good example of my emotions came last year while I was playing in a baccarat tournament. I don’t play anymore, but I used to play in whatever tournament the casinos were having, baccarat, blackjack, craps, whatever, (laughs) But anyway, this winner-take-all tournament came down to the last hand between me and another guy.

I was on “player.” He was on “bank.” “Player” came in and I won $300K. My wife was there watching and the guy next to her says,

“Does he know he just won?” Because I had no reaction. I just don’t get emotional. If I have the conviction that I’m going to be right, I can handle being down. And if it ends up a loss, I can handle it. I know some guys who think they’re going to have heart attacks, or can’t

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sleep, or stay up through the night and research their positions, but I know it’s not going to do me any good not sleeping. I already did the research. If I lose, it’s just part of the game. I’ll make it back.

What do you think other traders do better than you?

Entries and exits. Which I’m working on. But I have trouble waiting for the backside of big parabolic moves. Instead I start in on the front side too early. I can see a blow-off type move at the top—I can recognize it—but I just have trouble waiting for it. I don’t want to miss out. Of course other times I think we’re already seeing the backside of something, jump in short, and then realize it’s not. But a lot of that comes back to the fact that I base my trades on fundamentals. So if I know a stock currently at $5 is going to $2, it doesn’t really matter to me if it goes to $7 first. I can sustain that drawdown. Plus it really just creates more of an opportunity when everybody else is covering in a panic.

Do you keep a set of trading rules handy like some traders do?

I don’t have anything written down, but listening to some of the speakers at Traders4ACause last year I realized I do most of the same things they do. I just don’t think about them. It’s part of how I trade. I don’t think I work as hard as most people who do this for a living. I’ve become comfortable with how things are and don’t want to put any more time into it than I have to.

What is one of the most important traits of a successful trader?

Discipline.

Even though some might consider you undisciplined…

Yeah, I do have discipline, even if it sounds like I m a guy who just adds and adds to everything. But that s just not the case. You 11 blow up doing that, and I would have been out of the game a long time ago.

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How do you judge success when it comes to trading?

If you can consistently make a living trading, enjoy it, do it every day, and provide for your family, I think you’re successful. I don’t think there’s a dollar amount on it. It’s personal. And I don’t look at it day to day. I don’t ask myself, was today successful? I look back at the end of the year and if I made a good living, it was successful.

When you first started, was the goal to make like $80K a year?

Yeah, I think I wanted to make $1K a day. But obviously that changed over time.

How did that progression work? How did you push it to the next level so quickly?

I realized that I was right most of the time. As a result, my bankroll grew, which allowed me to take more and more risk. If you can trade 1K shares and be right 90 percent of the time, why wouldn’t you trade 10K shares next time? And I don’t take money out of my accounts.

Well I do sometimes if I need it for something, but I don’t have a rule of taking money out when I reach certain levels or anything like that.

You need that money to build your trading size as you grow.

Some traders get comfortable at a certain point, when they’re making enough each week…

Yeah, I’ve seen that happen, but you can’t do that if you’re trying to push to bigger trading. You can’t quit because you’ve already made X

this week, you have to just wait for the next opportunity. Some days there will be more than others.

What’s your best advice for beginning traders?

You can’t blindly follow someone. You can see what they’re trading, but then you need to research it and understand the trade. Also, keep smaller size until you are making money consistently. Build your

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confidence up. Because not everyone can do this. It’s not easy. And I hate saving that, because I’ve been so successful and don’t want to put anyone down, but I’ve seen it over and over again where guys just can’t do it. I understand that feeling too, because I had friends making millions as brokers yet I couldn’t even pick up the phone to make a cold call. So stay small, manage size and risk until you’re consistent and can build. Also save up enough money before you jump in. Not having enough of a bankroll can definitely affect your trading.

Some say the need to be proven right while trading leads to losses, yet your conviction serves you very well…

Yeah, but you don’t want to feel a need to be proven right. I don’t have an oversized ego about it. Even right now I’m scaling out of a trade that I know I’m right in, but it’s hanging around and the borrow fees are adding up too quickly, so it’s not worth it to hold. It makes sense to move on.

What do you wish the public knew about trading or traders that they currently don’t?

I wish they gave it a little more respect. They don’t seem to understand that it’s a real business, a real living. The failure rate is so high, people don’t believe it’s possible for anyone. When they find out what I do for a living, I always get looked at like, is that all you do? My friends around here are all CFO’s of gaming or presidents of companies, so sometimes I wish I had a title like that, but I wouldn’t trade jobs with them. Making more money than most of those guys while sitting behind my desk at home for whatever hours I want—it’s the best job in the world.

What do your friends and family think about trading?

My friends must know I’m successful at it. They’ve seen my house.

They’ve seen me go on exotic vacations and stuff like that. And I’m sure my family is really proud of me. Blue collar, fixed income, they gave me everything they could, but we didn’t have a lot growing up.

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Just seeing everything I have now… I think they actually believe in trading finally since I’ve been successful for so long, (laughs) I don’t think they understood it for a long, long time.

Did they understand you were making millions?

Between the restaurants, houses and vacations, they have to know now, but it took the longest time. Although my dad must have caught on at some point because one day he asked if I could give him a million dollars, (laughs) Meanwhile my mom was probably still worried I was doing something illegal.

What one thing would you change about the market?

The whole SSR, Short-Sale rule. That wasn’t in effect back when I first started, and it’s aggravating. Stocks don’t trade naturally when it’s on.

Plus it just helps people pump and manipulate stocks. Shorts always get the worst rap, calling us un-American, but the biggest manipulators in the market are on the long side. You see it all the time where they force a stock down 10 percent at the open just to get the SSR put on.

A stock runs from $1 to $6 with no problem, but now it drops $0.60

and the SSR comes on. It’s a joke. You short a stock because you see w something wrong with it. It’s a valid opinion.

Plus a lot of these trash companies go public for the sole purpose of milking Ma and Pa’s hard earned money…

Yeah. I actually believe shorting helps the public. Ma and Pa are the ones who are buying these trash companies at the top, and these stocks would be a lot higher if it weren’t for shorts. Everyone looks at shorts in a negative light, but we are the equalizers.

Do you consider yourself an addict?

I am. I miss it when I'm not trading. I want to trade. I enjoy it. I look forward to it. I wish the market was open on weekends.

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Any goals aside from trading lately?

Life’s more about being a good father and husband now. It’s exciting to be able to give my kids experiences I didn’t have as a kid. I also have the restaurants. I opened up one here on the strip last year, which had always been a goal of mine. So I still like taking on whatever new challenges come my way.

Where do you see yourself in five to 10 years?

I can’t see myself not trading. I enjoy it, it comes easily, and I make money at it. Plus I can do it from anywhere. On the other hand, would I want my son doing it? I don’t know. I find it difficult to recommend this profession to anyone. I wouldn't want to stop someone from continuing their education and becoming a great doctor or the president of some great company.

. Any advice for other successful traders on diversifying?

Not really. Although I will say not to make a lot of stupid investments early on like I did. I made a ton of money trading and turned around and blew it on bad investments, gambling, and partying. Now I’m older, more responsible, and have a family, so I learned from those mistakes and don’t do that stuff anymore. I try to make wiser decisions, like the few real estate investments I’ve had over the years and the restaurants I’ve opened. Although one dumb decision that actually turned out well was drilling an oil well in North Dakota in 2002. We just sold our interest in July of 2014.

Wow, right before oil prices plummeted…

Yeah, I met a guy at the blackjack table and he convinced me to drill an oil well with him. (laughs) But really I just made too much money too quickly so I was very loose with my money. Plus when I started trading I always thought I would eventually lose it all anyway, (laughs) Hasn’t happened yet..

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227 The Resilient

The Resilient

“Trade wel and profits fol ow.”

Nathan Michaud (@InvestorsLive) is a 30-year-old trader from New Hampshire who runs the well-known trading community at InvestorsUnderground.com.

He had a middle-class upbringing, working at places like KFC and Taco Bell during high school, but was exposed to the “good life”

through his uncle and knew how much work it would take to get there.

During college he became one of the top Staples salesman in the district while also building websites for customers on the side. His work ethic and knowledge of web design have served him well and contributed to the success he has achieved today.

From nearly going broke after earning close to a million dollars his first year trading to since becoming one of the most respected and prolific traders on Twitter, he has run the gamut of emotions the industry has to offer.

Whien he’s not trading, teaching, or helping members of his chat room, he can be found trying to find balance in life, whether with his wife, at the gym, or working on Traders4ACause, the charity he founded.

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What kind of kid were you?

I was always a hustler, always trying to make a buck. But I had business sense. I wanted to own a business one day. And I worked hard for whatever I wanted. It takes a long time to pay off a $750 dirt bike when you’re working in a fast food restaurant for $5.15 an hour.

So I was always doing other stuff, like building websites. I knew enough to set them up, design them, and then outsource the programming. I sensed what the client was willing to pay, got it done for less, and kept the difference.

What got you involved with the market?

It was just something I was interested in. And my uncle was into stocks. We’d go to his place in Cape Cod during the summers, and I always considered that lifestyle to be the “good life.” So I sort of knew I wanted to be involved in stocks at some point in my life. It wasn’t until high school when I started to regain that interest, though.

Someone gave me a stock tip that I ended up checking into, which led me to different stock message boards like InvestorsHub. I started getting into it and really revisited the idea that I might want to actually get involved in the stock market. I was working at Staples at the time and they were absolutely killing it, beating their earnings projections quarter after quarter, so I wanted to buy some Staples stock. I didn’t have a brokerage, though, so my uncle offered to buy it in his account and cut me a check for any profits when I was ready to sell.

What age were you then?

Around 17 or 18. I considered my uncle’s offer but ended up just opening my own account.

Was Staples the first buy you made?

Actually, no. It was going to be my first trade, but I ended up buying ESLR, which was a local solar company, and Lucent Technology LU, instead. I had absolutely no idea what I was doing. I woke up one

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Friday morning and ESLR had reported earnings but I had no idea I should be aware of something like that. Luckily it was good news and I was up $350.1 went ahead and took the profits, and I’ve been addicted since that day.

Wow, you actually took profits. A lot of newbies would have just held for more and eventually sold for even or a loss…

Exactly. But on the other trade, LU, I held all the way down for about a 50 percent loss. I could find breakouts, but I never knew when it was the right time to sell.

Did you start day trading right from the start?

Yeah, but at the time there was no pattern day trader rule, so you could trade as much as you wanted even if you didn't have $25K. So that wasn’t a big hurdle for me like it is for some new traders today.

Although it did take me quite some time to get over that $25K mark, anyway, because I had two big problems at the start of my career—I didn’t take losses, and I believed and invested in OTC stocks, which is A about the worst thing you can possibly do. Once I learned not to invest in OTC stocks, and after refunding my $5,000 account three or four times, I finally started to see some kind of consistency. By the summer between my sophomore and junior years in college, I was self-sufficient and able to make a daily wage on a regular basis.

What was your major?

Finance with a hospitality minor.

Did you know you were going to be an independent trader at this point yet?

I was interested in business, so I was thinking maybe a broker of some sort. I actually applied for an internship at Morgan Stanley, and on my resume I wrote “professional day trader. I was denied the internship, which ended up being possibly the best denial of my life, (laughs)

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So you actually had a close call with a 9-to-5 job…

Yeah, very close. But once I failed that interview and it wasn’t “easy,” I just said the hell with it and started doing my own thing trading.

Yet you finished your finance degree?

Yeah, if I start something, I like to finish it. And I always wanted to have that fall-back plan, because reality is, you never know. But do I use the finance degree? Absolutely not. But it is helpful in trading to be quick with numbers, and I was always good at math.

