In this issue, we encourage readers to get acquainted with the trader, who has more years 10 trades within the day, making several trades per day, while living “off the market”.He spoke about the pros intradeya, as well as its main trade rules that spectacular instructive.
Sinedza Michael received a Bachelor of Science in Electrical Engineering from Stanford University. In 1999, Michael switched to trading, which from that time is the only source of income. In 2003, he started a blog on his website, TraderMike.net, offering daily commentary to the market and educational materials.
Michael, how did you start trading?
The first time I became closely acquainted with the stock market in an investment club that we organized with college friends in 1992 year. A few years later, I started my own account. Over time I became more and more immersed in the markets. In 1997, almost simultaneously, there were several events that have significantly increased my interest in the trade.
During this time I worked as a consultant for a software company that traded on the energy market. Like environment sparked my interest in trading. In addition, 1997 I read some interesting books devoted to trade: «Trader Vic: Methods Of A Wall Street Master» Victor Sperandeo and «How To Make Money In Stocks» William O’Neill. Then I bought a dozen books and began to read Gary Smith’s column on the site TheStreet.com. The more I learned, the more I am convinced of his desire to make trading their main profession. In the middle of my project 1999 ended, and I decided now or never.
I understand that you have switched to Swing Trading day trading. What prompted you to this?
First of all, I wanted to make their profits more stable. When I was a swing trading, occurred a week when I’m not making any money. I thought that with such unpleasant day trading periods will be shorter, because there will be more opportunities for trade.
Until then, I could not imagine that I would trade within the day. Virtually all day traders, of which I’ve read at the time, were scalpers. Scalping and sitting in front of a Level II quotes ever I was not attracted. I always thought that scalping – it’s too much work for little profit.
What made you change your mind?
Several years ago I began to read the website of one trader who has done only a few trades per day. He traded through 30-minute charts for a very simple system. My attention was attracted by the fact that quite often he caught a huge movement in the shares, for which I was forced to watch from the sidelines, because they do not meet my criteria for entrance to the swing position. It became clear that it exceeds my trading style.
What is the main difference between them?
The obvious difference is that as a day trader, I do not leave the position for the night. Although it is ambiguous advantage. When the market is trending, because of this I miss a number of good moves. It is sometimes frustrating, but also had a lot of days when I was glad that closed their positions before the end of the auction. I really like the flexibility that gives rise each day in cash. I can switch between long and short positions in the blink of an eye. Or, if you do not see a specific day of suitable conditions for trade, I can do something else, not caring about what happens in the market.
Another most significant, the difference for me was the increase in purchasing power. Daytrader provided financial leverage, four times that of capital in the pledge. The remaining traders can hold only 2 times. During swing trading, I almost did not use financial leverage because of the fear that the action could open a gap against me in the next day. However, day trading can I use all of its purchasing power. Because of my position accumulation method, I can buy four times more shares than when engaged in swing trading, while maintaining risk at the same level.
Let’s see. Day Trading allows me to trade during earnings season, which I avoided during swing trading. Volatility increases at this time, but carry position on stocks through the night during the reporting season – is not nothing like a game of Russian roulette. Now, trading within the day, I can take advantage of these great movements.
How do you pick stocks to trade?
My candidates come from several sources. First of all, I’m watching stocks gapped. Also during the day I use a couple of scanners in real time. In my trading platform have a scanner that I use to find stocks with the highest percentage of high traffic volume. Another scanner – from Trade-Ideas. Their program explores the universe of stocks in search of certain patterns.
I am mainly looking for a pattern NR7 (the smallest range of seven days), new highs and lows on and 15 30-minute, opening range breakout and new intraday highs and lows. Every evening, I also spend a scan of its strategy for swing trading and then use the best options for intraday trading.
Do you follow the broad market or sector?
I usually look at the behavior of funds, exchange-traded (exchange traded funds) and sectors, and try to determine where is the basic movement. Then I find out what stocks of these sectors worth trading.
What indicators / patterns do you use?
