In this issue we invite our readers to get to know the trader, which is already more 10 years intraday trading, making several transactions a day, and at the same time lives “from the market”. He spoke about the advantages of intraday, as well as their basic trading rules, which is very, very instructive.
Michael Sinedza earned his BS in Electrical Engineering from Stanford University. IN 1999 году Майкл переключился на Trading, which since then has been the only source of his income. IN 2003 year he started blogging on his website, TraderMike.net, offering daily market commentary and educational materials.
Michael, как Вы начали торговать?
I first got to know the stock market in an investment club, which we organized with my college friends in 1992 year. Спустя несколько лет, I opened my own account. Over time, I became more and more immersed in the markets.. IN 1997 several events happened almost simultaneously, which greatly increased my interest in trading.
What kind?
At this time, I was working as a software consultant for a company, which traded on the energy market. This environment sparked my interest in trading.. Besides, in 1997 I have read some interesting books, dedicated to trade: “Trader Vic: Methods Of A Wall Street Master” Victor Sperandeo and “How To Make Money In Stocks” William O'Neill. After that, I bought a dozen more books and started reading Gary Smith's column on TheStreet.com. Чем больше я узнавал, the more I became convinced of my desire to make trading my main profession. В середине 1999 my project is over, and I decided: either now, or never.
As I understand it, you switched from swing trading to day trading. Что побудило вас на это?
First of all, I wanted to make my profits more stable. When I was swing trading, the weeks happened, when i didn't make any money. I thought, that with day trading such unpleasant periods will be shorter, as there will be more trading opportunities.
Before that I could not imagine, that I will trade within the day. Almost all day traders, which I read about at that time, были скальперами. Scalping and sitting in front of a Level II quote screen never attracted me. It always seemed to me, that scalping is too much work for a small profit.
Что заставило вас передумать?
Several years ago I started reading a trader's website., who made only a few trades a day. He traded on 30 minute charts using a very simple system. That caught my attention, that he often caught huge moves in stocks, which I was forced to watch from the side, because they did not meet my criteria for entering swing position. It became clear, that his trading style is superior to mine.
В чем основная разница между ними?
The obvious difference is, that as a day trader I no longer leave the position for the night. Although this is a controversial advantage. Когда рынок находится в тренде, I miss some good moves because of this. It is unpleasant at times, but there were also many days, when i was glad, that he closed his positions before the end of trading. I really like flexibility, which starts each day in cash. Я могу переключится между длинными и короткими позициями в мгновение ока. Or, if on a specific day I do not see suitable trading conditions, то могу заняться чем-нибудь другим, not caring at all, what's going on in the market.
Another, the most significant, the difference for me was an increase in purchasing power. Day traders are provided with financial leverage, four times the pledged capital. Other traders can only borrow in 2 times more. During swing trading, I almost did not use financial leverage due to the fear of, what stock может открыться с гэпом против меня в следующий день. However, in day trading, I can use all my purchasing power.. Due to my position accumulation method, I can buy four times as many shares, than when I was swing trading, while keeping the risk at the same level.
Что еще?
Let's see. Day trading allows me to trade during reporting season, которого я избегал во время свинг-трейдинга. Волатильность в это время возрастает, but carrying over a stock position overnight during reporting season is nothing more, like playing Russian roulette. Now, торгуя внутри дня, i can take advantage of these big moves.
How do you choose stocks to trade?
My candidates come from multiple sources. Primarily, i watch stocks, opened with a gap. I also use a couple of real-time scanners throughout the day.. My trading platform has a scanner, which I use to find the highest interest rate stocks on high volume. Another scanner - from Trade-Ideas. Their program explores the universe of stocks in search of specific patterns..
I, mostly, ищу pattern NR7 (smallest range in seven days), new highs and lows on 15 and 30 minutes, breakout of the opening range and new intraday highs and lows. I also scan my swing trading strategy every night and then use the best options for intraday trading..
Do you follow the broad market or sectors?
Я обычно смотрю на поведение фондов, обращающихся на бирже (exchange traded funds) и секторов, and I try to define, where will the main traffic be. Then I figure out, which stocks from these sectors are worth trading.
What indicators / patterns do you use?
Я стараюсь, чтобы мои charts были максимально простыми. I use 15-minute Japanese candlestick charts.. The only indicators are volume and a pair of moving averages. I am trying to spot a trend, and then find a low-risk entry point. Я ищу candles с узким диапазоном, pullbacks to the moving average or consolidation breakouts.