So you’re trading well by the time you start your junior year…

Yeah, freshman and sophomore year I was buying stuff and overstaying. I was making money on trades where I would actually take gains on, but those successes were masked by all these bag holds, all these OTC stocks I foolishly believed in. I could make a few hundred or a thousand dollars intraday but end up even or down on the day because of these stocks I was holding, hoping they were going to go back up. And they never did. When I finally figured out how to take losses on trades that weren’t working, I started making money. I quit working at Staples and started providing online customer support for my friend’s software company. I did it from home on a computer, so I had all the time I needed to watch these tickers go up and down all day. I could learn.

What kind of money were you making trading?

After refunding the accounts a few times the first year, the second year I probably made $25K to $50K. The third year, my junior year, is when I started to find my niche—the promotions and hidden gems inside the SEC filings. Every time this particular company was named in a stock’s SEC filings, that stock was likely to have a big promotion coming up in the near future. So I was always scanning the SEC filings for this company’s name. When I saw it, I’d put that ticker on watch and set alerts for volume. It seems like nearly 100 percent of the time

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the first day that stock had large volume, it never went lower until after the promotion had ended. I started buying on Day 1 and started making money hand over fist. I’d make $20K, roll it into the next promotion and make $40K, roll it again and make $80K, then $160K… I really started to make a lot of money very quickly. I had no emotion about the money I was making, either. I didn’t put it into the context of what it was actually worth or what it could buy. I sort of lost touch with reality until I got burnt on May 5th, Cinco De Mayo, which also happens to be my mom’s birthday.

The motorcycle story…

Yep. The strategy of buying promotions had gotten to the point where whatever ticker had volume, you bought it and then boom, you made money. You became immune to the price swings because even when it pulled back 10 cents, it was nothing to worry about. We knew it would still close at highs for the day. I bought 100K shares of RRPH at $2.20

and it slowly climbed a few cents each day after. On the 5th, it was hanging around $3.10 area and had started to get a little toppy, but I wasn’t worried, because it always closed at highs, right? Well the University called, they were having an event for Cinco De Mayo, and said I had to move my motorcycle before it was towed. I figured fine, whatever, RRPH will probably be back at highs by the time I get back, so I went out to move the bike. I had a Palm Pilot at the time, so as I’m walking back, I check the RRPH quote and it says $2.20. In my head I’m thinking that can’t be right, my quotes are messed up, maybe it’s supposed to read $3.20. But I start running back and now it’s at $2.10, then $2, and by the time I get back to my computer it’s at $1.50.

How much did you lose?

It ended up bouncing back up some and I took about a $90K loss on it, but it was about double that near the bottom. And that’s the first time I thought, hey, maybe this isn’t the greatest strategy, maybe too many people were doing the same thing. So that was really the peak of that easy money period. But it took me a while longer to realize that and truly change my ways. I was still looking for the next big score

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when I started loading up on CPNE and buying into its story. They were supposed to be uplisting to the Nasdaq and there were buyout rumors. I was still drinking the Kool-Aid then and believed what CEOs and PRs said and doing stuff like calling the IR department regularly. I started buying in the $2.50 range and ended up averaging down and down until 1 had about 200K. shares at around $1.80 to $2

average. Long story short, I ended up selling it all between $0.35 and $0.40 per share. In the end, I had made about $900K that junior year before giving back around half a million dollars between RRPH, CPNE and other trades where I was trying to “make it back” quickly.

Your strategy no longer worked. How did you reinvent yourself ?

Well this is where I took a step in the wrong direction. I tried to take a shortcut. I was compounding both losses and bad decisions as I tried to make back what I had just lost. Here I was counting my money at S900K, going for that million dollar break, thinking about the party I’m going to have when I hit seven digits, and then all of a sudden a couple weeks later I’m only halfway there. It was a big, big setback for me. Suddenly I had to face the reality that maybe this whole time making money hand over fist was just luck. And that’s when a friend I had met on InvestorsHub reached out to me. He was big into promotions and had just started making a ton of money promoting companies. He knew I had a following on message boards and the ability to pick good plays and stocks that people were generally interested in. He saw the potential for me to influence a stock with my opinions, so he wondered if I’d be interested in helping him promote.

He said I could make back all the money I had lost in no time. It was an opportunity for an easy fix to my problems, so I said why not.

Did you have any reservations going in?

For me, at the time, I really didn’t have any checks or balances. I was naive, and promoting stocks isn’t actually illegal. It’s stuck in a gray area. Companies need exposure. CNBC promotes companies and suddenly tons of volume pours in. That’s what develops a market over time. People find out about a company, become shareholders in the

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company, and the stock becomes liquid. I ended up making a website and promoting about a dozen companies with my friend. Where I went wrong is I started trading the stocks we were promoting, which is illegal. Horrible decision. And eventually my friend started to run things offshore, moving money and paper—the stock he was given to promote—offshore. I got very uncomfortable and decided to take a step back. 1 made it known I was separating from him and said it just wasn't what I was interested in doing. When we first started, the companies had good news and were legitimately seeking exposure.

None of them were bankrupt. But eventually my friend got greedy and it became more about how- much paper he could get to dump, no matter what company it was. I split ties and thought I was in the clear.

But…

But about six months later I got a knock at my office in Boston and it’s the DOJ and SEC. I was scared shitless. They wanted to know about my business relationship with my friend at InvestorsHub. As naive as I was, I thought I had done no wrong and had a conversation with them. We had a couple-hour long conversation, and they left some paperwork. I ended up getting a lawyer, and about a week later I was informed that I had now become a target of the investigation. It was a life-changing moment.

What was the result of the investigation?

Fortunately for me, as we went through this entire process, the proof of illegal activity they collected, the message board posts, instant messages, texts, etc—everything taken from my friend, myself, and others—was actually proof that I was an idiot and didn’t know what was going on. It showed I was concerned and wanted to get out.

But you were fined, right?

$190K in fines and another $75K for the lawyer. After bag-hold losses like CPNE and paying taxes for the prior year, I had very little money left. A couple grand. It was really a low point. My 52-week low’s.

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How did you bounce back?

I had to really use the support system of my friends, my then-girlfriend-now wife, Laura, and my parents, who were incredibly helpful and encouraging. 1 couldn't have bounced back as quickly without them. But 1 was in a bad spot. I actually opened a prop shop account at the time to try trading again, but I was just too emotional too aggressive. Even if I made a grand, it wasn’t even close to where I had just been, so nothing felt good enough. I ended up blowing it and literally started looking for 9-to-5 jobs. It happened to be the end of the year, though, and I noticed something while going through tax documents. $1,500 in interest. I had no idea what it was from and I sort of forgot about it until I came across another statement. I looked into it and realized when I had liquidated accounts, I had left one with $25K sitting in it. It had been collecting interest all year.

So you forgot about $25K?

Yeah, because I had like 10 accounts at the time. And I had been blowing out of bag-hold stocks like CPNE because I didn’t know if accounts w^ere going to be frozen. In the rush, I totally forgot about this one account. But finding it was enough to remind me that I knew how to trade, I knew how to build an account, and I could do it again.

So I started trading again. And blogging at InvestorsLive.com.

What was the catalyst for the website?

To keep myself honest. To blog about my watch list and stay focused on tracing. I’m more of a morning trader. Most of my money is made between 9 a.m. and 11 a.m., so rather than lose those gains during the lull and afternoon, I needed something else to preoccupy my time, I had always liked to build websites, so I figured I’d build one and blog about my trading. It was sort of just another project for me. Blogging was my way of combating overtrading. But then it started to catch on.

People were curious. People were talking about it, discussions developed in the comments section, and it made sense to add the chat room feature. There were a lot of ideas being shared as it grew and

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grew, but it got to the point where it was all over the map and confusing. I saw an opportunity to not only help others but also monetize the site at the same time, and it became subscription-based.

And that’s when you merged rooms with Muddy and Laura?

Yeah, Bill, his real name, and Laura ran another website with similar alerts, so I approached them with the idea of combining our rooms rather than stepping on each other's toes. That’s how it all started.

Subscription services in the investment and trading industry really started to break out, and it s been a pretty steady uphill breakout since.

How does the chat room play into your trading?

In two ways really. Number one, it prevents me from taking every single compulsive trade that I might typically take and forces me to focus on great setups, the prime setups that give our members the best chance at success. That’s the greatest result of chat. But number two, the financial stability provided by it has allowed me to become a better trader. Time and time again I have seen traders really start to excel when they finally separated themselves from the profits, when they no longer had to make money each day. When you can finally become financially comfortable enough to just trade what you see and not force stuff because you desperately need to make a trade, you’ll be amazed at how much more money you can make in the market.

Do you think it’s beneficial to have fellow traders to bounce ideas back and forth?

Absolutely. You don’t necessarily need to consult the whole world on a trading idea, but I think it’s necessary to have at least one trading partner. I trade with a couple close peers on a regular basis. Whether it’s a good day or bad day, they can help you keep your head on straight. You can be 100 percent honest with them about what you were thinking when you entered a trade, and then discuss what mistakes you made, etc. It’s really about having a support system, whether that’s high-fiving or picking someone up when they’re down.

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What’s your trading routine on an average day?

I like to get up early. 7:00 to 7:15 a.m. EST. That gives me time to do all the things that have no way of keeping my attention later once the market opens, like going through all the emails I get. I shower and get dressed, which 1 think is an important part of my success. Look sharp trade sharp. You’re a professional so act like one. I think your attitude trickles down into your performance. By 8:00 a.m. I’m starting to look at the stocks that made my scan the previous night, what stocks I’m going to need to borrow to go short, and whether or not it’s easy to borrow or something 1 need to locate. I don’t want to waste my morning watching a stock, preparing for its move, only to discover later that I can’t borrow it. If something is already setting up like I had anticipated pre-market and has a lot of volume, I will put a trade on. I also spend time from 8:00 to 8:45 a.m. fielding questions in the chat room or anvthing else people need help with. Then 8:45 to 9:00 a.m. I make my plan for the day. I pare my watch list down to about three or four main watches, the stocks I’m going to trade out of the gate. I like to get a feel for them, watch them, and see how they react at certain levels. That gives me some type of idea for how I’m going to play them at open.

What determines whether or not you trade one of your watches during premarket?

It really depends on what’s going on. If there’s a lot of volume or a big gap up with liquidity, that’s something I would trade. But if there’s just a few prints here and there, I’ll wait until after open. Basically the only time I trade premarket is when the stock is already trading like it would during market hours. It has trend, you can read it, and it’s no different than trading it normal hours.

And you trade immediately at open, right?

Yeah, most of my trades are purely reactive at the open as long as they are heavily liquid. I’m not anticipating what they may do but rather reacting to what they are doing. I think I have an edge during that time

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because I’m good at sensing the emotion on the other side of the trade. At what point would I be panicking if I held short overnight?

That s where I want to initiate a short today. Vice versa for the long.

The edge is reacting to emotional action. After the first 15 minutes, things settle down. The wicks get smaller, stocks pick a trend, and you can trade normally. But most of my money is made in the first couple hours. Past 11:00 a.m. I like to sit back and let things play out during the lull until I make another plan around 2:30ish into close. Then I like to leave the desk and head to the gym or somewhere to get my mind off trading. It's difficult to even have a conversation right after the close. I need an hour or so to detox and relax before moving on.

Do you come back to the market later?

Yeah, around 6:00 or 6:30 p.m. for 15 to 40 minutes to do scans. My scan is my strategy, my game plan for the next day. That homework allows me to come to the market with confidence each day. Then I try to get to bed by 10:00 p.m., fall asleep around 11:00 p.m. I want to feel refreshed in the morning.

What does your trading desk look like?

One main PC that controls three 30” monitors, which allows me to focus on what I need to focus on. The desk itself is a sit/stand that moves at the push of a button, so I always try to start the day standing.

I’ll end up sitting within an hour or two, but then I try to push the chair away again and stand. A body in motion tends to stay in motion.

What platforms and software are you using to trade?

DAS Trader Pro is the platform I prefer to use for everything from Level II to Time & Sales to charts and order entry. It’s simple, clean, fast, and I love it. So that’s really my main focus. I also use Sterling Trader Pro and E*Trade Pro for order entries with my other brokers, hut I think you should stick to what you know when it comes to charts and Level II because you’re familiar with how you see and find trades.