I’m trying to get my graphics were as simple as possible. In this paper we use 15-minute candlestick charts. The only indicators – the scope and the pair of moving averages. I’m trying to determine the trend and then look for low-risk entry point. I’m looking for candles with a narrow range of kickbacks to the moving average breakouts or consolidation.
Do you use the moment?
Only to find the stocks that show unusual activity.
When you find them, how to decide which to work?
It all boils down to how good point to enter each of them represents. I usually pay attention to those that are in obvious trend – up or down. I wish that I had the opportunity to enter with minimal stop, so I could buy a significant number of shares. There are stocks that just scream “buy me!” But, unfortunately, they do not pass through the stages of consolidation, so I’ll leave them alone.
For how many charts you watch at a time?
On my monitor usually 15 charts simultaneously. With the help crawlers I always follow the stock and put graphics on the screen the most interesting of them. In an average day, I look around and I do 100 shares five transactions.
Is not it hard?
30 first minutes of the day can be quite hectic. However, I do not sell to 10 hours, so the morning chaos does not affect me. After having made several transactions, I rely on the computer. After opening a position I always put a stop-loss, there was no need to keep a close eye on her. I also set alerts that will tell me that it’s time to take some profits or correct foot.
The most difficult for me is to see how escapes profit after the sudden reversal of the market. Then you have to decide whether to stay in position on or close it. It’s a tough choice, especially when things happen quickly.
Do you follow the different time intervals?
I play every day, as new, but watch for general trends. I use daily charts for the last 2-3 months to identify areas of support and resistance. I also pay attention to how far gone the current movement. For example, if a stock is moving in one direction 3-4 days in a row, and it looks like it is going to do today – I will abandon her. I do not want to trade such movements.
Highs and lows of the past actions have to do with how high or low the stock could go?
It’s always hard to figure out. I used to be too pessimistic about how far can share. When I saw the paper, which rose 15%, thought that everything – traffic on I missed it. Many times it was that later in the day I looked at it again – and it was much higher. So now I try not to think about how high it can go. As long as the paper is still growth potential three-to-one with respect to the risk, I give her a chance to prove themselves. In this case also helps partly profit. Therefore, if the stock rose to a level twice the risk, I sell half of the position, and the second part are allowed to grow with floating stop. So much easier to let me share to go where she was going. I do not use goals to exit.
Then you get out of positions that remain open after partial profit?
It depends on how fast moving paper. I usually try to stay in the position until the end of the trading day, however, if a certain paper begins to show exponential growth, then I can get out of it at the first sign of weakness.
What money management strategy you use in your trade?
Most in day trading I like the fact that I can build my position so that a certain percentage of risk capital. When I was a swing trading, it is usually shared their capital, say, 10 equal parts. Therefore, each paper from my portfolio took it exactly 1 / 10. In the case of models with a certain percentage of risk, I can say: “In this deal, I want to take the risk X% of the capital.” I take a dollar amount, which is equal to X% and divide it by the distance between my entry point and stop price. This gives me the number of shares that should be bought. For example, let’s assume that my capital is $ 100 thousand ($ 400 thousand taking into account the lever) and I want to risk capital 1% or $ 1000. And, for example, I see a good opportunity in the shares of Apple, which will require a stop at $ 0,80. This means that I have to buy 1000 / 0,80, or 1250 shares. Note that the stock price does not include in the calculation. So I can buy Apple stock at $ 90 thousand, while my risk would be limited to $ 1000. In the case of swing trading, I could buy shares of Apple only $ 10 thousand Therefore, the possibility to use a lot more money in the transaction significantly influenced my trading results. Thus, in its capital management methodology I use stop losses and risk percentage. Currently, I run the risk of each transaction 0,75% equity. It’s quite small and can easily survive the loss of a band at the same time large enough to allow large winning trades had a serious impact on the results.
Have you had any problems with discipline?
Yes and no. I now and then I’m wrong. But usually pretty easy to see in a trading diary and see a big loss, and tell myself that this does not allow it. Eventually, I realized that you can not “marry” on positions. I always get in trouble when I start to hope.
Did you blog become more disciplined?