Are you taking advantage of the moment?
Just for that, to find stocks, showing unusual activity.
Когда вы их находите, how do you decide, with which to work?
It all comes down to, how good an entry point each represents. I usually pay attention to those, which are in a clear trend - up or down. I want, so that I have the opportunity to enter with a minimum stop, so that I can buy a significant number of shares. There are promotions, who just scream “купи меня!”, but, Unfortunately, they do not go through the stages of consolidation at all, so i leave them alone.
How many charts do you follow at the same time??
Usually on my monitors 15 charts at the same time. With the help of scanners, I constantly monitor stocks and put charts of the most interesting ones on the screen.. Average per day, i'm looking around 100 shares and make five deals.
Isn't it hard?
First 30 minutes of the day can be quite hectic. but, I do not trade until 10 hours, thus, morning chaos does not affect me. After that, how will I make several transactions, i rely on the computer. After opening a position, I always put a stop loss, чтобы не было необходимости пристально следить за ней. I also set up alerts, who will tell me, that it's time to take a part of the profit or adjust the stops.
The most difficult thing for me is to see that, how profits slip away after an unexpected market reversal. Then you have to decide, whether to stay in position further, or close it. It's a tough choice, especially, when everything happens quickly.
Do you keep track of different time intervals?
Я играю каждый день, like New, however, I follow the general trends. I am using daily charts for the last 2-3 months, to identify areas of support and resistance. I also draw attention to the fact, how far is the current movement. For example, if the stock moved in one direction 3-4 дня подряд, And, seem to be, I intend to do this today - then I will discard her. Я не хочу торговать подобные движения.
Past highs and lows of a stock are related to, how high or low a stock can go?
It's always hard to figure out. I used to be too pessimistic about, how far can a promotion go. If I saw paper, which grew by 15%, то думал, what all – I missed movement on it. Happened like this many times, that later that day I looked at her again - and she was much taller. So now I try not to think about, how high can she go. Until, as long as there is three-to-one upside potential in the paper in relation to risk, I give her the opportunity to show herself. Partial profit taking also helps in this case.. That's why, if the stock has risen to a level, twice the risk, я продаю половину позиции, and leave the second part to grow with a floating stop. So it's much easier for me to let the stock go there, where was she going. I do not use exit targets.
Then how do you get out of positions, which remain open after partial profit taking?
It depends on whether, how fast the paper moves. I usually try to stay in position until the end of the trading day., but, if a certain paper starts to show exponential growth, то я могу выйти из нее при первых признаках слабости.
What money management strategies do you use in your trading?
What I like most about day trading is, that I can build my position like this, to risk a certain percentage of capital. When I was swing trading, then he usually divided his capital, say, on 10 equal parts. Therefore, each paper from my portfolio occupied exactly 1/10. In the case of a model with a certain percentage of risk, I can tell: “On this trade, I want to risk X% of the capital”. I take the dollar amount, which equals X% and divide it by the distance between my entry point and the stop price. This gives me the number of shares, which should be bought. For example, let's assume, that my capital is $100 thousand. ($400 thousand. with leverage) and I want to take a chance 1% Capital, or $1000. AND, for example, I see a good opportunity in Apple stocks, which will require a stop in $0,80. It means, what should i buy 1000/0,80, or 1250 Shares. Notice, the share price is not included in the calculation. Therefore, I can buy Apple shares at $90 thousand, and at the same time my risk will be limited $1000. В случае свинг-трейдинга, я мог бы купить акций Apple всего на $10 thousand. Therefore, the very ability to use a lot more money in a trade significantly influenced my trading results.. In this way, in my money management methodology I use stop losses and risk percentage. Nowadays in every trade I take risks 0,75% Capital. This is small enough to survive the loss streak with ease., at the same time large enough for, чтобы крупные выигрышные сделки оказали серьезное влияние на результаты.
Have you had any discipline difficulties?
Да и нет. I, every now and then, wrong. But it's usually pretty easy to look into a trade diary and see a big loss., and tell yourself, that I won't allow this anymore. Over time, I realized, what is not allowed “жениться” in positions. I always get in trouble, when I start to hope.
Has the diary helped you become more disciplined??
Yes, helped. The need to write transactions in a diary on a daily basis makes me be honest with myself.. As soon as I start thinking about, to break the rules, I immediately remember the diary and that, how will I explain my act there. In most cases, It's enough, to convince yourself to stick to the plan.