You’re used to reading the charts a certain way on a certain screen.

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Any other tools you’re using to trade?

I use Twitter to get a feel for what people are trading, in what direction, and what the crowd is doing. For instance if everyone is short a particular stock yet it continues to move up, I probably want to stay away from shorting that stock. Or if everybody on Twitter is long a particular stock but that stock keeps falling, at some point everybody is going to panic and sell, which is when I want to be buying. Twitter gives you an instant feel for what’s going on in the market. You can also generally find whatever information caused the stock price to move in the first place, whether that’s legitimate news or a buy/sell alert from someone with a big following. I also use DAS Trader Pro's High of Day list and the Nasdaq Gainers and Losers List to see what’s moving. I used to use many scanners, like Equityfeed, more actively, but since the OTC market has died I haven’t found as much use for them. We have more than enough potential plays the way it is.

I would think one of the biggest tools you use is your own chat…

Yeah, I do think of chat as a big tool, likely one of the most important.

Besides me or even the moderators, you’ve got hundreds of eyes all focused on the same thing, looking for the same type of setups, the same type of momentum, so you’re really not going to miss much.

That’s been one really big positive about chat. If I just have my chat and a laptop I’ve got more than enough to trade.

Are your trades based purely on technical analysis?

Everything I do is based on technical analysis. I react to and make the trade based on price action seen on the chart, Level II, and Time & Sales. But I’m continually trying to learn as a trader. A lot of the great traders we know, some of them in this book, are better at the fundamental side of things. They know what a particular offering or recent SEC filing means for the stock. That knowledge gives them the confidence and patience to hold for three to five days and capture the larger move. But for now I’m really more of a “trade the ticker, not the company” type of trader. I react to price action and volume.

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You trade momentum, whatever is moving, and rely on past experience to guide your entries and exits…

I rely on past experience, yeah, because stocks tend to do the same things over time. The biggest thing to remember when trading momentum stocks is not to fight them. If you’re wrong, be wrong. But for the most part, when a stock has so much momentum it becomes overextended, there is a period of profit-taking, which is when I like to take advantage of the downside. I also like to get a feel for what’s going on from an emotional standpoint. I want to take advantage of panic. I get interested in a short when I sense that early shorts are starting to get absolutely crushed and the price speeds up. I know if I was them, I’d be panicking right now.

What charts are you looking at?

I use the 1-min chart intraday and the daily chart. That’s it. And I don’t typically draw lines on charts, although I do look for where support is holding or what price points the stock is “magneting”

around, or hanging around.

Do you use any technical indicators?

No, I don’t use SMAs, EMAs, Bollinger bands, or anything like that.

Just volume and the candlesticks. I feel like all the others are hindsight indicators. When you actually look at them in real time, they look absolutely nothing like what you see after the fact. I know those indicators give some people the confidence to make a trade, and if that’s what you need, then go for it, but personally I’d rather rely on price action, Level II, and Time & Sales.

Can you explain how you use Level II and Time & Sales?

Well, there’s not really an objective answer. Best I can do is give you an example. Let’s say you’re watching a stock that is about to squeeze, and someone posts a very large bid on Level II. Then a bunch of volume comes into the offer but the price doesn’t budge. It’s just a

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huge volume bar and then that large bid disappears. To me that tells me someone’s trying to prop up the stock artificially. They want to scare shorts into covering, maybe convince longs to buy, and then potentially pull the bid later on and sell it off. They build a short position and then pull support. So Level II and Time & Sales don’t really provide me with a certain answer, but I like to use them as sort of a secondary guide. It’s subjective.

Do you care whether or not you provide liquidity when trading?

I do whatever I need to do in order to enter the trade. If I m prepared for a trade and I’m looking to long something on dips, for instance, I’m typically adding liquidity, waiting on the bid and scaling in. On the other hand, if I see a stock that looks like it’s about to break out, I’m not going to worry about waiting on the bid, I m just going to take out the offer. I’d say for the most part I add liquidity, though.

Using hidden orders…

Yeah, most of the time, because you don’t want to show your hand.

That’s an edge you can have, so why give it away?

You mentioned scaling entries... At what increments?

Yeah, I scale in all the time. And I usually start off with much smaller than you would expect, before slowly adding in from there. I typically start with a big picture idea, so I know where I think the stock is headed and I want to scale in based off X price. If it’s not doing what I expect, I won’t add. If it’s doing exactly what I expect, I will continue to add to that winner. I only like to add to a winning position.

But you also average into trades that are going against you from time to time…

When it’s part of the plan, yes. The reality is we trade stocks with high, volatile ranges, so I’m not going to get the perfect entry every single time. I can’t nail the exact top or exact bottom every time, so the idea

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is to average into a position around those levels. So if my thought process is that a particular stock is going to move towards a whole number, I’ll take a starter position first, maybe a third or half size.

Then I won’t put on full size until the trade is either going my direction or making an extended parabolic move, in which case I'll keep a very short leash. Typically, though, I only like to add to full size if I already have house’s money.

Can you run through an example of scaling into a short?

GENE today was holding in the $9.10 to $9.20 range before it started to break out towards that $10 whole number mark late in the afternoon. I don’t know if it’s going to go to $10 or $10.20 or $10.50, so if I want to trade 5K or 10K shares full size, I can’t do that in one entry. If I’m in full size and it goes another 50 cents, I’m going to be in a pretty bad situation. So I like to anticipate the short into that parabolic move. If it starts to go $9.40, $9.50, $9.70. . and then goes from red to green on the day and rips toward that $10 mark on increased speed, I’m going to start into that $10 push with a partial position every day of the week because there’s a good chance it can’t sustain and will have some kind of a pullback.

And how big is that starter?

Somewhere between 1K or 2K shares so I can be comfortable with a 50 cent or even dollar move against me. I took the starter so I can potentially start with a good average, but I won't add more until it starts putting in a lower high, lower high, lower high, where it’s peaking out. In the case of GENE today it did put in lower highs and peaked out at about $9.80 a few times before starting to fade off lower.

That’s when I want to go ahead and add more shares, building my risk off of either $9.80 or $10, depending on size of the trade.

Adding to a winner…

Exactly.

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What if it holds at $10 where you started and starts going higher?

Are you cutting it off or adding?

Well, part of my goals for this year are to cut losses on the front side of a big move, but it’s a learning process. Put it this way, as long as you have a plan and you’re not adding outside of that plan, you’ll be fine. If you don’t have a plan, you shouldn’t be trading it. If you were anticipating the push to $10 and then a quick pullback but now it’s slowly grinding back up and looks like it’s ready to break out again, you should size back down or get out completely. The worst thing you can do—and I’ve been getting progressively better at this—is wait patiently while something does the unexpected and goes against you.

Have a plan and suck to it.

How do you determine your stops on an average trade?

First of all I don’t use hard stops. I use mental stops, because I find in some of the thin stocks we trade it can be just one order that stops you out, especially during the afternoon lull where one big market order can push the price. But if you have a hard time following your plan and taking your losses, you should place hard stops. On average I’m usually scaling into trades against whole or half dollar marks. So if I’m looking to risk $0.10 on full size, I’ll risk $0.40 on a quarter size starter position. Then I continually lower the amount I’m willing to risk as I add to the position. So once I make it half size, I’ll probably move my risk to $0.20, then $0.10 for full size. The ability to scale into a trade is what gives you the leeway to adjust your stops.

Do you set targets before you enter trades?

At the very least I want every trade idea to have a 3:1 reward-to-risk ratio. So if I think a stock is going to move $0.30, I’m looking to risk $0.10. I don’t necessarily have price targets, but I have an idea of what trigger points are really going to cause the stock to wash out, and that’s probably where I’d like to cover.

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And you’re scaling out like you scaled in?

If I’m anticipating a wash out and it happens quickly, I’ll go ahead and lock it in right away. Because there’s no other job where you’re going to just walk in and make a grand or two in minutes.

Are you locking in all of it?

Anywhere from a quarter to a third, without question. I have the worst possible patience, and I like to be right, so when a trade immediately goes my way, I’m taking some profits. But it’s that profit cushion that gives me the patience to let the rest of the shares ride and play out.

Do you move your stop down on the remaining shares?

I’ll take the rest off when one of two things happens—either 1) the stock starts grinding back towards prior resistance and perks above it, or 2) if the stock changes trend and starts to put in higher lows.

How long does a typical trade take?

Probably 70 percent of my trades take anywhere from seconds to minutes, which probably stems back to when I first learned to trade in college. I was always trading between classes, so I only cared about the move, the big move, and not what it was going to do all day long. But now I am working on bigger picture type trades where I might hold a stock all day. There’s bigger money to be made there.

What’s your favorite trade setup?

I have two favorites that I’m most successful with. One is the very overextended chart, something that has been climbing up steadily for days or even weeks with no big correction yet. There hasn’t been any reason for people to take profits because every time they look at it, it s up even more. What I’m watching for is the day it speeds up relative to how it was climbing previously. So if it was going up five or 10 cents every day and suddenly it gaps up 20 or 30 cents higher one day, then

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ramps another 30 cents at open, that’s when I’m interested in it. That might be the day where it falls back off highs and longs consider taking profits. That first profit-taking candle is sometimes awesome. It can be an adrenaline rush because not only did you anticipate it, not only did you load up on the short, but the profits can happen in literally 10 seconds.

And your other favorite?

A nicely trending stock that continually consolidates and holds gains each day. I want to start looking for a weak open, where the stock starts off red but begins consolidating and moving back up towards green on the day. Once I see that I start buying dips with my risk or stop at the low of the day. We’re anticipating the red-to green move because once it hits green, it usually gives a nice rip and trade.

One short, one long... What is your tendency?

I'm definitely more comfortable going short, hands down. One hundred percent. The last couple of years the long has been so easy, everything going straight up, and I’ve just been caught waiting and waiting for the short. I don’t trust the stock market. I have a much easier time finding the top. As you know, it’s a staircase on the way up and an elevator on the way down. Profits are quicker on the short side.

Although I am continually opening my horizons and trying to get more balanced lately.

How many positions are you comfortable with at once?

My best days are when I trade three or four tickers with only two or three trades on at a time. I can manage upwards of five or six, but the only time I usually have that many is when I’m in partial positions, letting things ride. Trading less is more, really. If you focus on the big setups, the high probability, big reward type trades, your profits are going to skyrocket. If you’re trying to nail 10 different trades because you re afraid to miss one, you’re going to minimize profits across all of them. So you’re basically doing more work for less return.

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How big are your positions as a percentage of your account?

To be honest I don't look at what percentage my trades are. What I look for is really what risk I'm willing to take, not the entire value of money that I m putting into the market. For example, I’ll look to risk $300 on a trade where my risk is 10 cents on 3K shares. Or I might risk $1K on that trade if 1 think I need a 30 cent risk on 3K shares. It all depends on the number of shares I want and how big of a range I think that stock will have. In fact, I really don’t focus on equity at all. I don’t even know what s in my account most of the time. I focus on trading and usually don’t pull up the account info unless I’ve been on a tear for a month or two and have finally had a bad day. Then I might check and potentially wire out.

So your risk varies on any given trade…

Depending on how I’m trading and how the day is going I might risk more or less, but I have a plan for every single trade before I enter. If the trade works, great, but if it doesn’t, I revert to my plan to see where I want to stop out. Of course there are times where you might let it blow through your stop, and then you need a number that will keep you in the game.

You’re talking about your “oh shit” handle number…

Yeah. I think the reason 90 percent of traders fail is because they don’t have that number. They end up blowing through accounts like I did when I started. That’s why I developed the “oh shit” handle number, like when you’re in the car and you grab for the “oh shit handle. You weren’t expecting this to happen, you weren’t expecting the trade to go this horribly, but here it is, and you need to be forced out of the trade, no matter what. My number is $10K. If I get down $10K on a trade, I’m out. Your number can be whatever works for you, but it should be a number that, yes, it’s a dent, it hurts, but it won’t stop you from coming back to work the next day. It’s recoverable. Pick a number and stick with it. I went back through my trades over the last three or four

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years and realized if I had stopped a few of my major losses at $10K, I would have saved myself about a quarter million dollars each year.

