Brian Shannon is an experienced and successful trader, lecturer and teacher. Being involved in trading in financial markets with 1991 of the year, he worked as a broker, had a trading company, was a hedge fund manager, managed his own trading terminal, being at the same time the most profitable trader in his company. Brian's articles have been published in such magazines, as "Technical Analysis of Stocks & Commodities», «Barron’s», «Active Trader», «Stock Futures and Options Magazine», and on numerous sites.
Question: How did you first become interested in trading the markets??
Brian: My interest in the markets started, when I was still about 11 or 12 years, I then watched a weekly Wall Street review with my father every Friday. I didn't know at first, what they talked about - it was just interesting for me to sit next to my dad and watch the same, as he. In the end, some information began to settle in my mind, and I found the markets very attractive.
Question: Do you ever use options and if so, what are your favorite strategies?
Brian: Yes, use. I'm acting, what most people think, the easiest way. Most of my options deals involve buying premiums, однако, i trade, first of all, shares. Nevertheless, when there is a technical installation, in which I would like to participate, but there may be event risk (for a single stock or at a macro level) i buy put- or "call" options. I use options for directional bets, when I feel, that the risks of buying shares outright may be too high. In this way, it's more of a risk management strategy, than a way to place leveraged bets.
Question: What do you like most about the trading business?
Brian: I am attracted by the freedom of trade itself, the need to rely only on oneself and the "black and white" nature of success and failure.
Question: How do you view losses and how do you determine your risk tolerance threshold before, how to make a deal?
Brian: I try to take losses impartially and very quickly. There are times, when i forget, that my opinion does not matter to the market, and hold the position longer, than it should. On rare occasions like this, I endure the pain of loss and move on. Determining my threshold for risk tolerance when trading options is easy enough, since buying option, i can never lose more, what do I spend on a deal, so I keep these positions relatively small. There are many factors when trading stocks, which I try to take into account: general market conditions, share price, average daily volume, the expected retention time and, возможно, the most important is the amount of dollars, which I am ready to lose.
Question: Your trading systems are more geared towards long-term or short-term strategies?
Brian: My personal qualities are best suited for swing trading with a hold period of up to 5 days, but trading a bear market, how is it now, I drastically shortened my trading periods, and most of my trades close at the end of every day. When the market stabilizes and new growth leaders emerge, I expect, that my time in the market will stretch again.
Question: What are the key rules or factors you consider before choosing any potential trading opportunity?
Brian: Trading with a trend on a time frame, corresponding to the period of holding my position, and perfect, if it matches the direction of the trend of the larger scale.
Question: What markets do you prefer to track and trade with your analysis tools?
Brian: I follow the QQQQ market most closely, and for day trading I like to use leveraged QID and QLD, based on that, how they trade on a 1 minute timeframe. I also trade SPY and IWM along with enhanced leverage long and short for these markets.. For individual stocks, I prefer to trade long, that's why I'm not so active here now, how was it in the indices lately, but when the market turns around, i will trade multiple stocks every day in addition to indices. My analysis tools are really very simple - multiple timescale analysis, using the price, volume, Moving averages and for short-term positions I find the VWAP indicator particularly useful.
Question: What was the most memorable deal for you??
Brian: There are both good and bad. Of the good, вероятно, the most memorable was the deal a week or two after 11 September 2001. When the markets were reopened, I was ready with a list of stocks, That, as i thought, benefit from moving towards a safer world. I bought stocks like this, like VSNX, INVN, MAGS and some others, many of them are no longer traded for various reasons, but at that time it was great deals, and I made a very good profit on them.
I remember the TASR deal as bad. When TASR stocks rallied in 2004 year, I traded them very well long. For some reason I thought, that I was able to determine the top for stocks, but on common stocks it was impossible to locate to enter short positions. I thought I was pretty skillful, to figure it out – i sold warrants and made some really good short trades, which increased my confidence.
but, the warrant deal went against me for 2 or 3 dollar, so I sold again, to average the position, and repeated this operation again 3 or 4 Times, before I understood, that the market did not turn around. I recorded a big loss on this trade, but overall remained in profit taking into account a long position in TASR shares. I would say, that this trade was memorable not because of the amount of dollar losses, but because I broke so many of my rules and, essentially, turned into a gambler. I hated myself for it at that moment, but actually learned a very good lesson.
Question: Considering all the variety of technical and fundamental analysis tools, as a beginner trader can avoid information overload, or, so-called, "analysis paralysis"?
Brian: This usually comes with experience.. We all want to find the perfect indicator or instrument., which the, as we hope, will allow us to see something new, but ultimately, it's just the price. That's why, most attention should be focused directly on price.
Question: How would you describe your technical approach to the markets?
Brian: Trend following, using multiple time formats. I am considering technical analysis not like a trading system, but as a method to objectively look at market data, to identify possible trading scenarios for the current market environment. If we can expect all potential results in advance, then we are less likely to be surprised by real market action, which reduces the likelihood of emotion in the decision-making process.
Question: What kind, In your opinion, The biggest misconceptions beginner traders have about trading the markets and trading systems?
Brian: That, what they, after completing a training course or purchasing some software, can fully rely on it, discarding all personal responsibility. You must take the information and learn to think for yourself and use the tools that way., how does it make sense in your personal situation. Trade is, kind, contact sport, in which you will receive bruises and injuries – how emotional, and material. If you have strong defenses, then you can limit your damage, when you are wrong, being in strong financial and emotional position, to take advantage of opportunities, when the market provides them.
Question: What advice would you give a person, just starting to trade in financial markets?
Brian: I think, what now, given the current bear market – best time, in order to study, because it will help you shape the right approach to risk management, which is sometimes overlooked, when we are in a bull market. I would advise them to move slowly, understanding the market structure and remembering, that the first rule is risk management.
Question: You can describe your typical trading day and average trade from setup to execution?
Brian: My preparation for the next trading day begins, as soon as the market closes. I go through a long list of stocks, to find 10-20, which I will closely monitor the next day. The next morning I analyze these stocks carefully., to appreciate that, what i am sure of – key levels, where market dynamics can become more active and lead to short-term trends, which i can use. I set signallers a few pennies below (for long positions) or higher (for short positions) key levels.
When I got ready, I then view each stock over multiple time frames, focusing most on shorter periods and formulating an exit strategy, which minimizes losses, if the situation does not develop as expected. If stock behaves, as i expected, then I transfer it to the second level of the screen, where can I observe its dynamics more closely and determine, will i really enter the market. When I actually execute the deal, I try to initially enter on a fairly large volume and fix small parts of the trade with a small profit. This allows me to cover operating costs and capture a small profit., which strengthens my position.
Assuming, that the stock will continue to move in the expected direction, I continue to fix small parts of the position at local peaks or when the price reaches potential resistance levels. If the price continues to move higher, I still allow the remaining small part of the trade to accumulate profits, until price makes a lower low at that time frame, which the, in my opinion, looks most appropriate.
Question: What decision-making process do you go through before choosing a particular market sector and a particular deal, which would be worth opening a trading position?
Brian: I am more of a deep shopper, but the strength or weakness of the sector actually plays a small role in making trade decisions. I am most interested in low risk trades with high potential in those stocks., which have a history of forming fast movements.
Question: What analysis methodology do you use, to find the best trading opportunities?
Brian: Technical analysis, using multiple time scales.
A source: Forex Magazine
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