But for that, to go back to the diary and view old transactions, discipline is also required, is not it?
Yes, certainly. I was doing this a couple of weeks ago.. And I was surprised that, that in several cases, when I moved my stop for no particular reason, it all ended with, that I gave all the profits. Оглядываясь назад, it's pretty easy to notice. Therefore, reading a trade diary, undoubtedly, helps me stay focused.
What factors played a role in your formation, as a trader?
The main two are understanding risk and money management. I always tell others, that trading is nothing else, as a permanent money management. Finally, it is impossible to trade without money. Correct position sizing is vital. Trading too large is the main problem for traders.
Discipline is also a very important factor.. Lack of discipline was the cause of big losses almost every time.. I either moved the stop, or didn't put it at all. Fortunately, there were few such moments. I want to emphasize, which is very important to keep losses as low as possible. Easy to recover from a few small losses, but one or two large losses can take you out of the game.
В дополнение к этому, my curiosity and desire to learn new things helped me a lot. Trading has become a continuous learning process for me. Amazing, how much more do I know now compared to that time, when I just started trading.
How do you think, anyone can become a trader?
Раньше я так думал. However, seeing, how many traders come and go, I don't think so anymore. Some are simply not meant to be a trader. Others have an irresistible need to be right all the time and, respectively, difficulty accepting losses, small or not so. Still others don't have enough discipline, to stick to a trading plan.
Как долго, average, вы остаетесь в позиции?
It is hard to say, somewhere around three o'clock. I usually try to make deals before 11:00 or 11:30 and hold positions until the end of the day, if I don't step out earlier.
How long did it take you, to become a full-fledged day trader?
Trading has become my only source of income in 1999 year, but I switched to day trading about a year before.
Как прошел переход?
Не помню, exactly how much I thought about it. Probably, около года. I always thought, what it's like to trade stocks as your sole source of income? I mentioned this in a conversation with my college friends., и они спросили меня: “What is stopping you?” Я осознал, that I do not know the answer to this question until then, until I try. Я начал торговать, worked for about six months - from spring to autumn 1999. Results were mixed, я вышел в нуль. I was ready to blow the dust off my diploma and get back to work.. Fortunately, then the market took off, and i made good money. At the end of each week, I withdraw all profits from the account. This gave me a reserve of funds to, to learn how to trade the subsequent bear market.
How do you think, potential day traders should start as investors, then move on to swing trading, before, what to do intraday trading?
Непростой вопрос. For most, swing trading is a good place to start., primarily because, that it is slower. Basically, then, чем я занимаюсь сейчас, similar to swing trading, только на более коротком временном масштабе. That's why, as soon as you “get your hand” со свинг-трейдингом, you can go to intraday trading.
What advice could you give to that, who wants to trade stocks?
Primarily, raise enough capital. The exact amount depends on, how much do you need to maintain your usual lifestyle. I would say, minimum – $50 thousand. The more, all the better. Если есть такая возможность, имейте еще один источник дохода. Much easier to trade, when you don't need to worry, how to pay for housing and food.
If possible, find a mentor / coach. This is what, what i regret, what didn't. A good mentor will greatly shorten the learning curve. Read all literature, which you can get. However, don't just focus on the ins and outs.. The most important thing is to learn how to manage position size, уяснить, what is probability and expected return, and also feel all the psychological aspects. У вас может быть лучшая в мире система, but, if you do not understand these principles of trading, then everything will end in tears. Book “Trading In The Zone” Mark Douglas - A Cool Guide to Psychology and Discipline. Для понимания процесса управления позицией рекомендую почитать Books Ван Тарпа “Financial Freedom Through Electronic Day Trading” And “Trade Your Way To Financial Freedom”.
Treat trading, how to business. Write a business and trading plan.
And finally, I recommend keeping a detailed trade journal. Yet again, this is what, what i regret, what didn’t do from day one. I have never kept a journal, until I started trading intraday. He proved to be extremely useful, helping me trade better.
What would you like to achieve in trading?
One of the things, which I learned from Gary Smith, there was an idea to relate to capital, how to stock. The goal is to scroll through inventory as fast as possible. In other words, you need to use the magic of compound interest, increasing your account by a small percentage every day. I would be glad, if my account increased by 1%, but even at half the growth rate, you can get an excellent result.
Thank you for the interview, Michael.
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