Do you have a profit target each day?

No, my motto is trade well and profits follow. Take what the market gives you. If you’re too focused on a daily quota, what happens if you don’t hit it? Do you have to double it up the next day? Do you start forcing trades to try to get there? I don’t think that works. In fact I’ve noticed traders start to excel when they no longer worry about their rent money or their car payment. Once they no longer associate today’s trades with bills they owe, they start to trade better. You really need a clear mind in order to trade well.

How many accounts do you trade?

Six or seven, but three main trading accounts. First is Centerpoint Securities clearing through Wedbush, second is Centerpoint clearing through ETC, and third is E*Trade, which I use for block trades and things like that. The other accounts are for longer-term swing trades or if I get a random borrow on a stock that no other broker has, so they get some use.

How much do you keep in accounts to trade the way you do?

Up until recently I would always keep about $70K to $100K in each of the three accounts. Once I had built an account up to $120K to $140K

it seems like I’d inevitably have some type of drawdown, whether it was a stubborn trade or just a dumb trade. It always reminded me I probably wouldn’t have done that had I not had all that money in my account. So then I’d wire out back down to $70K. But recently, Gregg Sciabica, another trader in this book whom I admire greatly, questioned why I felt like I always had to wire out. It didn’t make sense to him with respect to growing as a trader, and it made me think twice. That thought, in combination with the fact that I had recently achieved a level of savings outside the market that made me feel comfortable taking on more risk, is why I no longer cap my accounts.

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In fact, I’m focused on growing them. My main account is over $200K

now and the other two are each a bit over S100K. My current goals are to get more familiar with trading bigger size, disconnect from the monetary aspect of the capital, keep my emotions in check during price swings, and grow from there.

How often are you flat in your accounts at night?

I’m flat overnight about 95 percent of the time, but again, I’m trying to learn new things. If you re only trading intraday, there are times when you’re prepared to short something in the morning only to find it gapping down 20 cents pre market and then washing out another 30

cents at open. Now you ve missed 50 cents of downside unless you held the short overnight. So I’d like to get better at that.

What are you doing during a trade, analyzing every tick?

I’m usually multi-tasking like crazy. I’m answering messages in chat, reading emails, Twitter, pretty much anything besides talking. My wife knows I can’t talk and trade at the same time, (laughs) But I like to multi-task, and I think it helps because you shouldn’t have to watch every single tick. If you do, you’re probably in too big of size. Plus it leads to making impulsive decisions for no reason. Bottom line, you want to make trading as least stressful as possible, and if you’re going to make a career out of this, you need to think big picture. Go in with a plan and then execute that plan. Let the trade work for you.

Do you look at your P&L during trading?

Yeah, I do. It’s important to me because I really respect a $2K or $3K

gain. I know how much money that is. Sure, I might be aiming for much more, but if the trade instantly goes in my favor that much, I’m going to go ahead and take some off. At the end of the day, that’s what we’re here to do—take profits. But if you’re a person who lets P&L impact your every move, then absolutely don't watch it. But for me, it’s important. I watch it.

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Do you think taking profits so quickly minimizes your gains?

No, because I don’t take it all. And by taking some off, it allows me to be more patient with the rest than I would be with full size. Now I can let that winner run. If I’m up $1K and take $300 off, I have cushion to let the trade work for me and I’m not as emotional on the price swings. Instead of getting scared out of the trade as it bounces around, sizing down allows me to make more while actually using less risk.

How much do you pay attention to the overall market?

I watch it every single day. Some days I may refer to it more than others, but if the market is down 200 to 300 points, I'm not going to be looking for breakouts. The sentiment is not in your favor. In that case people are looking to sell on pops, not chase breakouts. Vice versa if the market is at huge highs. I'm not looking to add, add, add into a short. I'm more likely looking for dip buys. Basically you can use it to get a sense for how people are feeling that day.

How do you use social media when it comes to trading?

Well, no trader should ever influence you. If someone posts a trade, pull up the stock chart and see if you see what they see. If it fits within your strategy, go ahead and take the trade, but don’t just blindly follow. It’s the same as looking at someone’s posted P&L at the end of the day. People get caught up in comparing themselves, especially if the other trader’s P&L is much bigger than theirs, but you have to let yourself be inspired, not influenced.

What’s your biggest win?

It was a $130K win on one of the big promo stocks, CVDT, back when you could still hold an OTC stock for days and wait for the promotional mailers to hit. I probably held that one for three to five weeks. I’ve had many J20K to $30K wins, but with my habit of taking profits, CVDT was the single biggest. I’m getting better now at separating myself from the capital, forgetting that I’m up five or 10

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grand and just letting the trade play out. It it’s working, why exit? Most recently I had an $83K day which was the result of nailing the right read on the market and scoring with an ETF

That uas earlv in \our career. Did you do anything crazy after?

Not really. I was sort of calm, cool, and collected. Nobody really knew what I was making and I didn’t have anybody to tell, besides Bao maybe, who was probably making double what I was making on the same trade, (laughs)

How big of an account were you trading at the time?

Probably between a $300K to $500K account. That was back on the original run-up to $900K. There were a lot of great promotional plays that added to that run-up. SNPK was another nice $50K win. Before the SEC came down on Awesome Penny Stocks, they were incredibly hot. We were always watching particular stocks for promotional type activity. You could speculate on what might be the next big pick based on the filings and structure of a particular company. So SNPK starts to come down late one afternoon and all of a sudden the volume explodes with one million, two million, five million shares…

A ton of volume at the bottom, right?

Yeah, it basically went from $0.50 to $0.20 really quick. Then you could tell it was coming close to a bottom because it wasn’t coming down 10 cents at a time anymore. It dropped five cents, then three cents, then two, and then all of a sudden you saw block after block of giant volume trades. I was on a hot streak trading at the time, so I thought it was worth risking about $20K to $30K and bought a couple hundred thousand shares right around $0.25 or so at about 3.15 p.m. I stared at it for the next 15 minutes before I thought, the hell with this, and asked my buddy, Tyler, to head to the bar with me for a late lunch.

I figured we’d have a few casuals and pray for SNPK to gap up the next morning. We ended up having a couple drinks and then hitting the gym. Backwards, I know, but I remember doing fist pumps at the

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gym when Awesome Penny Stocks sent the SNPK alert out to all of their lists after hours instead of just one or two lists like they had done sometimes. They had about 20 different websites, so you wanted the subscribers at all of them to get the alert. It was a good night.

And the next day?

It gapped up about 10 or 15 cents and then ran further at the open. I ended up selling between $0.50 and $0.55 on its way to $0.80. Then it pulled back, and I felt okay about the sales, until it ran all the way back up to over $1 and beyond. I left a ton on the table.

But you had more than doubled your money…

Yeah. In about 45 minutes of work. Owned it for the last 30 minutes before close and sold it in the first 15 minutes the next day.

Those were the good ‘ol days…

Yeah. The days where you could just sit and watch your email inbox without trading because you knew a big pick was coming. I remember one time Laura and I were scheduled to go on vacation the same day a new pick was coming, so of course I was stressed out and dreading that I would miss it. Well, we were at the airport waiting for the airplane when they released the pick. I quickly bought the stock, but then it was time to get on the plane with no Wi-Fi. I was so confident in the promoters back then I gave my buddy my login information and told him to sell half the position before market close and keep the rest.

When we landed I checked and he had sold half. I was up 100 percent on the trade. As traders we worry about missing trades on vacation, but that was one of the best vacations I’ve ever had because by the time I landed at my destination I was up $30K. In fact, another promoter who was hot at the time came out with their new pick a few days later while I was on that same vacation. I had just made $30K, so I figured why not and bought 40K shares. The stock went up a buck and I sold for $40K profit.

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What’s your biggest loss?

My biggest loss to date was CPNE, which was over a quarter of a million dollars. It came as part of the destruction we discussed after I had such a great run to my original $900K. The wins were just rolling in so quickly you never had to worry about anything with the promotions. I became way too comfortable with the dips and CPNE

was just an averaging-down nightmare. From $2.50 to $2.00 to $1.50

to $0.80 to eventually selling all of it between $0.35 and $0.40.

You had sort of become a bag-holding believer, right?

Yeah, it was supposed to be uplisted to Nasdaq, and then it was supposed to be bought out by a Nasdaq company, and on and on. I started calling investors relations on a biweekly basis, and you know how that goes—they just tell you what you want to hear while the stock continues to plummet day after day. Then they missed earnings and continued to miss earnings. It was just a complete disaster.

It was really an investment rather than a trade…

Exactly. A bad investment. And I continually threw money down the rat hole, continually averaging down, because like most people, I mistakenly believed the only way to make it out in one piece was to get my average lower. Of course in doing that, you learn that your losses just compound at a much faster rate and it soon becomes an exponential, horrible loss. I don’t have losses like that now because I have the “oh shit” handle number and I don’t hold stocks and average down anymore. My biggest losses these days come from being stubborn on the front side of parabolic shorts, when I think the stock has gone up too far too fast, but it doesn’t stop. Eventually it gets to the “oh shit” handle number.

So losses these days don’t bring you to contemplate quitting…

No. But there have been times where I’ve been consistently profitable for days and days and then that one stubborn trade wipes out an entire

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month of profits… You sit there and wonder why the heck you trade every single day. Is it worth it? Is it even worth trying to get to the next level? So those emotions are still there. I still get frustrated with trading, but not to the level of quitting, no.

How do you handle those periodic drawdowns?

The way I always tell people to look at it is trade well and profits follow. It seems simple, but that’s the reality. You need to realize you’re a good trader and just continue trading, onward and upward. I don’t wire money into accounts either. I can move money from one to the other, but I never wire in from savings. I figure if I’m in a drawdown, why throw good money after bad? Instead, why not be on a “timeout” with your smaller account while you go back to doing what made you profitable. Once you build the account value back up, then you can start pushing again. But you need to build that confidence up again. If you’re still dwelling on that $2K loss you just took, you won’t think a $600 profit on the next trade is good enough.

Then more often than not that $600 unrealized profit becomes zero or even a loss because you were trying to “make it back.” But if you just go back to trading well and letting profits follow, before you know it you’re going to have that big day you’re waiting for. It always happens.

I lost $43K on GENE a week ago, but I didn’t let it faze me. I just traded well and I’ve already made up for that loss without forcing it.

Do you ever have unprofitable months? Or years?

I’ve never had an unprofitable year, and I can only recall maybe two months out of the last five years where I’ve ended it red. Both were due to pushing on stubborn trades. The losses could have been prevented had I stuck to the plan. But typically I’m very slow, steady and consistent. I always start small and then add to the winners.

What would you call a turning point in your career?

There are a couple. First I would say the transition from OTC trading to Nasdaq was a turning point. I used to trade the OTC market about

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90 percent of the time. I never really had a consistent game plan for trading Nasdaq. I was good at trading OTCs, nailing tops and bottoms, and it just became second nature to me. But when the OTC

market started to die, the liquidity dried up. You had to adapt or perish, and now I probably trade Nasdaq 99.9 percent of the time. A total flip. Then a more recent turning point came when Gregg made that comment about me wiring out. It sort of pushed me toward the next level, toward disconnecting from the money more than I already had. Now all that matters is whether or not the trade is working. If it is, then why would I be exiting the position? Although I still do combat the urge to exit because I still do like to take profits along the way, but I’m getting better at it. IVe taken the last six to eight months to focus on my own trading instead of concentrating on verifying trades and proving myself to others. I realized I’m a trader first, service second. To get to the next level of trading, I need to focus on me.

What do you find disappointing about trading?