Yes, helped. The need to record every transaction in the diary makes me be honest with you. Once I start thinking about how to break the rules, I immediately think about the diary and how I explain his action there. In most cases, this is enough to convince yourself to stick to the plan.
But to return to the old diary and view transaction also requires discipline, is not it?
Yes, of course. A couple of weeks ago, I just worked on this. And was surprised that in a few cases, when no particular reason I moved the stop, it was over the fact that I gave all the profits. Looking back, it’s pretty easy to spot. So reading the trade journal certainly helps me stay focused.
What factors played a role in your formation as a trader?
The main two – understanding of risk and capital management. I always tell people that trading – nothing else, as a permanent capital management. In the end, no money can not be traded. The correct position size is vital. Trade size too big – the main problem of traders.
Discipline – also a very important factor. Almost every time cause large losses are due to lack of discipline. I drew back, or stop, or do not set it. Fortunately, such moments were few. I want to emphasize that it is very important to keep losses to a minimum. It is easy to recover from a few small losses, but one or two major loss can put you out of the game.
In addition to this, my curiosity and desire to learn new things very much helped me. Trade has become for me a constant learning process. Wonder how much more I know now compared to the time when I first started trading.
Do you think anyone can become a trader?
Previously, I thought so. However, seeing as many traders come and go, I do not think so. Some are simply not designed to be a trader. Others have a compelling need to be right all the time and, consequently, the complexity of the adoption of the losses or very small. In the third enough discipline to stick to your trading plan.
How long, on average, you stay in position?
Difficult to say, somewhere around three hours. I usually try to make a deal before 11: 00 or 11: 30 and hold the position until the end of the day, if you do not go out on foot before.
How long did it take you on to become a full day trader?
Trading has been my only source of income in 1999 year, but I switched to day trading about a year before that.
How was the transition?
I do not remember exactly how much I thought about it. Probably about a year. I always thought what it is – to trade stocks as the sole source of income? I mentioned this in a conversation with his college friends, and they asked me, “What’s stopping you?” I realized I did not know the answer to this question as long as no try. I started trading, he worked for about six months – from spring to autumn 1999. The results were mixed, I went to zero. I was ready to blow the dust from your diploma and get back to work. Fortunately, while the market soared, and I made good money. At the end of each week, I have disabled all of the profits from the account. It gave me a stock means to learn to trade in the subsequent bear market.
What do you think should start daytrader potential investors, and then proceed to swing trading, before tackling the trade in the day?
Difficult question. For the majority of swing trading – good place to start, especially because it is slower. Basically, what I’m doing now, like swing trading, only on a shorter time scale. So once you “nabete hand” with swing trading, you can proceed to intraday trading.
What advice would you give to someone who wants to trade stocks?
First of all, gather sufficient capital. The exact amount depends on how much you need to maintain their traditional way of life. I would say at least – $ 50 thousand more, the better. If possible, have another source of income. Much easier to sell when you do not have to worry about what to pay for housing and food.
If possible, find a mentor / coach. This is what I wish I did not. A good mentor will significantly reduce the training period. Read all the literature you can get. But we should not only focus on inputs and outputs. Most importantly – learn to manage the size of the position to understand what is the probability and expected profitability, as well as experience all the psychological aspects. You can have the best system in the world, but if you do not understand these principles of trading, all end in tears. Book «Trading In The Zone» Mark Douglas – classy benefit psychology and discipline. To understand the process control your recommend reading the book Van Tharp «Financial Freedom Through Electronic Day Trading» and «Trade Your Way To Financial Freedom».
Treat trading as a business. Write a business plan and shopping.
Finally, I recommend to keep a detailed trading journal. Again, this is what I wish I did the first day. I never kept the magazine until he was traded within the day. He was exceptionally helpful in helping me to trade better.
What would you like to achieve in the trade?
One of the things that I learned from Gary Smith, had the idea to treat capital as commodity stocks. Objective – scroll inventory as quickly as possible. In other words, you must use the magic of compound interest, increasing your score on a small percentage of every day. I would be glad if my account daily grows by 1%, but even at half the rate of growth can get a good result.
Thanks for the interview, Michael.