When the trade is right, you’re never in big enough. When the trade is wrong, you’re always in too big.

What makes you proud when trading?

When you come to the market prepared and then nail it. The trade immediately does what you thought it would and gives you that adrenaline rush, that fist-pump type emotion. That’s why I trade. As far as running the service, I’m proud of people when they nail a huge trade. I start to live through other traders at times. I may only be up $1K on the day but see that Derrick just made $60K and I’m ready to celebrate for him. It’s awesome.

Do you ever worry that you won’t be able to make a living trading one day?

Not really. I worry about making the right trade decisions and not continually fighting something that might blow up an account and then I’m dealing with wiring in, etc. But it’s not even a fear really…

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It’s just in the back of your mind somewhere…

Somewhere deep, (laughs)

Some traders worry about whether or not their strategies will remain profitable…

I think the way to combat that is to be willing to adapt. If you’re continually adapting, you’re going to fight the potential of becoming unprofitable. One suggestion I have for people is to never live beyond their means. I don’t live beyond mine. And when things are going well, pay down bigger portions of your mortgage and things like that, just in case of a rainy day. God forbid you have an extended period of unprofitability, you’ll still be able to live within your means and not have to drastically change your lifestyle. That’s been important for me.

Do you think trading is an innate skill or can it be learned?

It can definitely be learned, but it’s something that takes time. People think they can just choose to be a full-time day trader one day, but it doesn’t really work that way. You need to attempt it, see if you understand it, see if you have any success at it, see if you have any consistency, and then maybe at that point you can consider making it a career. And before taking that plunge I think you should have at least two years salary in the bank. Although I will say we’ve had very smart people join the chat, scientists even, and they’re almost too smart for trading. They overanalyze every single aspect of a trade, which prevents them from making the right decisions at the right times. So you have to allow for some leeway, some intuition, or some feel.

Do you think there are characteristics of your personality that lend well to trading, though?

Sure. If you find simple mathematics difficult, I think you’re going t°

have a tough time day trading. You should know right away that on 1K shares a 50 cent move is $500, a 10 cent move on 3K shares is $300, and stuff like that. I see people who have times tables where you

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plug in the amount of money you want to risk and the price of the stock and it will tell you how many shares you should buy… by the time you do all that, the trade is already gone.

What are you currently doing to make yourself a better trader?

One thing I’ve been focusing on lately is organizing my trading by separating different types of trades into different accounts, sort of organizing the thought processes behind each trade. So I day trade in my main account, put my bigger picture trades in another account, and swing trade in my E*Trade account.

You’ve also been increasing sizes and trying to hold trades for longer lately…

Yeah. One of the easiest mistakes to make is to add to a loser because we feel the need to make it “less bad” by bringing our average closer, when what we should be doing is the exact opposite—adding to winners. It’s so stupid simple and makes so much sense, but I’ve been working on that. My plan is to start into a trade small, give myself room for higher or lower, depending on whether I’m short or long, and then continually look for spots to add when the trade goes in my direction. By doing that, you begin compounding profits instead of losses. And you can use the house’s money as risk. If you’re already up $1K and start to add a bit but then it starts to go against you, you can still stop out even or with a bit of profit.

Let’s run through an example of adding to a winner. You start in short on a parabolic move up, and then it comes down a bit in your favor. Where are you trying to add? On the next lower high?

Or when it breaks below previous support?

Let’s say I nail the entry on a parabolic. I’m short a quarter or third size position because I always start small. If it starts to pull back and then pops up again but forms a lower high, I want to see it retest that lower high a few times. Then once it puts in another lower high, lower than the first, I can start to risk off that first lower high. That first

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lower high would be a good place to stop if it goes back up there.

That’s how I add to my winner on pops, not on pullbacks. I don’t want to add emotionally just because I don’t want to miss it. I want to add to pops on a downtrend.

But if it cracks a major support, would you pile in more?

The only time I would do that is if it’s been bouncing around a good support level and it has that look. . I know that’s subjective, but it has that look where I’m already in half size, I have a nice unrealized position, it’s starting to get heavy, offers are coming down, it really looks like it’s about to snap, it’s retesting and retesting support, and the offer is getting crowded… that’s when I might double down. But if it doesn’t snap, I’ll go ahead and scale back out.

Immediately?

If I’m anticipating a crack, and it doesn’t crack, then yes. Or if it does crack, but then quickly reclaims the support level, I also size back down because everybody was anticipating a crack and it didn’t happen, so it’s probably about to go the other way.

Anything else you’re doing to become a better trader?

I’m trying to wait for prime setups. I used to try to nail everything. I suffered from "FOMO," the fear of missing out, which many new traders will experience. But what makes more sense, making $1K each on two trades or making $200 each on 10 trades? Basically it boils down to using your resources wisely, focusing on the best of the best, and then sizing in accordingly.

Interesting advice coming from one of the most prolific traders I know, seemingly trading hundreds of tickers a day. Is that something you’re changing?

Yeah, because my best days are when I trade three to five tickers I might alert more trades or discuss more setups in chat, but that’s

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because at the end of the day I still run a service. I want to continually find other plays in ease members didn’t trade what we found earlier.

But reality is, when I trade less and focus more. 1 make more money What’s something you do very well when it comes to trading?

I make good entries. I can usually nail the top or bottom within a couple cents, which has to do with intuition and thinking about the opposite side of the trade. And the other thing I do well, which is a double-edged sword, is take profits. I like to pay myself along the way, which can be both good and bad, like we’ve discussed, because you might limit your upside on winning trades. But generally I'm just a prepared trader. I come to the market prepared and ready to nail it.

Weaknesses?

I definitely soil battle the fear of missing out. Overtrading. Or holding something short overnight just because I’m afraid I won’t have borrows available the next day. And I’m still stubborn. Especially when I form a really strong bias on something. Another weakness is continuing to trade through the afternoon even though I’ve had a great morning. Instead of sitting on my hands with a nice $10K or $20K. profit for the day, I’ll continue to risk for no reason and sometimes give profits back. I try to combat that by doing something else, writing a blog or going to the gym, but it still happens.

What’s something you do that you think other traders don’t?

Ignore the trolls, (laughs) I quickly get over things. I get upset when I make mistakes, but I’m pretty good about not letting anger turn things into bigger losses. There’s always another trade. I don’t let losses get me down. I’m good at rebounding and staying in check emotionally.

What do other traders do better than you?

Definitely the fundamental side of things. I have a finance degree, and I understand accounting, but the fundamentals aren’t really a strong

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suit of mine. I want to reach a point where I understand what each filing actually means, what certain trials mean for biotechs, why they need to raise money, etc. I want to have confidence in taking a sizable short swing position on a company that needs to raise cash, for example. But I want to determine that on my own, not just based on the advice of really successful people I’ve surrounded myself with.

Any trading rules you live by?

“Trade well and profits fol ow.”

“Trade the ticker, not the company.” If you enter a trade based on technical analysis but then find yourself reading the Yahoo! Finance message boards or trying to rationalize why you’re in the trade, it’s probably not a very good trade.

“Nail and bail, don’t stay and pray.” Applies to trading the front side of a large move the first day it’s up. You want to take profits quickly. Don’t fight the trend and add as it moves against you with the hope that it comes back.

“If you don’t have a plan, you don’t have a trade.” I always have a game plan for each trade, whether it’s a scalp reaction trade or not.

”If you re wrong, be wrong.” If the trade goes against you and you were wrong, take the loss. If you can’t let yourself be wrong, you’ll soon be out of the game.

You have seen so many traders come through chat… What type of people make successful traders?

Driven people. People that get back up quickly when they’ve been beaten down. Some of the best traders I’ve seen have that staying power. Oftentimes they get beat down right when they start too, but the best traders fight right back. Another thing I notice is consistency.

The best traders don’t swing for the fences every at-bat. The get base hits with consistency and every once in awhile one goes out of the

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park. So when they have a drawdown, what do they fall back on? Their consistency. They know how to go the market each day and collect a paycheck. Winning traders are also able to disconnect themselves from their capital. It’s just a number on a screen. Once you sever your connection to the money, the trades work for themselves.

What is something you wish you would have been told when you first started trading?

Not to invest in penny stocks. But believe it or not, most people still come into trading through penny stocks. They know a guy who knows a guy who has a hot penny stock tip, and that’s their first introduction to trading. Someone always knows a friend of a friend who hit it big in the stock market, so they mistakenly believe if they just had that one tip, that one pick, they could also hit it big. I could have saved a lot of money if I had stayed away from investing in penny stocks and knew how important taking a loss was. I also think it’s important to learn from someone who is experienced and consistently profitable.

What other mistakes do you think beginning traders often make?

Being too influenced by others. Not having a plan. Always looking for the easy way. I’ve seen a lot of traders have success as a beginner, go from $5K to $20K quickly, and then go right back to zero. They become influenced by the first few lucky trades they had and how easy it was, so they take wild risks. Easy come, easy go. They don't take the time to learn the right way.

How you judge success when it comes to trading?

Monetarily. The more you make. But what I’ve noticed, in always trying to get to the next level and the next level and the next level, is that it’s never good enough. If you’re always trying to get more, more, more, your life is just going to fly by. So you need to find some type of balance. Yes, you need to have that aggressive, striving mentality to be successful, but at the same time you need to find some balance between life, wife, and trading. It’s something continually work on.

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It’s a battle to make sure you’re on the path you want to be on. Before you know it, you’ll be 50 or 60 years old and wishing you would have done other things. You’ll wish you would have taken that vacation or gone on that cruise but you didn’t. You allowed trading to come first.

So balance is the key to happiness…

Yeah, because if money is where your happiness lies, you’ll never be truly happy. At first you'll just want to reach $100K, but once you’re there, it'll be $500K, then a million, and then two million—notice the trend? Find a structure to your life where you can make time for other things that matter. It’s not the money that drives me, anyway. It’s my passion for trading, the industry, and helping others that motivates me.

I could be having an amazing month business-wise, but if I’m not trading well, I’m not happy. It doesn’t matter if my profits are $10K or $100K for the month, as long as I’m following my rules and trading well, I’m happy.

What do friends and family think of your career?

They’ve always known that I’m into the stock market and that I do

“well,” so they always have investment questions for me like what to do with their 401K or what age to retire at, etc. But the reality is I’m scared shitless of the market. I have absolutely zero long-term investments and probably never will because I don’t trust it. I can’t even hold a stock for more than a minute sometimes, (laughs) On the other hand, I m just a normal Joe Schmo to them. I don’t talk about how much I make or things like that. My close friends know I have great success, but you can’t unload to your friends. You can’t whine about giving back $5K of your $10K intraday profits to somebody making $25 an hour. You just can’t. In fact, when I got engaged to Laura, her parents—as any good parents would—asked her if I was going to keep trading or find something more secure. Basically what I did for a living didn't appear to be that steady. They knew I did okay, but they didn't really know to what extent. Actually it wasn't until after about seven years with Laura, when we started looking for and eventually budding our house, that she even really knew.

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You were like, Hey, I have the money in cash…

(laughs) Exactly. I guess I had remained a little too quiet about what I was making. Although to her credit, she had saved up a considerable chunk of cash to put towards the house, too.

What is the public’s biggest misconception about trading?

When people learn that I’m a day trader, the most common question I get is, “Do you actually make money doing that?” I shit you not. As if it’s not what I actually do for a living when they just asked me what I did for a living. The other thing people hear is that 90 percent of day traders fail, so they assume it’s all gambling. But it’s not. It’s an educated risk. If you’re trading with setups you’re familiar with, setups that we study, and you come to the market prepared with a plan, trading is an educated risk. If you step away from that, then yes, it’s gambling and you’re at the liberty of the market.

What one thing would you change about the market?

I don’t think I’d really change anything. As a trader, you have to continually adapt to the changes that are made to the market over the years, like when they started showing true bid and offer size on Level II for OTC stocks or when they put the SSR rule into effect. I feel like I’ve been fairly quick at figuring out what advantages lie in each new change, so I gain an edge for a period of time until other people start to catch up.

Do you consider yourself an addict?

I’m absolutely a recovering addict, (laughs) My wife now knows that I need one day to decompress before I’m actually able to get into vacation mode. I need to be able to check quotes for the first day to sort of detox and realize I’m on vacation and then it goes more smoothly. I didn’t take that day in the past and would end up sneaking in work here and there for the entire vacation, never fully pulling away from the market, but I’m getting better. I still get anxious, though. I

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worry about what I’ll miss and how much money I could have made on that perfect setup that happened. Suddenly your $5K vacation becomes a $50K vacation because of opportunity cost.

Where do you see yourself in five to 10 years?

I want to continue to do what I do, find a happy balance between work and life, and figure out how to make the most with the least amount of stress. I’ve even taken on a like-minded partner to handle the business side of things while I continue to trade and develop as a trader. But wherever this takes me in the next 10 years, that’s where it takes me. The beauty of the community we’ve developed is that I’m continually meeting new people from all over the country and developing great new relationships. It’s always been just me and the screens, so being able to make a difference in people’s lives is a great feeling. And starting the charity is just another step in the right direction. Other than that, I take one day at a time and hope to continue building an amazing community of traders.

So you’d be happy still trading in 10 years, right?

Absolutely. And have a dozen of me to run the chat room. Actually, a dozen Derricks. And you can quote that. (laughs)

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The Swing Trader

“I would rather wish I was in a trade than wish I was out.”

Michele Koenig (@offshorehunters) is a 47-year-old trader who specializes in technical swing trading, moderates the Swing Chat at InvestorsUnderground.com, and runs TradeOnTheFly.com.

She grew up in a middle class family with a stay-at-home mother and a businessman father. Her family enjoyed hunting, fishing, camping and riding horses across the Montana countryside. She even showed horses competitively through grade school and into her 20s, earning her several national championships at the Morgan Grand National in Oklahoma City.

With a business finance degree from Montana State University and her father’s entrepreneurial spirit, she grew restless as an employee in several post-college positions before finally taking the plunge to become a full-time, independent trader. Now nearly 15 years later, she’s still trading successfully, hunting and fishing regularly, and riding horses in Montana.

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What got you first interested in the market?

Two things during college really sparked my interest in the market.

The first one involved a college professor who was actually a broker for D.A. Davidson. He had real world experience in the financial markets, which made the whole thing more relatable in a way. He made us team up with another classmate to research stocks and pick one that we thought was a good buy. My partner and I picked Kellogg—solely based on fundamentals since we knew nothing about technical analysis at the time—and presented it to the class. They chose it as the most logical buy and therefore the winner of the competition. So that made an impression on me. The second thing that really influenced me was an older student in my finance classes.

While the rest of us were working at the pizza shop or flipping burgers to help pay for school, he wasn’t. He said he went down to his broker every month and bought stock. If it did well, he didn’t have to work that month or that quarter. If it didn’t do well, he’d get a job like the rest of us. I remember that idea just stuck in my mind for years and years, but I didn’t immediately start trading after college. I worked in pharmaceutical sales for awhile before leaving that job to move back to Montana. There I worked different hourly jobs just to make ends meet. But the idea of him buying stock and making enough money to live on was something that stayed with me.

How did you end up trading then?

One of the jobs I got was at Edward Jones as an office manager. I learned a few things from a broker there and it started opening my mind even more to the idea that maybe there’s a way to make a living trading. After a short time there I went back to software sales and ended up sitting in front of a computer all day long right when the online brokerages like E*Trade and TD Ameritrade were starting to gain in popularity. I had less than $10K saved but I decided to start trading part-time. I didn’t have a mentor or chat rooms or Twitter. I didn’t even have a strategy. I had no idea. I would look at message boards and try to find things online, but there was no rhyme or reason

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to what I was doing. After about a year of making some and losing some, not really gaining any traction, I bought John Murphy’s, book, Technical Analysis of the Financial Markets. I read it cover to cover several times. The idea of analyzing charts made sense to me because I’m a really visual person. I started using TA in my trading. That was right when the Internet bubble popped and the company I worked for lost a bunch of its venture funding and started laying people off, so I decided it was time to try to make the leap into trading full-time.

That was brave…

I was fortunate that I was married and my husband had a full-time gig that could pay our bills. I didn’t have the pressure on me to make a mortgage payment with my trading profits. Otherwise it would have been much more difficult. I was also fortunate to have a ton of success very early. I started with about $40K and more than doubled it in less than six months. It was exciting and thrilling but horrible for my discipline. I thought trading was so easy I was going to make a million bucks. And with that overconfidence quickly came a very painful lesson. I blew up my account. It was nearing $100K when I blew it up to less than $20K and had to start over again. And I did that more than once early in my trading career. I was slow to learn my lessons.

How long did it take before you were consistently profitable?

I would say it took about three years to get things figured out and stop making a ton of mistakes. I wish I would have had a mentor or the access to information and other traders we have today. I feel like my learning curve would have been a lot shorter. But I was trying to figure things out by trial and error, and there were a lot of errors.

What do you think held you back the most in those early years.

Lack of discipline. I let myself ride the emotional rollercoaster of trading. When things were going well, I just felt amazing. Then that overconfidence would lead to overtadnig and taking too much size, and when it started to slip I would feel horrible. And I hear that all the

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time from new traders. They all experience the crazy ups and downs from highs to lows, but you need to remain disciplined in order to combat that. All these years later I’m able to feel very little while trading. If I make $30K. or $40 K. on a trade, it feels good, but I don’t feel the ecstatic happiness I did in the beginning. Vice versa, if I have a bad trade and lose $20K or $30K, I just move forward with my trading strategy and try not to dwell on it. I don t spend a lot of time looking back, good or bad. It's an unnecessary distraction. I want to find the next trade and trade it well. If I can do that, the money will follow.

How would you describe what type of trader you are?

I would say I’m a hybrid trader because I swing trade about 75 percent of the time but also day trade when the opportunity presents itself.

Although that ratio fluctuates depending on market behavior. If the market is choppy it makes swing trading more difficult, so I’ll focus on more intraday stuff. And I’d definitely describe myself as a technical trader. I’m using chart patterns, support and resistance, moving averages, trend lines. . several technical indicators to help make trade decisions. I’d say only five percent to 10 percent of my swing trades incorporate fundamentals. In those cases, I look at things like the short interest, size of the float, institutional holdings, and maybe an earnings report if it’s a position I’m going to hold for awhile. I just look to see if there’s something more that will help drive the stock.

But I don’t spend a lot of time on fundamentals.

Let’s go over your trading routine…

I get up between 5:30 and 6:00 a.m. MST and get coffee going, feed the dogs, and get downstairs to my computer by 6:30 a.m., an hour before open. I do a lot of my preparation the afternoon and night before, so III have sticky notes on my desk of the stocks I’m interested in. 111 check on those, see what they’re doing premarket, check CNBC for any news related stuff, and log on to chat to see what’s moving otherwise. But I don’t do a lot of trading premarket or after hours anymore, unless it’s something that has really good volume and liquidity. But as I’ve gotten older, more and more I’ve tried to put

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my blinders so Fm not distracted from what works for me. If I stick to my plan, stay patient, and not get distracted with whatever momentum play is happening that day, Fm usually better off.

What happens when the market opens?

I’m usually very active for the first couple of hours. A lot of my setups trigger during the first half of the day, so that’s a busy time for me.

Then I try not to stay and stare at my computer all day. Staring at a swing trade is not healthy for the trade. If you’re following every tick on the 1-min or 5-min chart, you’re probably not going to let it work for you. Worse yet, you might remove a stop and let something go against you. So I try to take breaks, go outside, turn the ponies out, do chores, and then come back after lunch to scan and review charts.

What kind of scans are you running?

I’m old school in the fact that I don’t actually run scans. But I probably look at between 300 and 500 charts every day. And I have lists of different stocks according to sector, like oil, natural gas, agricultural, brokerages, healthcare, cyber security, etc. So if a certain sector is moving that day I can bring up the charts I like to watch and figure out what they look like right now. I have thousands of charts stored at StockCharts.com, which is what I’ve used since pretty much the beginning of my career. My trade setup list has 240 stock charts in it right now. So I’ll scan through those charts one by one throughout the day to see how they’re setting up, to see which ones may have pulled back, and to see which ones may be shaping up into a familiar chart pattern. I pull the ones I like and move them over to my thinkorswim platform, where I probably have between 50 and 70

charts I’m always scanning intraday. Then I jot down my favorites on a sticky note for the next day.

What happens after hours?

I try to leave as soon as the market closes, unless there’s some expected news I want to watch. Although I don’t hold anything into

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earnings. I learned too many painful lessons over the years doing that.

When the market closes I go outside, do chores, ride horses, go fishing, plant trees, work in my flower beds. . whatever it is, I get out of here. I don’t stick around. I remember as a new trader I would be glued to my screens from early morning until some crazy hour at night, but that’s not healthy. These days I only come back to my office or laptop in the evenings to answer emails, work on tradeonthefly.com, and review more charts for the next day.

What’s your trading desk look like?

I have a sit/stand geek desk, although I spend too much time sitting at it. I have three big monitors and a laptop. The laptop runs my emails, Twitter, and occasionally I pull charts up on it. My monitors have the chat room and my thinkorswim platform with all my charts. I have so many charts up that I have to tab through them. They could never fit on the screens.

Do you only use the one brokerage?

Yes, just one. I’ve thought about opening another, but here’s the problem… I’m an old dog. I shouldn’t admit it, but it’s really hard to teach me new tricks. I’ve used the thinkorswim platform for so long I just love it. I’m comfortable with it. And I know everyone probably giggles when they find out I trade through TD Ameritrade, but I’m a very simple trader. I’m on the board of directors for Traders4ACause, but as the day for the event drew closer and closer last year I literally almost had a nervous breakdown. I’m a simple person, a simple trader, and have simple methods, so I was scared and intimidated about meeting other traders. I knew most of the guys attending were big, complicated traders with fancy accounts, and here’s this little gal from Montana who likes to fly fish, (laughs) Even though I’ve been successful, I didn’t feel adequate. Of course when I went everyone couldn’t have been nicer, and I had a great time, but I do trade differently than most of those guys. I can’t do what Nate does. Some of those things are out of my wheelhouse, so I’ve realized to be

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successful I just really need to focus on what works for me. And the simple account and simple trading style works for me.

Any other tools on the monitors?

I basically use StockCharts.com to store all of my charts. And I use Fmviz.com to look at the percentage gainers or losers list every day.

We’re in a bullish market now, so usually it’s the gainers list. I pull the charts I’m interested in and bring them up on StockCharts com to see if it’s something I want to watch. It’s also easy to go to Finviz to see what certain sectors are doing on the day, the week, or the month. I like to know if money is rotating out of one sector into another.

How do you pick your trades?

I always start with the daily chart. I’m a technical trader, so I’m looking for chart patterns like bull flags or ascending triangles, anything that might be setting up. But I’m also looking for entries that make sense, maybe a pullback to the 200-day moving average would be a good risk/reward area to buy. I’m looking for trading ranges, where something is trading between clear support and resistance areas, so I can trade against them. I’m looking for pullbacks to trendline support to buy. I’m looking at breakouts above resistance to buy. I also look for stocks that are bottoming on the daily chart and have consolidated for awhile to potentially buy for the bounce. So there’s not one set pattern I trade. I’m looking for things that make sense when I see the daily chart. If I find something I like, I pull it up on the 60-min chart with a 50-period exponential moving average and slow stochastics to help fine tune what I’m looking at. Where is the true breakout above resistance? Has it pulled back to trendline support? Is it over sold. Is it a good risk/reward area to initiate a long position? So that’s how I go out it from a swing trade perspective, but I use all that same stuff on intraday trades, just with smaller charts like the 15-min.

I assume Level II quotes mean nothing to you…

Level II looks like Christmas lights. It’s meaningless to me.

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You’re not scalping stocks for 10 seconds at a time…

No, even with my intraday trading I’m trying to find something that’s going to set up and move throughout the entire day or for at least a few hours. I’m not looking for gains of $0.10 or $0.15. I’m looking for $0.50 or $1 or $3 moves intraday.

If your trigger price is met you enter a trade immediately?

If it’s a liquid stock, yeah. I don’t care if the trigger was $36 and now it’s $36.03. I’ll pay the extra three cents because I’m not scalping for $0.10. I’m looking for dollars. If I’m late on an entry because I went upstairs to make a sandwich and now the stock is 20 cents higher than the trigger, I’ll still buy it if I like it. Maybe I’ll start with a partial position and try to add on a pullback, but I won’t trip over dollars trying to save nickels and dimes. I’m not fussy about getting an exact price because my timeframe is longer.

Do you normally scale your entries?

I’m terrible about scaling. For most of my career I’ve always been either all in or all out, although it’s something I’ve been working on for the last couple years. If the trigger price is $36 and I like the setup, I might buy some at $35.90 in anticipation, then more at $36, and even more above $36 if it’s acting really well. But I don’t do that all the time.

And I’m usually all out at the same time on my exits. But it’s something I’m working on.

Do you have a target for your exits based on technicals?

The exits depend on several things. Most of these chart patterns have a potential measured move, whether it’s bull flags, symmetrical triangles, ascending triangles, descending triangles, etc. If that’s the case, I will be looking at the measured target to exit. Doesn’t mean it will certainly get there, but it’s the historic potential of that chart pattern. Plus we don t know what time frame it needs to complete that move. It could be a day or it could be a month.

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What about targets when it's not a specific chart pattern?

If it’s just a stock that has simply broken out of resistance, I will look to wherever the previous resistance was above the breakout price.

Does it make sense to take profits there? And I’ll combine that with an overbought or oversold level. I also add in my trendlines, etc, so I can continue to move my stop up to lock in profit. If it reaches the target or has made gains very quickly, I book the profits. I can always reevaluate as the stock consolidates or sets up again. And that’s something I’ve developed over time. I used to watch something go way up, get greedy and wait for more, and then watch it come all the way back to where it started or worse. So now I book the profits and reassess. I spend a lot of time trying to evaluate the price action of the stock I’m in. Is it acting as expected? If it makes the big move I want, it’s either going to consolidate sideways at that higher level because it needs to rest before continuing higher, or it’s going to pull back. If it pulls back, I want to see it pull back to an area that makes sense, like trendline support or a previous breakout level. The idea is to try to hold a swing trade longer in order to get bigger gains. If it s acting as expected, nothing has changed, so give it more time.

And the pullbacks are expected…

Yes, often when a stock breaks out of a resistance area you’ll get a retest of that area. Before the breakout you'll see the stock continue to test that area of resistance from below as it gets rejected and rejected again. Usually during that time it will be setting higher lows, too. Then when it finally does break through to the upside it usually has a pretty big pop. Intraday traders might take profits on the initial pop, but I’m swing trading it according to the daily chart with a bigger picture view, so I’m fine if it comes back down and retest that area of resistance.

People get disappointed when that happens, but it’s acting exactly as expected. Now what level had been resistance ideally becomes support. If you missed the initial entry, it’s providing you with another chance to get in or even add to your position.

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Can you explain how you use stops?

I place hard stops and I set them by looking at either the trendline moving average, or area of support below my entry. So to me, entries are the most important part of trading. If I get the entry right, the trade should be profitable more quickly and I should feel more relaxed in that trade. If the trade goes in my favor, I can move the stop up along with the price and give it enough room so that I’m not stopped out on intraday volatility but also protecting my profits at levels the stock should support. If the trade doesn’t work, I take my loss at that trendline, moving average, or area of support below my entry.

What’s your favorite trade setup?

A trend change on the 60-min chart with the 50-period exponential moving average and slow stochastics. Often a stock is bullish and trending above that EMA or bearish and trending below it. What I look for is a stock that has been in a downtrend and has started to consolidate sideways with the EMA starting to flatten out. What I want to see is that price going from below the EMA to above it. And it might take several days where it goes above and below several times, but often it starts to move higher. CARA did this recently. My trigger buy was at $11 when the stock got above the 50-period EMA. It made a big jump above it before consolidating for several days. Then the moving average caught up to it from below and CARA made another big move up. And so on. If I could only chose one setup to trade, that’s the one I would choose. I see it happen over and over again on the 60-min time frame and it seems pretty reliable. It works the same for shorts when the trend changes from bullish to bearish and goes below the EMA.

Do you immediately buy when your trigger price is met?

Like with CARA I don’t always buy that exact trend change, because I want the move to confirm first and make sure that’s it’s going to hold.

So I’ll often look to an area of resistance just above the trend change and buy strength if it busts through that. In my early days I would feel

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like I needed to buy the exact bottom, but that’s ridiculous. Over the years I’ve realized the key to swing trading is to get the middle of the move. So I’d rather see confirmation of a trend change and buy into strength at a higher price than try to pick the bottom, get flushed out, and get frustrated. With CARA it had moved above the 50-period EMA and I looked back a couple months on the daily chart to see it had previous resistance at the $11 area. As I always say, I looked to the left to help see the right. So I was looking for the break of $11 and that’s when I entered the trade.

How long-biased are you?

I would say 90 percent of my trades are to the long side right now, but only because the overall market has been in a bullish uptrend for several years. I’m actually naturally bearish as a trader. I always have been. But I’ve learned over time not to fight the trend of the market.

So right now I look for bullish setups. Rather than short a pullback, I’m waiting for that pullback to provide me with another long entry.

Although I do short sometimes.

How much attention do you have to pay to the overall market as a swing trader?

I watch the SPY and the S&P. With thinkorswim I watch the market internals. I don’t stare at them all day long, but I definitely need to be mindful of the market. I need to understand if we are coming into resistance or if the market is overbought and may pause or pull back and how that’s going to affect my swing trades.

If the market is pulling, you might exit a position based on that?

Maybe, but it depends. If the market is just overbought and it’s pulling back to trendline support, I’m not too worried about it because it makes sense. But if market internals get really bad and S&P slices through a trendline I thought should have held, that absolutely gets me to tighten my stops. I can always get back in if conditions improve. I would rather wish I was in a trade than wish was out.

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How many swing positions are you comfortable taking at once?

Eight to 12 at the most, but that’s on the high side. I prefer to have three to six. But if the market starts turning or I feel uncomfortable with what I’m seeing, it can go to zero positions very quickly.

How many day trades do you typically realize?

Not very many. I used to do more, but probably three to five at the most now. I’ve really been focusing on swing trades.

How do you deal with the overnight risk?

You have to size appropriately for your account. You don’t want to be too large overnight. And I don’t ever hold into earnings or any scheduled news event. I also am very careful with biotech stocks, always aware of anything that has impending trial dates or a possible secondary offering. With swing trading you are going to get caught by surprise overnight every once in awhile, but you do your best to steer clear of anything that seems sketchy. It’s been a long time since I was caught in something negative overnight. Just be careful with size and trust the chart. Let it work.

How long do you typically hold swings?

I depends. Probably one night to a couple of weeks. But I will say it’s never long enough. I always look back in hindsight and see the trades continue to produce after I’m out. I wonder why I didn’t just set my stop and go on vacation. But part of the problem is being in front of the computer all day. Other trades start setting up and you’re tempted to close older ones out when they’re no longer a priority. Sometimes paring too much attention can be a detriment to swing trading.

How big are your positions generally?

It depends on how I’m trading at the moment. If I’m trading well and things are moving well, I will go bigger size. But if I’m not trading well

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or the market is not conducive to my style of swing trading, giving me a lot of mixed signals, I’ll go smaller. On average I might use 10

percent of my account size, but there are times I will size up larger, especially if it’s a setup that I have been watching for a long time. If all the factors align, I will take large size, but they are probably shorter trades in duration, maybe for a couple days only.

What size account should someone have to start swing trading?

I don’t ever discourage anyone from starring to trade. I had one member start with only $1,500 in his account. But what I tell people like that is your choices are going to be limited. You’re going to have to take really small size in maybe only two or three positions until your account gets bigger. And you need to be realistic about the amount of time it will take to grow that account, too. The amount you need also depends on whether you’re going to be trading part-time or full-time.

If you’re going to try trading full-time, you’re going to need either another income to rely on while you do it or a year’s income in savings, plus $50K to $100K ideally to trade with.

Do you look at your P&L while trading?

I will check it a couple times a day, but I have a pretty good feel for where I’m at anyway just by doing the rough math. But I don t focus on it. I definitely enjoy looking at a nice, green P&L at the end of the day, but I set my stop and try to let the trade work for me. Although I am continually evaluating the trade while in it. What’s the price action look like? Is it acting as I expected? Is it at trendline support? Is it working off an overbought condition? Is it retesting resistance? The chart changes every minute, every hour, so your evaluation of it needs to be open to change, as well.

Do you have a set amount of profit you’d like to make each day?

When I first starred trading I wanted to make X amount per day, but I found it to be way too much pressure. I even think shooting for a weekly goal is too much pressure. There are going to be times when

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you trade well or trade poorly, so it's too hard to expect a certain number. If you must put a number on it, do it on a monthly basis. Just focus on trading well and the money will continue to follow.

Do you have any advice for letting your winning swings run?

I encourage people to remember why they are swing trading to begin with. You’re looking at the bigger picture and working off daily charts.

You make sure you have good entries on good setups that you understand and then ignore the intraday volatility. Because there will be days where the intraday moves test your willpower. A good example is AFMD, one that I had been watching for awhile. It triggered a long at $8.50 and then collapsed back to just below $8

immediately after my buy. My members were nervous, but it hadn’t hit the $7.49 stop yet, so I said, “I’m just going to let it work.” It didn’t close great that day, but the next day it closed at $11.72. So again, I try to focus on the daily charts and remember there will be days where stocks consolidate or pull back. What’s nice about swing trading is that you can have three to five positions on and usually something is working. Those help balance out the one’s that aren’t. All your trades will be in different stages, so don’t just stare at 1-min charts. Get four dogs and take them for a walk. Trust your charts and your stops.

Does it have to be four dogs?

Okay, fine. One dog. But like with AFMD, I took off early that next day when it shot up so quickly, but I had my stop on so I wasn’t worried about it. I actually got a message from one of my moderators in chat after hours about how high it had closed. Had I been here when it was ripping up through $9.50, then $10 and $11, I might have been impulsive and booked profits too early. So walking away does have its benefits.

Was that $7.49 stop based on previous resistance?

Yes, and also within my risk tolerance. For people that don’t want that wt e o a stop, you have two options. Either tighten your stop and risk

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getting stopped out before the move, or take smaller sizes on the initial entry. Of course a really clean move that never looks back is ideal, but more often than not the price action will be sloppy. It might take a few wild swings and a few days to really start trending in your direction. I don’t want to get stopped out on that silly movement, so I set a risk that I’m comfortable with.

Do you have a set percentage of your account you’re willing to risk on any given trade?

I know there are rules people follow like that, but I don’t have a set percentage. I just size appropriately and really focus on my entries. If the support level below my entry means I’m risking $1 to make $2 or $3, I’m okay with that.

Is a 3:1 risk to reward ratio typical for you?

Yes, ideally.

What’s your biggest win?

I made about $200K on FNMA when it was going nuts and everybody was making money on it. It only took a couple days, and I was definitely happy about it, but my emotions have been leveled so much over the years, it kind of felt like just another day.

What's your biggest loss?

My biggest loss was like $60K or $70K but I don’t even remember what the ticker was. I had too much size and let it go against me by not following my rules. Lack of discipline is always the biggest culprit when I make bad trades. Pulling a hard stop because you think it needs a little more room before it goes back in your direction is always a mistake. You end up playing the waiting game and then the pain just gets bad enough to where you need to get out immediately. But those types of situations usually come from my intraday trading.

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Why do you think that is?

Because it’s me getting away from what I’m good at and trying to do something that Pm not. Too much size, getting caught up in the crowd, and trying to play momentum with the big boys. So I’ve learned my lesson there. And there’s nothing wrong with what they’re doing. It’s just not what I do best.

Have you had unprofitable months or years since the early days?

I’ve certainly had unprofitable months but not years. January this year is a good example. The market was really volatile and had some really wide swings. Trades would go green and then whipsaw back and take out my stops. So you have stretches like that every once in awhile.

How do you push through those periods of unprofitability?

Scraping and clawing, (laughs) Actually what you need to do, and what I wish I had been better at as a new trader, is just stop trading. And that’s one of the hardest things to do, because you feel like you need to hurry up and make back those losses, but you’re only going to compound them by making more bad decisions. You need to just stop, take a break, reevaluate, and figure out what you’re doing wrong.

Are you trying to trade momentum intraday when you really don’t have the skill set or personality type for it? Are your entries sloppy?

Are your stops within your risk tolerance? Whatever it is, take a few days or ideally a few weeks to get a mental reset so that you can come back to the market with a fresh set of eyes and figure out how to correct what’s wrong.

Do you still worry that one day you won’t be profitable?

You never want to say never, but I don’t spend a lot of time thinking about it, no. I don’t live a particularly fancy lifestyle. We live within our means. My husband, Corey, is very successful at what he does, and I’m at a point in my trading career where I’m pretty consistent, so we have choices and flexibility. I just continue to make forward progress by

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continuing to learn and get better as a trader. Focus on what I’m really good at and don’t get distracted by what I’m not.

What has been a defining moment in your trading career?

I’ve had a couple. Blowing up accounts early on I began to question whether or not I could do it. I could have easily quit. But I realized I loved trading. I loved waking up in the morning, and I felt fortunate for that. I felt like I had truly found my calling in life. And more recently, it was a realization that I need to stay focused on the style of trading that works for me. When I stop trying to make trades outside my wheelhouse, my trading improves dramatically. That understanding has definitely defined the type of trader I am today.

Is that an ongoing process, that refocusing on swing trades?

Yes, especially with running the swing trading service I do now. I have members who are using the information I put out, so I’m working harder at finding the best swing setups, the best stocks that are really ready to move. The process has forced me to take a hard look at my strategies and setups, and that refining has really made me become a better trader.

What are you proud of when it comes to trading?

I get a lot of satisfaction from actually working with other traders over the last several years. I love seeing the light bulbs click on for other people after I’ve helped them incorporate something into their trading.

See new traders in the chat room begin to see their own trades and spot the good trade setups. I get thank you emails from people who say it’s making a lot more sense for them now. It s all very satisfying.

Obviously making a living is also great and something to be proud of, but I really like helping other traders. Hearing from them that I’ve made a positive impact on their trading is great.

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You’re of the camp that thinks trading can be learned then…

Yes, I think it can be learned. Certain personalities are probably more inclined to do it, but I definitely think that if you have the desire and will to learn, you absolutely can. You might not be naturally wired for it, but anybody with the necessary dedication can learn to trade.

What mistakes do you see new traders making?

One of the biggest mistakes I see now is people not trading their own plan. They’re simply blindly following someone else’s alerts. And that doesn’t mean you shouldn’t trade alerts, but you need to understand why that person is making that trade and how you’re going to manage everything that comes along with it, including entry, exit, stop, size, etc. You need to be confident and independent in your trading.

Understand what style of trader you are. If you want to make a career out of trading and have longevity in this industry, I think it’s a huge mistake to blindly follow someone else. How anyone can do that just amazes me. When I first started trading it never even occurred to me to care where anyone else was getting into or out of a trade. What does their entry have to do with yours? Besides, you don’t know their plan.

Their plan could change the next minute. I also see traders getting overly emotional about every trade, which is easy to do when you’re starting out. Part of overcoming that involves a conscious effort to stay more grounded, but part of it is also just time in the seat. Time will help level the emotions.

What do you wish someone had told you when you first started?

I wish someone would have told me trading is a business. You need to have a business plan. You need to have a strategy. You need to understand the ins and outs of a trade. You need to be disciplined How are you going to manage your trade? Where are you going to enter/exit? You re going to have to invest some time and capital in educating yourself and acquiring the necessary mental tools to be successful, whether that’s books, DVDs, or subscribing to a service. If you want to be a trader, you better treat it like a business.

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That makes a lot of sense…

It does. And I m not trying to promote my service. Just find something that works for you. But knowing what I know now, if someone had offered me a tool for $1K to shorten my learning curve and help me not blow up my accounts, I would have paid 20 times that. Every foolish mistake I made in the early days cost me more than that. There are so many tools out there today that can help you get a leg up, but if you’re not investing in yourself and treating trading like a business, you’re setting yourself up for failure.

How do you judge success in trading?

The obvious way is based on profits. Are you green or red? But I think staying focused on what works for me is being successful. It has been sort of a coming-home-again moment for me as I’ve refocused or swing trades in the last few years. I have a nice feeling about it. A big part of trading is the mental aspect of it, and staying grounded and focused on my path feels good.

What are the traits of a successful trader?

A successful trader definitely has to be self-motivated. Nobody is going to tell you that you need to get up in the morning. You can’t flop onto your computer two minutes before the bell and think you’re ready to trade. You also need discipline. You have to be willing to do your homework and prepare every day to trade. Being humble and grounded also helps you stay on the right path while trading. I think having an entrepreneurial spirit is also important. And curiosity. Every day I come downstairs excited because I feel like I’m about to put a puzzle together. It’s a challenge. What chart can I find today that’s going to do really well? What can I find that’s going to make somebody in chat a lot of money? I love to figure things out.

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Do you have any advice for people on how to be emotionless while trading?

I’ve put a lot of thought into that because I know when I was finally able to eliminate those huge highs and lows it made a big difference in my trading. But I’m not quite sure what to tell someone to get them there. When I look back at my own career, it just seems like the emotional swings got smaller and smaller with time. If I could graph it, you would see huge mountains and valleys in the early days and mere blips on the radar today.

So you ride the rollercoaster until you’re just numb to it all…

That’s kind of it. You just get numb, (laughs) But besides the passage of time, I think something you can at least try to do is check yourself in the moment, get ahold of yourself and make a concerted effort to control your emotions. Also, as new traders we tend to waste a lot of emotional capital by looking back, whether good or bad, and wondering what if. But your emotional capital as a trader is so important it needs to be preserved. Instead of dwelling on what just happened, look forward and focus on what’s next.

What do you think is the public’s biggest misconception about trading?

People assume it’s easy. But it’s not. It can be a huge struggle and very stressful Trading still has a negative connotation in the public eye, too.

Most of the movies depicting traders, like The Wolf of Wal Street, don’t paint the industry in a very positive light. The public doesn’t see regular people like me trading to make a living. Soccer moms and dads who trade for a living. Maybe through things like Traders4ACause we can change some of that perception. In my early days, I was a young, blonde female so nobody took me seriously when I told them I was a trader. I remember having a discussion with my mom about what to tell people I did for a living. I think we settled on stock speculator or some crazy tide, so she could tell her friends what I did.

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What one thing would you change about the market?

I would really like a four-day work week. I need three-day weekends. I have a lot of chores to get done, (laughs) What are your goals right now?

To continue to trade successfully. To continue to focus on what I’m good at. Corey and I have been married for 17 years and all my stepkids are grown and out of the house, so we’re at a cool point in our lives where we have options and a lot of flexibility. I’m also excited to be involved in Traders4ACause and give back a little bit. I’m excited to continue to grow TradeOnTheFly.com and help new traders become successful.

Where do you see yourself in five to 10 years?

Definitely still trading and just doing what we do. I’m not trying to become president or anything like that. I just want to continue enjoying life here in Montana.

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285 Afterword

Afterword

So what makes a great trader? What combination of traits, characteristics, and skills produces someone capable of earning in mere minutes what most people earn all year? The traders in this book come from all walks of life. Some are outgoing and excitable. Others are introverts. Some are brash. Others are humble. Some approach the market methodically and with caution. Others play it as it comes, seemingly by the seat of their pants. Even strategies that appear similar differ greatly in how they are executed.

So there is no simple answer to what makes a great trader.

Becoming one yourself is a subjective process. Trying to emulate each and every trader in this book, trying to adhere to every single rule they mention and regimen they follow, will either drive you mad or leave you paralyzed with fear and unable to place a trade. So you have to find what methods are most comfortable for you.

Which trader did you connect with most? What strategy resonated with your approach? Can you stomach large drawdowns for days, or would you rather cut losses quickly? Do you prefer to have a backtested system governing your trades, or would you rather make decisions in the moment? Start with what comes naturally and grow from there.

286 Afterword

Having said that, if tasked with building the perfect trader, I would pull various characteristics, skills, attitudes, and philosophies from each of these traders. .

Great traders are calm under pressure like Tim, patient like Michele, consistent like Nathan, emotionless like John, risk averse like Bao, optimistic like Eric, analytical like Gregg, objective like Phil, humble like Derrick, and confident like Tom. Great traders are also studious, disciplined, self-motivated, resilient, grounded, proactive, and ever-evolving. They focus patiently on the best setups, trades with a perceived edge, and capitalize on them to the fullest. They trade their own ideas, never follow, and take responsibility for their own decisions. They trade their plan, entering and exiting positions without hesitation nor arbitrary conditions. They add to their winners and take partial profits on big moves along the way. They’re willing to be wrong and admit to mistakes freely. They’re able to detach real world value from the money in their account and treat their P&L like points in a video game. They review their trading, realize what works, what doesn’t, and then adapt.

Last but not least, great traders understand that trading, including learning how to trade, is a journey without a guaranteed destination.

It’s a story that might have three beginnings, two restarts, a bumpy middle, and no end. Because even after years of learning, hundreds of hours spent in the chair, once profitability is attained, it still must constantly be sustained. The market is ever-changing. Not only must you claw your way to the top, you must 6ght to stay there, too.

If you’re up for the challenge, as the traders in this book were when they started and still are each day, I wish you the best of luck.

Although, as you now know, luck is the very least of it.

287 About the Author

About the Author

Brady Dahl is a trader, entrepreneur, and writer best known for his work on the first four seasons of the FX hit show Sons of Anarchy.

Trading since 2008, he is fascinated by the speed of the industry and the voracity of its players.

He currently resides in Minnesota, where he can be found raising a family, writing books, film and television, staring at stock charts, or hiding at the lake.

Connect at BradyDahl.com or @MiltonaTrades.

288 About the Author

289 Traders4ACause

Traders4ACause

Traders4ACause is an organization which supports and promotes charitable works and giving among members of the stock market day trading community.

As professionals capable of capturing gains and accumulating wealth, traders have been blessed with the means to help others. Learn how you can give back at:

www.Traders4ACause.org

In recent years, Traders4ACause has supported organizations like GiveWell, Breast Cancer Research Foundation, Building Dreams for Marines, Care Foundation, The Bachmann-Strauss Dystonia & Parkinsons Foundation, The Rapunzel Project, and many more.

290 Traders4ACause

www.MomoTraders.com

Exclusive content, including videos, trading materials, review, links to resources mentioned in this book, and a whole lot more!

Document Outline

- Foreword

- Preface

- Acknowledgments

- Note From Nate

- The Storyteller

- The Gambler

- The Youngster

- The Scanner

- The Rock

- The Tape Reader

- The Student

- The Steadfast

- The Resilient

- The Swing Trader

- Afterword

- About the Author

- Traders4ACause

Table of Contents

Foreword

Preface

Acknowledgments

Note From Nate

The Storyteller

The Gambler

The Youngster

The Scanner

The Rock

The Tape Reader

The Student

The Steadfast

The Resilient

The Swing Trader

Afterword

About the Author

Traders4ACause